Insurance Bad Faith Verdict

Tuter v. GEICO and Smith Freed and Eberhard PC, Multnomah County Case No. 1309-13606

Plaintiff was sued as a result of a car versus motorcycle collision in August of 2007.  Defendant, GEICO, was his auto insurance company. Plaintiff had an insurance policy with $100,000 limits. The lawyer for the injured party made multiple demands to GEICO in which they offered to settle for the limits of Plaintiff’s insurance policy and not pursue Plaintiff for amounts in excess of the policy.  GEICO would not agree to pay limits unless the injured party’s health insurer was named on the check as well as the injured party. The lawyer for the injured party explained to GEICO that the health insurer did not have a statutory lien so it would be up to the injured party to pay or negotiate amounts due the health insurer. Plaintiff offered to sign a release that would hold GEICO harmless in the event the health insurer made a claim against GEICO.

GEICO refused the limits offers and hired the Portland law firm Smith Freed & Eberhard (“Smith Freed”) to defend Plaintiff. Further policy limits offers made to the law firm were rejected. The lawyers at Smith Freed told Plaintiff that there was an enforceable healthcare lien. The lawyers and GEICO never told Plaintiff about the repeated policy limits demands and the decision to reject them or what that might mean to Plaintiff in the event of a verdict in excess of his limits.  Instead, they advised Plaintiff and took steps to assist him in filing for bankruptcy before trial.  The attorneys and GEICO never advised Plaintiff that if he filed for bankruptcy he would be prevented from accruing a cause of action against GEICO or Smith Freed for negligently causing him to be subjected to an excess verdict.

Plaintiff ultimately decided against filing for bankruptcy and the case proceeded to trial.  The injured party obtained a verdict in the amount of $329,820.50.   After the verdict GEICO and the lawyers at Smith Freed continued to advise Plaintiff to file for bankruptcy.  GEICO, with advice and counsel from Smith Freed, refused to allow Plaintiff to assign his negligence claims against GEICO to the injured party thus satisfying the judgment against him.  GEICO paid the injured party their $100,000 and left Plaintiff on the hook for the remaining amounts.   Plaintiff, in an agreement with the injured party to satisfy the judgment, brought this lawsuit against GEICO for negligence and breach of contract.

Plaintiff sought $329,820.50 for the amount of the judgment he was subject to and also sought $29,000,000.00 in punitive damages.

GEICO took the position that they did everything required of an insurance company when they tendered limits with the condition that the injured party’s health insurer be named on the check.  The reason for this was the risk of litigation from the health insurer directly against Plaintiff for not including them on the check when they had an enforceable lien.  GEICO further took the position that Smith Freed did not adequately advise them regarding Oregon law with respect to liens, excess verdicts and assignments.  GEICO also claimed that they never advised Plaintiff to declare bankruptcy; they only referred him to a bankruptcy lawyer. Smith Freed settled with Plaintiff before trial leaving only GEICO as a defendant.

Plaintiff’s Counsel – Don Corson & Travis Eiva

Defense Counsel – Christopher B. Marks

Verdict – $335,888.76 + $17,500,000.00 in punitive damages.

Date – June 5, 2015

June 19, 2015

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