Esperanza Garcia v. Geico General Insurance Company , 807 F.3d 1228 ( 2015 )


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  •                Case: 13-15788       Date Filed: 08/19/2015       Page: 1 of 14
    [PUBLISH]
    IN THE UNITED STATES COURT OF APPEALS
    FOR THE ELEVENTH CIRCUIT
    ________________________
    No. 13-15788
    ________________________
    D.C. Docket No. 1:07-cv-23044-CMA
    ESPERANZA GARCIA,
    as Personal Representative of the Estate of Paola Penafiel,
    Plaintiff - Appellee,
    versus
    GEICO GENERAL INSURANCE COMPANY,
    Defendant - Appellant.
    ________________________
    Appeal from the United States District Court
    for the Southern District of Florida
    ________________________
    (August 19, 2015)
    Before WILSON and MARTIN, Circuit Judges, and HODGES, * District Judge.
    WILSON, Circuit Judge:
    *
    Honorable Wm. Terrell Hodges, United States District Judge for the Middle District of
    Florida, sitting by designation.
    Case: 13-15788        Date Filed: 08/19/2015       Page: 2 of 14
    GEICO General Insurance Company (GEICO) appeals from a final
    judgment entered in favor of Esperanza Garcia, personal representative of the
    estate of Paola Penafiel, on Garcia’s Coblentz bad faith claim against GEICO. 1
    GEICO contends that the district court erred in denying the admission of evidence
    of the development of Florida law as it pertained to whether an insurance policy
    GEICO issued to Edgar Baena (Edgar) covered a vehicle collision involving Edgar
    and Penafiel. GEICO also argues that the district court improperly excluded
    evidence of earlier decisions of the district court rejecting the theory on which
    Garcia based her argument that coverage existed. After careful consideration of
    the parties’ briefs and the records, we agree with GEICO and vacate the final
    judgment and remand.
    I.
    Miguel Baena (Miguel) rented a car from Enterprise Rent-a-Car (Enterprise)
    on December 14, 2006. The rental agreement between Miguel and Enterprise
    expressly denied permission to anyone other than Miguel to drive the car. Under
    the agreement, if Miguel violated the provision, the agreement would terminate,
    and Enterprise would be entitled to seize the vehicle and/or report it as stolen to the
    1
    Coblentz v. Am. Sur. Co. of N.Y., 
    416 F.2d 1059
    (5th Cir. 1969). Coblentz agreements
    permit an insured to “enter into a reasonable settlement agreement with the [plaintiff] and
    consent to an adverse judgment for the policy limits that is collectable only against the insurer.”
    Perera v. U.S. Fid. & Guar. Co., 
    35 So. 3d 893
    , 900 (Fla. 2010). If a plaintiff wishes to recover
    in excess of the policy limits, the plaintiff must establish that the insurer acted in bad faith in
    wrongfully denying coverage. 
    Id. 2 Case:
    13-15788       Date Filed: 08/19/2015   Page: 3 of 14
    police. When he rented the car, Miguel also purchased a collision damage waiver
    that would likewise terminate should anyone besides Miguel operate the vehicle.
    Miguel and his brother, Edgar, went out for a night on the town. Edgar
    drove the rental vehicle when the two decided to head home, despite the rental
    agreement’s and collision damage waiver’s provisions. Edgar rear-ended
    Penafiel’s vehicle, killing her.
    Edgar had an automobile insurance policy (Policy) with GEICO at the time
    of the accident. Speaking in general terms, the Policy covered Edgar for vehicle
    collisions wherein he was a driver so long as he drove his own vehicle or the
    vehicle of another with that person’s consent. Specifically, and as is relevant to
    this appeal, Edgar was entitled to coverage while driving another’s vehicle where
    the “use [was] with the permission, or reasonably believed to be with the
    permission, of the owner and within the scope of that permission.”
