INSURER THAT OFFERED $7,500 TO PAY $60,000 UNDERLYING JUDGMENT ACTED IN BAD FAITH

ALBANY, Ga. -- A federal jury has found Allstate Insurance Co. acted in bad faith when it refused to settle a third-party claim for policy limits and appealed the underlying judgment all the way to the Georgia Supreme Court, forcing its insured into bankruptcy. The jury awarded $520,000 (Larry W. Strickland v. Allstate Insurance Co., No. 1:96:CV-189-1-WLS, M.D. Ga.). The April 7 verdict in the Middle District of Georgia included $45,000 in compensatory damages and $475,000 in punitives. U.S. District Judge W. Louis Sands refused to submit the question of specific intent to harm to the jury, therefore punitives will be capped at $250,000. Larry Strickland had an auto policy with Allstate in February 1991 when he collided with a car in which Katrina Childs was a passenger. Childs suffered soft tissue injuries.

Liability Disputed

Allstate denied the claim on the grounds that Childs was a guest passenger in Lorenzo Stubbs' vehicle, and Stubbs disregarded a traffic signal. Childs sued Strickland and Stubbs, whom she later dropped from the suit after marrying him. She sought $3,600 in medical bills and $5,000 in lost wages. Allstate defended Strickland. Despite evidence, including an independent witness who testified Strickland had the green light, the underlying jury awarded Childs nearly $60,000. Allstate's home office authorized no more than $7,500 to settle the case, even after the motion for a new trial was denied. An Allstate adjuster who testified at the bad faith trial said he interpreted the home office decision to mean that all appeals would be exhausted unless the $7,500 was accepted. Childs repeatedly offered to settle for Strickland's $25,000 policy limits. Strickland urged Allstate to do so. But the carrier refused. After the Georgia Court of Appeals affirmed the underlying verdict and the Supreme Court denied certiorari, Allstate offered the policy limits. The excess verdict forced Strickland into bankruptcy.

Voire Dire Issue

Strickland contended at trial that Allstate vigorously pursued the appeal of the underlying judgment in an attempt to change Georgia law permitting questions about insurance during voire dire. Allstate believed it was prejudiced in the underlying trial by Childs' counsel asking if any jurors had an affiliation with Allstate. Allstate contended the question let the jury know an insurer was involved, and made a damage award more likely. The appeals court did not alter the law on the issue. Allstate's counsel, who would not discuss the case, said he is not appealing the bad faith verdict. Strickland plans to appeal the court's decision not to submit the issue of specific intent to cause harm to the jury, which resulted in the punitive cap. Plaintiff's bad faith expert was former Georgia Insurance Commissioner Tim Ryles. Counsel to Strickland are Charles A. Gower of Columbus, Ga., and B.T. Edmonds in Albany, Ga. Eugene P. Chambers Jr. and Dale C. Ray Jr. of Chambers Aholt & Rickard in Atlanta represent Allstate.

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