- "GEICO ordered to pay Missouri woman 5.2 million
after she contracted STD in car."
"GEICO must pay 5.2 million to a woman who got HPV
from sex in man's insured car, court rules."
Well, I'm sorry to tell you that the headlines are wrong,
but the truth is even more interesting
because it involves nuances
and esoteric details of insurance law.
Now, you may have heard
that GEICO was on the hook for 5 million
because a woman contracted HPV after she had sex with a man
in his 2014 Hyundai Genesis that was insured by GEICO.
And it is true that a thing happened
that a lawsuit was filed between the former couple.
The man knew he apparently had throat cancer
that was caused by HPV
but did not tell the woman that he had it.
She took him to an arbitration
and was awarded more than 5 million.
As Lawyer Elie Mystal put it,
"That was probably an expensive 15 minutes for GEICO."
(dramatic music)
Now, it occurs to me
that I probably should have put a warning on this episode.
If there are any kids watching,
sex is when two people love each other
and then wrestle in the back of a car,
in this case, a 2014 Hyundai Genesis.
And when those two people no longer love each other,
they will sue each other for what happened in that car.
Now, how does that implicate GEICO, you might ask?
Well, the man's car was insured by GEICO.
The encounter happened in 2017,
and the woman filed an insurance claim, which GEICO denied.
GEICO told the woman
it's auto insurance coverage didn't apply
because the damages claim did not arise
out of a normal use of the vehicle,
which I think we can all agree, probably makes sense.
And now to understand this whole case,
we have to take our first diversion
into the nuances of insurance law.
Because generally speaking,
when you get an insurance policy,
it provides insurance over, let's say an accident happening,
in occurrence of some kind, but in addition,
you'll often get what's called a duty to defend.
In other words, if you are sued
over something that might be covered by the policy,
then the insurance company has to provide lawyers
or at least the funds for lawyers to defend that case.
♪ Send lawyers, guns and money ♪
Now, when an insurance company refuses
to defend its policy holder,
it's considered basically the same
as denying coverage outright,
saying that the policy doesn't cover
the accident that happened.
So an insurance company that wrongfully refuses
to defend its insured can be liable
for the cost of the defense in any damages that arise
from the breach of their duty to defend.
Now, how do you know
if a policy is going to apply to an accident,
or whether the insurance company has a duty to defend you?
Well, you look to the four corners
of the complaint in the lawsuit,
and you compare that to the policy itself.
This is called the four corners rule,
or sometimes the eight corners.
You're comparing what's contained
inside the lawsuit complaint
to what's contained inside the policy.
And if it's possible, if it's a remote possibility
that this claim could be covered by the insurance policy,
then the insurance company
has to provide you with a defense.
Now, if the allegations are untrue,
then the insurance company won't have to pay a judgment
because well, they'll win.
But you can't know that until the trial is over,
which is why the insured needs someone to pay
for their defense.
And that's why there's often a duty to defend
under certain policies.
And that's why sometimes the defense costs
are the whole ballgame.
If the insurance company denies the defense,
then the insured might be in a world of trouble.
They have to defend against a lawsuit all on their own,
and lawyers are expensive.
Now, an old partner of mine used to say that,
"The only thing an insurance policy gets you
is the right to sue an insurance company."
In other words, if they deny your defense or deny coverage,
then you might have to sue the insurance company
if you lose the initial case going forward.
But that's why some plaintiff's attorneys
will actually specifically try to cast their allegations
in a way that will invoke insurance coverage,
so that they make sure the insurance company
is part of the litigation.
They'll either add another claim,
or they will craft the story
of what happened in a way that might fall
under coverage of the insurance company
because the insurance companies
tend to be the ones that have the big pockets.
So now we come back to this particular case.
In February of 2021, the woman sent GEICO
a copy of a lawsuit that she was about to file
against the Insured,
the guy that she had sex with in the car.
She offered to settle the claim for $1 million.
GEICO ignored the notice.
Basically, GEICO decided that the claim wasn't covered
and refused to defend.
Basically, GEICO said, "Having sex in a car that we ensure
is not covered under the policy,
so we're not going to provide coverage,
and we're not going to provide a defense
to the guy whose car it was."
And for the record,
these people only use their initials in the lawsuit,
which was probably an incredibly smart decision
so that they don't go and down in history
for something that may or may not have happened
in this particular suit.
And for the record, M.O. is the injured party.
She's the one that contracted HPV.
M.B. is the man with a car who gave her HPV.