    Enterprise informed GEICO that Edgar did not have permission to use the
    rental car and of the express limitation on permission contained in the rental
    agreement. Edgar never responded to GEICO’s inquiries regarding whether he
    reasonably believed he had the owner’s permission to use the vehicle. GEICO
    concluded that it did not owe coverage on the accident because Edgar did not have
    Enterprise’s permission to use the car, and there was no basis for suggesting that
    Edgar reasonably believed he had such permission. GEICO conveyed its decision
    3
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    to Edgar, Edgar’s attorney, and counsel for the accident claimants by a certified
    return-receipt letter.
    Garcia filed a complaint for wrongful death against Edgar in Florida state
    court. Rather than defending the action, Edgar entered into a Coblentz agreement
    with Garcia, stipulating to a $5 million judgment. The agreement provided that
    Garcia would not execute against Edgar. Garcia then filed a complaint against
    GEICO, alleging that GEICO acted in bad faith in denying coverage. GEICO
    removed to the United States District Court for the Southern District of Florida and
    filed a declaratory action in that court. GEICO sought a declaration that the policy
    did not cover the accident. The actions were consolidated and the bad faith action
    was stayed pending the outcome of a trial on the coverage issue. Garcia’s theory at
    trial was that, under Florida law, a vehicle owner’s permission to use a vehicle
    could be imputed to an insured third party where the initial permittee grants
    permission to the third party to use the vehicle. In other words, by permitting
    Miguel to drive the car, Enterprise implicitly extended permission to anyone else
    Miguel permitted to drive the car, including Edgar. In denying motions for
    summary judgment by both parties, the district court rejected this “implied
    consent” argument.
    The first two trials resulted in mistrials. After the first, the district court
    directed a partial verdict for GEICO on the issue of whether Enterprise gave Edgar
    4
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    permission to drive the car, “find[ing] as a matter of law that Enterprise did not
    consent to [Edgar’s] use” of the rental car.2 The subsequent trials, then, considered
    only whether Edgar reasonably believed he had permission to drive the car. After
    the third trial, the jury returned a verdict in GEICO’s favor on that issue. Garcia
    moved for judgment notwithstanding the verdict, which the district court denied.
    The district court relied in part on Geico Indem. Co. v. Shazier, 
    34 So. 3d 42
    (Fla.
    Dist. Ct. App. 2010), quashed sub nom. Chandler v. Geico Indem. Co., 
    78 So. 3d 1293
    (Fla. 2011),3 which rejected the implied consent doctrine as a matter of law.
    Accordingly, the verdict established that Edgar did not reasonably believe that he
    had permission to drive the car, and the district court entered judgment in GEICO’s
    favor on the coverage issue, rendering the bad faith question moot.
    Garcia appealed the judgment to this court. During the pendency of the
    appeal, the Florida Supreme Court decided Chandler, which adopted the implied
    consent doctrine and quashed Shazier. See 
    Chandler, 78 So. 3d at 1299
    –1302.
    Accordingly, we reversed the district court and remanded for proceedings applying
    the law as set out in Chandler. See Garcia v. Geico Gen. Ins. Co., 450 F. App’x
    870, 873 (11th Cir. 2012) (per curiam).
    2
    The district court also denied Garcia’s motion for summary judgment, distinguishing
    Florida precedent that Garcia argued supported the implied consent doctrine.
    3
    The order denying the motion for judgment notwithstanding the verdict was issued
    while Shazier was still good law.
    5
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    On remand, the district court entered judgment on the coverage issue in
    Garcia’s favor. 4 The bad faith question was scheduled for a jury trial. In his report
    and deposition, GEICO’s expert witness addressed the nature of Florida law on
    implied consent at the time GEICO denied coverage, including the district court’s
    orders rejecting implied consent prior to the appeal as well as the Shazier and
    Chandler decisions. Garcia sought to exclude discussion of those decisions.
