In what can only be described as a disastrous turn of events for Progressive American Insurance Co., the insurance giant’s half-hearted communication with an at-fault policyholder turned a potential $10,000 settlement into a wrongful death judgment worth $22,663,058 plus legal fees.
Progressive found itself potentially liable for the entirety of the judgment because U.S. District Judge Beth Bloom denied summary judgment for the insurer and an upcoming trial would have allowed a jury to decide whether the company had acted in bad faith vis a vis its policyholder, Earl Lloyd.
Rather than go to trial, Progressive settled for an undisclosed sum.
Here is a brief summary of the facts:
- On Nov. 17, 2008, Lloyd was driving his car in Fort Lauderdale, Florida, when Wallace Mosley, then 11 years old, rode his scooter into the street where he was hit by Lloyd's car.
- The accident report shows that Lloyd was driving at a high speed and that Wallace was thrown 100 feet.
- Lloyd had a Progressive policy with bodily injury limits of $10,000 per person.
- Lloyd didn’t tell Progressive about the accident.
- An attorney for Mosley's family sent the insurer a letter of representation on Nov. 26, 2008, and forwarded the accident report on Dec. 1.
- Progressive reserved its rights but never denied coverage.
- On Dec. 4, 2008, Progressive sent Mosley's family a $10,000 check of its own volition.
- On Dec. 9, 2008, the Mosleys’ attorney sent a settlement offer to Progressive, indicated that if Lloyd executed the affidavit within 14 days and it showed no viable assets, then Mosley's family would execute a release and settle the claim. But if Lloyd did not execute the affidavit, the family would sue.
- Progressive’s claims handler called Lloyd on Dec. 17 and then forwarded the offer letter to him the same day.
Now, how did an insurance company that was only on the hook for the $10,000 policy limit see its potential losses balloon to $23M? As recently reported in Law360, the company’s handling of Mosely’s claim raised serious questions about whether it fulfilled its duty to defend its policy holder. Progressive could have breached its duty by:
- Not pushing back strongly against Lloyd’s objection to executing the affidavit.
- Not sending a written communication explaining that Lloyd could be held personally liable for amounts over and above his coverage limits if he did not execute the affidavit.
- Not notifying Lloyd that its own review had determined he was at fault.
- In April 2018, Lloyd testified that if he’d fully understood the ramifications, he would have completed the affidavit.
- Progressive did not tell Lloyd that, if and when he was sued, he should tell the company and it would provide a free lawyer.
Because the Moselys never saw an affidavit, they sued Lloyd, winning a $75 million wrongful death judgment, which was reduced by 70 percent because of the child’s contributory negligence.
In 2017, Lloyd learned that Mosely's attorneys had obtained an expert opinion that Progressive might have acted in bad faith. Lloyd assigned his bad faith claim against Progressive to the Mosley family, who filed suit against the insurer.
The lesson here might be that the duty to defend does not begin in the legal department when an insured has been sued. Alerting the insured of certain jeopardy during the claims process, so that by his actions he can minimize his losses, is part and parcel of the duty to defend.
If your insurer has failed to protect your interests with regards to your claim, get in touch with an insurance bad faith attorney. Your attorney can assess your case and explore the best legal options for your business.