What Does It Mean When an Insurance Company Makes a Ridiculously Small Settlement Offer?

We often get ridiculous settlement offers from GEICO and are forced to take these cases to trial. A few weeks ago, GEICO was ordered to pay over $2 million because of their bad faith refusal to fairly settle a case.

A motorist, whose car “flipped up in the air into a power pole” when struck by a car insured by GEICO, had $10,000 of medical bills. The motorist’s lawyer offered to settle with GEICO for the $30,000 insurance policy but GEICO refused and offered only $12,409.

A judge issued a judgment in the amount of $2,916,000 and the defendant filed for involuntary bankruptcy. But GEICO hired a lawyer to fight the bankruptcy petition!

Since GEICO’s insured would obviously benefit from the bankruptcy, GEICO’s motivation to fight the bankruptcy could only have been to protect itself so GEICO could not be sued by the trustee in bankruptcy for their bad faith failure to settle the injury claim, if the involuntary bankruptcy proceeded.

GEICO’s lawyer was not successful in stopping the bankruptcy and the trustee in bankruptcy sued GEICO in US District Court. The federal jury found GEICO liable for $2,020,342

GEICO will likely appeal the order but it’s going to cost GEICO a lot of money. I just hope the attorneys don’t settle and let it go to appeal.

This case illustrates the frustration that personal injury lawyers frequently have with insurance companies. When an insurance company offers to settle for only $10,000, or any amount, your lawyer must tell you about the settlement offer. It doesn’t mean that your lawyer is doing a bad job. It just means that the insurance company doesn’t want to settle.

I’ve noticed a change in the last six years that insurance companies frequently don’t make reasonable settlement offers until the time of trial and even then, the offers would only have been adequate early in the claim, not at trial.

Bad faith claims are difficult in New York State but we have made insurance companies pay above the insurance policy.

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