BLOWN OPPORTUNITIES AND NO ALTERNATIVES LEAD TO CATASTROPHIC EXCESS JUDGMENT
Individuals and businesses purchase liability insurance to protect themselves from catastrophic losses they cause. In exchange for the timely payment of premiums, insureds turn over complete control of claims to their carrier and expect their carriers to perform their policy obligations and make good faith efforts to settle the claims made against the insured when given a reasonable opportunity to do so.
The carrier’s acceptance of reasonable settlement demands is of the utmost importance for several reasons. Among these are that most businesses and individuals don’t have sufficient personal assets or disposable income to satisfy a judgment that may be entered in excess of their insurance policy limits and there are few remaining alternatives available for businesses and insureds to protect themselves from a carrier’s settlement failures short of bankruptcy.
The carrier’s failure to perform its settlement obligations can lead to catastrophic results as one small Georgia business recently discovered.
Game Truck Georgia v. Atlantic Specialty Ins. Co., 20-cv-00679-MLB (N.D. GA)
Background
Game Truck Georgia’s saga began in 2016 with the end of the year celebration of the Campbell High School soccer team. Rather than have a typical sit-down banquet, the boys’ soccer team decided to do what they do best: play soccer. Instead of the typical soccer game, the team and coaches organized a game of bubble soccer.
Bubble soccer involves players wearing clear, inflatable, plastic bubbles that cover a participant from their head to below their waist. The soccer team booked a local small business, Game Truck, to provide the bubble equipment and explain the safety rules for the game.
Almost immediately after the game began, Salvador Reyes ran into another player and was knocked unconscious. Reyes was hospitalized and in a coma for a period of time. As a result of his head injury, Reyes sustained memory loss, impulse control issues, and lost his sense of smell and taste.
Underlying Lawsuit
A few months after the injury, Game Truck was sued by Reyes based on Game Truck’s alleged failures to warn Reyes of the dangers posed by bubble soccer and its failure to provide proper supervision. At the time of the incident, Game Truck was insured by Atlantic Specialty Insurance Company under a CGL policy providing $1,000,000 in bodily injury limits and Game Truck promptly tendered the lawsuit to Atlantic Specialty for defense and indemnity.
Initially, Atlantic Specialty performed exactly as required under the policy and retained defense counsel to defend Game Truck pursuant to the terms of Game Truck’s policy. However, this proper behavior did not continue when Reyes began to make settlement offers.
The first such offer came almost a year after Game Truck was sued when Reyes offered to settle his claims against Game Truck for the payment of $750,000. Atlantic Specialty was sent a copy of the offer but chose to not respond.
Reyes chose to make a second offer, this one compliant with Georgia’s fee shifting statute, to settle his claims against Game Truck for the limits of the Game Truck’s policy. Again, Atlantic Specialty chose not to accept the chance to protect Game Truck.
For the first time, roughly 2 ½ months before trial, Atlantic Specialty informed Game Truck that the Reyes claims could exceed the limits of the Game Truck policy. Despite noting that Reyes’ claim might well exceed $1,000,000 the day before, Atlantic Specialty offered Reyes just $250,000 to settle his claims and protect Game Truck.
Unfortunately for Game Truck, there was little that it could do to protect its interests and the Underlying Lawsuit proceeded to trial. After three days of evidence, the jury returned a net verdict of $4,742,996.16 against Game Truck that continues to accrue post-judgment interest of over a $1,000 daily.
Aftermath
Currently, Game Truck is subjected to an excess judgment of nearly $4,000,000 that grows daily. Game Truck’s current assets, consisting primarily of game trailers, are subject to immediate seizure as Atlantic Specialty chose to post only a partial supersedeas bond. Game Truck has essentially shuttered its business after the judgment and apparently lost its franchise rights as a result of the crippling judgment.
At this point, Game Truck’s only opportunity to return to profitability is to satisfy the judgment against it through its filing of a bad faith case.
While not every claim presents the risk of bankruptcy to small business, far too many do, and this risk is only increased when carriers fail to adhere to their settlement duties. Small businesses and individual insureds should not be pushed to the brink of bankruptcy or to the point of shuttering their doors and their sole hope of survival should not be a bad faith claim decided years after an excess judgment has been entered.
Instead, businesses and individuals should be provided tools to protect themselves when their carriers will not.
Such tools include covenants not to execute as well as §537.065 agreements in Missouri. While theoretically in existence, recent modifications by the legislature have drastically limited the utility of such agreements in Missouri. Unfortunately, many Missouri businesses and individuals may soon find themselves in the same position as Game Truck, with bankruptcy the only viable alternative.
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