In Pelaez v. Government Employees Insurance Co., 2021 U.S. App. LEXIS 28312 (11th Cir. Sept. 20, 2021), the Eleventh Circuit upheld summary judgment for GEICO in a Florida bad faith case. Merely offering an overbroad release to a third-party claimant was insufficient to establish bad faith in the totality of the circumstances, which included GEICO’s repeated invitations to the claimant’s lawyer to edit the release’s language and diligent efforts to settle all covered claims.

Pelaez arose from an automobile accident between John Pelaez and Michael Conlon, Jr. Conlon, who was insured as an “additional driver” under his mother’s policy with GEICO, turned into a median and subsequently collided with Pelaez’s motorcycle. Pelaez was severely injured and airlifted to the hospital. GEICO assigned a claims adjuster to the incident the next business day. Within two weeks of the accident, GEICO hand-delivered a tender check for $50,000 with a note explaining the check represented the per person policy limit for Bodily Injury Liability coverage. GEICO also delivered a proposed form release that purported to release Conlon and his mother from any and all claims as a consequence of the crash and a letter inviting Pelaez’s attorney to send GEICO either a new release or any suggested changes, additions, or deletions to the form release. At the same time, GEICO asked Pelaez for the location of the motorcycle so that GEICO could inspect it and make an offer on the property damage claim.

Pelaez’s attorney agreed to let GEICO inspect the motorcycle but did not disclose its location. GEICO continued to try to locate the motorcycle. Pelaez’s attorney later rejected the settlement offer because the draft release covered all claims while only tendering a check for the bodily injury limit. GEICO responded by noting that it had repeatedly tried to locate the motorcycle to adjust the property damage claim. GEICO reminded Pelaez that the release was only a proposed release and again invited his attorney to edit the release or provide his own release.

Pelaez then sued Conlon and his mother in Florida state court. The trial court awarded Pelaez $14,900,000 against Conlon but stipulated that Pelaez could only seek to satisfy the judgment from insurance proceeds, including claims of bad faith damages. Pelaez and Conlon then filed suit against GEICO, alleging that GEICO acted in bad faith by requiring its adjusters to send “all claims” releases with tender checks for only bodily injury claims. The district court granted summary judgment to GEICO.

In an opinion written by Judge Ed Carnes and joined by Judges Branch and Grant, the Eleventh Circuit affirmed, emphasizing that the question of whether an insurer has acted in bad faith in handling claims is determined under the totality of the circumstances standard. The focus, the court stated, is on whether the insurer itself diligently worked on the insured’s behalf to avoid an excess judgment. However, the court explained that the actions of a claimant or the claimant’s attorney are not irrelevant and may be factored into the totality of the circumstances analysis. In this case, Pelaez and his attorney contributed to the failure to settle. The court went so far as to question the attorney’s motives for refusing the settlement offer. Pelaez and his attorney’s actions, the court explained, showed how the failure to settle did not result from any bad faith of GEICO.

The court held that the scope of a release is one circumstance to consider under the totality of circumstances standard, and what happened before and after the release was sent should also be taken into account. The court found that because GEICO quickly assigned a claims adjuster, diligently investigated the accident, and repeatedly offered to work with Pelaez’s attorney to edit the release, no reasonable jury could find that GEICO acted in bad faith.