Progressive American Insurance (“Progressive”) recently settled a bath faith lawsuit with the guardians of a child injured in a car accident by Earl Lloyd, a Progressive policyholder. Progressive faced liability for an underlying judgment of $22.7 million against Lloyd, who had purchased a $10,000 automobile policy from the insurance company. The bad faith lawsuit alleged that Progressive failed to advise Lloyd regarding the significance of executing a financial affidavit. If Lloyd had executed the affidavit, the claimant would have allegedly accepted the insured’s policy limits in exchange for a release of Lloyd.
The underlying case arose out of an auto accident that occurred in November 2008, when Lloyd struck Wallace Mosley, an 11-year-old boy, who was riding his scooter in the road. Lloyd was allegedly traveling at a high rate of speed and the child was thrown nearly 100 feet. Lloyd did not initially report the accident to Progressive, and the insurance company did not learn of the accident until 10 days later, when the company was contacted by an attorney. The attorney even provided a copy of the police report to Progressive.
After learning of the accident, Progressive assigned the matter to a claims professional who made numerous attempted to contact Lloyd. The company then issued a reservation of rights letter to Lloyd based on his failure to notify Progressive of the accident; however, Progressive did not deny coverage. On December 4, 2008 Progressive tendered Lloyd’s $10,000 policy limits to Mosley’s counsel. Then on December 8, 2008, Lloyd finally contacted Progressive.
Mosley’s counsel subsequently provided Progressive with a 12-page financial affidavit as a condition of the settlement. The accompanying cover letter advised that if the affidavit showed no visible assets for Lloyd, Mosely would execute a release; if, on the other hand, there was no execution of the document within two weeks, a lawsuit would be filed. Progressive forwarded the affidavit along to Lloyd, as well as additional attempts of correspondence. However, Lloyd stated that Progressive failed to explain the consequences of not executing the document. Ultimately, Lloyd did not execute the document and Mosley filed suit on May 5, 2009.
The matter proceeded to trial in 2014 and a $22.7 million judgment was entered against Lloyd. Thereafter, Lloyd entered into an agreement with Mosley assigned his bad faith claim against Progressive in exchange for an agreement not to execute the judgment.
The bad faith case was initiated in 2009, when Mosley also filed suit against Progressive for third party bad faith. The insurance company moved for summary judgment, but was denied. The court reasoned that, under Florida law, Progressive had a fiduciary relationship with Lloyd, which required it to refrain from acting on the basis of its own interests. The court further noted that Progressive had, in fact, failed to send any correspondence that would give Lloyd an understanding of the consequences. Two weeks after the court denied Progressive’s request for summary judgment, the insurance company settled the matter.