    Initially, the district court sided with GEICO. Before trial, Garcia again raised her
    objection to the evidence. She cited Harbison v. American Motorists Insurance
    Co., 
    636 F. Supp. 2d 1030
    (E.D. Cal. 2009), to support the proposition that,
    because those decisions were issued after GEICO’s coverage determination, they
    could not have affected the substance of the coverage dispute and GEICO’s
    rationale for denying coverage, see Robinson v. State Farm Fire & Cas. Co., 
    583 So. 2d 1063
    , 1068 (Fla. Dist. Ct. App. 1991) (listing “the substance of the coverage
    dispute or the weight of legal authority on the coverage issue” and
    “reasonable[ness] and legitima[cy]” as factors in considering bad faith (internal
    quotation marks omitted)). Garcia also argued that admitting the evidence would
    constitute improper “bolstering” of the expert’s testimony. This time, the district
    court accepted Garcia’s argument, ordering that GEICO’s expert could not discuss
    any of the decisions.
    4
    Because the district judge who had presided over the controversy prior to the appeal had
    been elevated to this court, a different judge handled the case on remand.
    6
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    At trial, Garcia argued that, at the time GEICO denied coverage, Florida law
    had recognized the implied consent doctrine, that such law was well-settled, and
    that GEICO ignored that well-settled law when it denied coverage. After Garcia’s
    expert testified on the subject, GEICO objected, asserting that Garcia had opened
    the door to evidence of the excluded decisions. The district court overruled the
    objection. Garcia later elicited testimony on cross-examination from GEICO’s
    expert that the district court had, prior to the jury trial, determined coverage in
    Edgar’s favor. The expert was not permitted to explain that that decision came
    only after Chandler was issued.
    The jury found in Garcia’s favor, and the district court entered judgment for
    Garcia. GEICO moved for a new trial, relying on the purportedly improper
    evidentiary exclusion. The district court denied that motion. This appeal
    followed.5 For the reasons stated herein, we vacate the final judgment of the
    district court and remand for a new trial consistent with this opinion.
    II.
    In diversity cases, “the admissibility of evidence in federal courts is
    governed by federal law.” Borden, Inc. v. Fla. E. Coast. Ry. Co., 
    772 F.2d 750
    ,
    754 (11th Cir. 1985). We review the exclusion of evidence for an abuse of
    discretion. City of Tuscaloosa v. Harcros Chems., Inc., 
    158 F.3d 548
    , 556 (11th
    5
    There was also a Coblentz issue for the jury that resulted in an additional trial
    subsequent to the jury verdict on bad faith. The issue is not before us.
    7
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    Cir. 1998). A district court abuses its discretion when it makes a legal error, and
    we review legal errors de novo. 
    Id. The district
    court’s evidentiary ruling here
    was oral, and the record does not contain much detail of the district court’s
    consideration of the issue. Based on the district court’s use of the term
    “bolstering” in its order and the switch on the ultimate admissibility question after
    Garcia’s citation to Harbison, it seems that improper bolstering and/or Harbison
    were the reasons for the ruling. Both were legal errors, and the district court’s
    ruling was thus an abuse of discretion.
    A.
    We begin with the threshold for admissibility: relevance. See Fed. R. Evid.
    402. GEICO argued that its legal conclusion that coverage did not apply here was
    a reasonable one based on existing Florida law, or at least that the issue was
    unclear. It is clear that it is relevant to the reasonableness of GEICO’s decision
    and the substance of the coverage dispute that the district court agreed with GEICO
    before the Florida Supreme Court reached the opposite conclusion. See 
    Robinson, 583 So. 2d at 1068
    (stating that the insurer having a “reasonable and legitimate
    basis to deny coverage would be relevant” to bad faith where that reasonableness
    was based in part on an earlier order in the same litigation denying summary
    judgment to the insured on the coverage issue before a jury found in the insured’s
    favor (internal quotation marks omitted)); accord Allan D. Windt, 2 Insurance
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    Claims and Disputes § 9:26A (6th ed. 2014) (“Case law can, in many
    circumstances, constitute evidence that the insurer’s policy interpretation or
    understanding of its rights/obligations was reasonable. Even if the insurer was
    unaware of the case law, or the case law post-dated the insurer’s claim handling,
    the very existence of the case law (or simply the existence of a reasoned dissenting
    opinion) can constitute evidence that the insurer’s analysis was at least
    reasonable—since an independent judge utilized the same analysis.”).
