Fife M. Whiteside v. GEICO Indemnity Company

[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
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No. 18-15074
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D.C. Docket No. 4:16-cv-00313-CDL
FIFE M. WHITESIDE,
Plaintiff-Appellee,
versus
GEICO INDEMNITY COMPANY,
Defendant-Appellant.
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Appeal from the United States District Court
for the Middle District of Georgia
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(May 11, 2021)
Before WILSON and GRANT, Circuit Judges, and MARTINEZ,* District Judge.
PER CURIAM:
* Honorable Jose E. Martinez, United States District Judge for the Southern District of Florida,
sitting by designation.
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The relevant facts of this appeal are set out in Whiteside v. GEICO
Indemnity Co., 977 F.3d 1014 (11th Cir. 2020). To briefly summarize here,
“GEICO has been found liable for rejecting a policy-limits demand against one of
its insureds. The measure of damages in this suit came from an earlier negligence
case that GEICO neither knew about nor participated in.” Id. at 1015. The
attorney for Terry Guthrie, the injured party, “did not notify GEICO about the
negligence suit—even though he and the insurance company had been
communicating about the injured party’s claim.” Id. And Bonnie Winslett,
GEICO’s insured driver, “thought GEICO was handling the case, so she threw
away her summons and complaint, failed to answer either, and decided against
notifying GEICO.” Id. at 1016. That resulted in a $2.9 million excess default
judgment against Winslett, who was then forced into involuntary bankruptcy. Her
estate sued GEICO for bad faith failure-to-settle and, after a trial, the jury
concluded that GEICO was 70% liable for that excess default judgment.
GEICO argued three points on appeal. First, it asserted that O.C.G.A. § 33-
7-15 and a corresponding policy provision relieved unnotified insurers of liability
for any judgment against its insured. Second, GEICO contended that its rejection
of the policy-limits demand was not the proximate cause of the excess default
judgment; instead, it said that Winslett, its insured, “caused the entry of that default
judgment by throwing away the Summons and Complaint, not informing GEICO,
and not taking steps to answer the Complaint.” And third, it claimed that using the
excess default judgment as the measure of damages violated due process because
GEICO did not have notice of that original suit. These arguments raised novel
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issues of Georgia law, so we certified three questions to the Supreme Court of
Georgia:
1. When an insurer has no notice of a lawsuit against its insured, does
O.C.G.A. § 33-7-15 and a virtually identical insuring provision relieve
the insurer of liability from a follow-on suit for bad faith?
2. If the notice provisions do not bar liability for a bad-faith claim, can an
insured sue the insurer for bad faith when, after the insurer refused to
settle but before judgment was entered against the insured, the insured
lost coverage for failure to comply with a notice provision?
3. Does a party have the right to contest actual damages in a follow-on suit
for bad faith if that party had no prior notice of or participation in the
original suit?
Id. at 1022.
This case now returns to us from the Supreme Court of Georgia, which
considered each of our questions. See GEICO Indem. Co. v. Whiteside, No.
S21Q0227, 2021 WL 1521527 (Ga. Apr. 19, 2021). It answered the first question
with a qualified “no.” Id. at *7. The court noted that the “question is whether
Winslett’s breach was an intervening act sufficient to break the causal chain
between GEICO’s unreasonable rejection of Guthrie’s settlement demand and the
excess default judgment entered against Winslett,” which turns on “whether the
facts of the case supported a finding that GEICO reasonably should have foreseen
Winslett’s breach and the consequences flowing from it.” Id. The court then
rejected GEICO’s argument that the notice provisions relieved it of liability,
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explaining that “under the facts and circumstances of this case, OCGA § 33-7-15
and the corresponding policy provisions regarding notice to the insurer of the filing
of a suit against the insured do not bar liability as a matter of law for Whiteside’s
negligent or bad faith failure-to-settle claim on the basis that GEICO did not
receive notice of the lawsuit against its insured.” Id. at *9.
On the second question, the court gave a qualified “yes.” Id. at *10. It
concluded that “even though Winslett lost coverage when she failed to notify
GEICO of Guthrie’s suit, GEICO is liable for its negligent failure to settle
Guthrie’s claim under the circumstances of this case.” Id. at *11. After all,
“Winslett was a covered insured under the policy; GEICO owed her a duty to
settle; GEICO breached that duty; and the jury found that GEICO was partially at
fault for Winslett’s failure to comply with the notice-of-suit provision and the
resulting default excess judgment entered against Winslett.” Id.
Finally, the court responded “no” to the third question because if “GEICO
were able to re-litigate Guthrie’s personal injury claims in the failure-to-settle suit,
and then use Guthrie’s measure of damages as a substitute for what Winslett
actually suffered as a result of the excess default judgment against her, Winslett
may not be made whole even if the jury finds entirely in her favor.” Id. It
reasoned that “Winslett remains liable to Guthrie,” so “if the bankruptcy estate
does not recover enough from GEICO to satisfy Guthrie’s judgment, the estate
would not be fully compensated for Winslett’s damages, and GEICO would escape
responsibility for breaching its settlement duty to Winslett.” Id.
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The answers supplied by the Supreme Court of Georgia largely resolve this
appeal.1 We thank that court for its guidance, and the decision below is
AFFIRMED.
1 GEICO also argues that “enforcing the default judgment against GEICO violated GEICO’s due
process rights” under the Fourteenth Amendment because it did not receive notice of the original
action against Winslett after she threw away the summons and complaint. We find no merit in
this argument. Like we said before, GEICO “has not cited a case persuading us that the United
States Constitution applies in the way it had hoped.” Whiteside, 977 F.3d at 1022 n.3. And as
the Supreme Court of Georgia explained, GEICO’s due process argument “makes little sense
under the circumstances of this case because damages in a negligent failure-to-settle case reflect
the damages the insured incurred as a result of the insurer’s tortious failure to settle a claim
brought against the insured by a third party.” Whiteside, 2021 WL 1521527, at *11. Moreover,
here GEICO had notice and an opportunity to argue to the jury that it did not cause the excess
default judgment—the jury just did not agree.
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