So now we're in 2021,
M.B. is going to defend this lawsuit on his own dime
because GEICO has refused to provide a defense.
So GEICO basically takes itself out of the picture.
At which point, the Insured, M.B.,
the guy with the car and the STI,
enter into an arbitration agreement
with M.O. in March of 2021.
And they agree to settle their dispute through arbitration.
Now, Missouri's insurance laws have some procedural quirks,
and the relevant statute is section 537.065.
That statute allows a claimant, like M.O.,
to enter into a contract with the tort-feasor here,
M.B., the guy with the HPV,
to settle their dispute in private arbitration,
which would be much, much cheaper
and much, much quicker than going to trial in state court.
Now, you're allowed to enter into one of these agreements
when the insurance company has refused to defend the insured
or agrees to a defense of honor
under a reservation of rights,
which I won't go into.
Now, the parties enter arbitration with an agreement
that the maximum payout that the arbitrator can give
is whatever the insurance policy limits are.
And generally, that the plaintiff
won't go after the defendant, the tort-feasor,
and will just take the judgment
and use it against the insurance company,
which as discussed, depends on whether the claim
is covered or not.
Effectively, the plaintiff is gambling
that the claim is or should have been covered.
And if they win in arbitration,
they're going to take that award and say,
"You, insurance company,
you should have covered your insured.
And, therefore, you can just pay me everything that was owed
because we made this side agreement."
So in other words, once you get an award in arbitration,
either the insured sues the insurance company
and turns that money over to the claimant,
or the claimant standing in the shoes of the insured
sues the insurance company saying
that they wrongfully denied coverage or defense costs,
that's called subrogation.
Now, obviously, insurance companies hated all of this
and that's why this section has been amended twice,
once in 2017 and once in 2021.
And this is effectively exactly what happened here.
They went to arbitration without GEICO,
'cause GEICO said they didn't wanna participate,
they didn't think it was covered,
and the claimant got an award of $5.2 million.
And the arbitrator found,
and yes, this is the actual language
that the arbitrator had to find
because law is interesting.
The arbitrator found, quote, "there was sexual activity
in Insured's automobile in November/December of 2017
which occurred in Jackson County, Missouri; 2,
these sexual activity in Insured's vehicle
'directly caused, or directly contributed
to M.O. to be infected with HPV';
3, Insured knew or had been told his throat cancer
was diagnosed as HPV positive;
4, Insured should have disclosed his diagnosis
to M.O. prior to their sexual activity that occurred,
and he did not; and 5,
Insured was negligent and is liable
for causing M.O. to contract HPV.
The arbitrator found that the 'amount that would fairly
and justly compensate Plaintiff, M.O.,
for all of her damages and injuries is $5.2 million'
and entered an award in that amount
'in favor of Plaintiff, M.O.,
and against the Defendant, the Insured.'"
So in the end,
the arbitrator awarded her 5.2 million in damages.
And so the headlines were sort of right,
that M.O. did get a judgment for 5.2 million
against the guy that screwed her.
Pun absolutely intended.
(bomb exploding)
But here, it just wasn't against GEICO.
Yet, GEICO asserted that the plaintiff and defendant
had conspired to jack up the damages award
in the arbitration.
M.O.'s counsel says that this wasn't the situation
in their case, that the liability
and damages were determined on the merits,
and the arbitration proceeding was not based
on any admissions and that it was fairly contested.
There were arguments and witnesses going both ways.
But after this arbitration award,
the woman informed the Insured that she would file
an action in state court to confirm the damages award,
which is what you do.
When you get an arbitration award,
you then basically confirm it in state court.
Now, at this point, GEICO tried to intervene.
They wanted a new trial
because they didn't think the arbitration was fair.
That motion was denied.
But at the same time, in April of 2021,
GEICO filed a separate suit in federal court
in the district of Kansas seeking a determination
that it has no duty to defend
or indemnify M.B., the guy with HPV.
So GEICO chose to fight its case in two fronts,
one in the state court and one in federal court.
And it's really the federal court case
that's going to determine on the merits,
whether GEICO actually has to provide a defense
or provide indemnity based on the contract language.
We'll come back to that in a second.
Now, in state court, GEICO argued that the judgment,
the arbitration, violated the company's due process rights,
and the arbitration agreement was unenforceable.
GEICO said it never had an opportunity to participate
in discovery or to provide a meaningful defense.
And by the time that they were aware of the judgment,
they argued it was too late.
And you can see some merit to this.
They didn't get a chance to contest the facts
in this more or less secret arbitration,
where the Claimant and the Insured might have colluded
to drive up the award.
And at the very least, the Insured didn't care
because, by virtue of the agreement that he made,
he wasn't on the hook for the damages.
So he might not have colluded,
but he also didn't care if there was this giant judgment
because the Plaintiff, M.O.,
was just gonna turn around and sue GEICO over it.
Now, on the other hand, this arbitration and this award,
it's not against GEICO,
it's an award against M.B., the HPV guy.
If GEICO was right that the policy doesn't cover it,
then they don't have to pay.
And we'll talk about that in a second,
whether the policy covers it.
And if GEICO wanted to participate
in this from the very beginning
and they were worried that they would have to pay indemnity
to M.B. or cover his defense costs,
then they could have provided him a defense
from the very beginning.
That's the point of the duty to defend.
And that's why state laws are often crafted
in a way to incentivize insurance companies
to provide a defense.
Because you can't go back in time
and provide a defense after the fact.
So if you, the insurance company, are worried
that you might have to cover the damages award,
well, then provide a defense to the guy
that you provided insurance
and participate throughout the entire thing.
As the Missouri court found, quote,
"GEICO's claim of constitutional deprivations
presumes GEICO was denied the opportunity
to defend its interest relating
to M.O.'s claims against Insured,
including the ability to challenge liability and damages.
But GEICO did have the opportunity to participate
and defend its interests,
including the ability to challenge liability and damages,
by entering a defense of the Insured.
GEICO did not take advantage of this opportunity,
and instead denied coverage and refused to defend Insured.
Moreover, GEICO initiated a declaratory judgment action
in federal court seeking a determination
as to its obligations under the insurance policy,
and that federal action provides yet another forum
in which GEICO may defend its interest."
And right, the federal court action.
GEICO is currently suing in federal court
for an order that says the policy doesn't cover
the HPV transmission at all.
And if they win, they won't have to pay anything,
no part of the 5.2 million,
because that judgment is only against M.B.
So the headlines were wrong.
There has been no determination that GEICO was responsible
for this 5.2 million award, for now.
There's also no determination
that GEICO wrongfully denied a defense to M.B.,
but they might.
Now, usually if someone files an insurance claim
because they were injured in a car,
it's because of an accident.
That's one of the reasons that this seems
like an unfair ruling.
It puts insurance companies in a weird position
of defending any and all claims,
no matter how bonkers they might seem.
But it's really a question
of whether the insurance policy actually applies
to this scenario.
GEICO asserted that there's no way policy
can be interpreted to include this kind of negligence.
The woman sued over the contracting an STI in a car.
But to determine that,
we have to look at the policy language.
Generally, since insurance companies write these policies,
the language is construed against them.
Let me know if you've ever had a chance
to write a custom insurance endorsement.
Generally, the insurance company
gives you what they give you,
which is why policies are often hundreds of pages long.
They're trying to prevent any and all weird situation.
So in this particular case, what does the policy say?
Well, I had to do some digging,
but I found the relevant language
in GEICO's appellate brief.
According to GEICO, the policy covers bodily injuries
"arising out of the ownership, operation, maintenance
or use of a motor vehicle."
Now, you might notice, that language is very broad.
Does this type of injury arise
out of the ownership of a car?
Well, it seems like a lot
of stuff arises out of the ownership.
Does it qualify as use of the motor vehicle? Maybe.
Is this a bodily injury? Maybe.
Is it the type of bodily injury
that's intended to be covered by an insurance policy?
Who knows?
But for the most part, you're just looking
at the text and the meaning of the words
that are in the policy itself
construed against the insurance company
or in the light that is more favorable to the insured.
So it's possible that GEICO might have to cover this,
because if it's even possible
that this language covers this situation,
then GEICO was wrong to deny defense to M.B., the Insured,
and they're gonna be on the hook
for not only the attorney's fees,
but also the award of damages itself.
But we'll know soon.
GEICO filed a lawsuit in federal court
seeking a declaratory judgment
that it is not responsible for this situation.
And that is scheduled for trial in October.
But even if GEICO loses,
don't consider this a license to engage in unsafe sex,
because you can bet
that GEICO has already changed the policy language
in all of its car policies to make sure
that no future policies cover this situation in the future.
But either way,
it seems this is the new McDonald's hot coffee case.
People completely misunderstood what was happening
in this particular case.
But it is another example
of using your car for weird things.
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