    Shazier also supports GEICO’s contention that Florida courts did not clearly
    recognize the implied consent doctrine prior to Chandler, or that there was at least
    a reasonable basis for concluding that they did not. And Chandler is relevant for
    the purpose of establishing at what point Florida law definitively recognized the
    implied consent doctrine and what caused this court to reverse the first judgment in
    GEICO’s favor.6
    B.
    6
    Chandler described the implied consent doctrine as “long-established” and declared
    Shazier to be in conflict with previous decisions of the Florida Supreme Court. See 
    Chandler, 78 So. 3d at 1296
    . Though the dissent persuasively maintained that rejection of implied consent did
    not conflict with previous Florida Supreme Court decisions, see 
    id. at 1302–03
    (Canady, J.,
    dissenting) (recognizing that the previous Florida Supreme Court decisions imposed vicarious
    liability on rental car owners through Florida’s dangerous instrumentality doctrine and did not
    establish or apply the implied consent doctrine), we must credit the Florida Supreme Court’s
    legal conclusions regarding the law of that state, see Towne Realty, Inc. v. Safeco Ins. Co. of Am.,
    
    854 F.2d 1264
    , 1269 n.5 (11th Cir. 1988). Nonetheless, Chandler at the very least clarified the
    doctrine, and it, in conjunction with Shazier, is indubitably probative of the reasonableness of
    GEICO’s coverage denial.
    9
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    Now that we have established the threshold requirement of relevance, we
    address the district court’s bases for ordering exclusion. Contrary to the district
    court’s implicit conclusion, Harbison does not hold that previous decisions in a
    given litigation are irrelevant to the bad faith question or that such decisions cannot
    otherwise be admitted as evidence on that issue. 
    See 636 F. Supp. 2d at 1043
    .
    First, that order, in denying the insurer’s motion for summary judgment, merely
    stated that a “prior decision in favor of [the insurer’s] motion for summary
    judgment does not preclude a finding of bad faith.” 
    Id. In other
    words, the court
    only refused to give the prior decision there dispositive effect; it did not exclude
    evidence of those rulings from trial. 7 Second, the court refused to give such
    dispositive effect only after concluding that California law clearly provided for
    coverage under the circumstances, while Florida law here was, as discussed in this
    opinion, unclear prior to Chandler. See 
    id. (distinguishing an
    opinion permitting
    admission of decisions coming after the insurer’s coverage decision “because
    there, the court was deciding the reasonableness of an insurer’s coverage decision
    in light of conflicting case law”). Finally, and relatedly, there was no indication, as
    there is here, that the prior decision in that case relied on precedent that was later
    abrogated, overruled, or clarified by intervening state court decisions. See 
    id. 7 The
    court did state that the prior decision was not “admissible evidence supporting the
    reasonableness of defendant’s denial of coverage.” 
    Harbison, 636 F. Supp. 2d at 1043
    .
    However, that was merely dicta, as the order only disposed of a motion for summary judgment.
    See 
    id. at 1033–34,
    1045. Even if the statement were part of the decision’s holding, it is not
    binding, and we do not find it persuasive.
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    The decision in Harbison and Garcia’s argument partially depend on the
    proposition that an insurer cannot rely on court decisions coming into existence
    only after the conclusion that coverage does not exist. We could not agree more.
    It is quite obvious that it is temporally impossible to rely on then-non-existent
    decisions to reach a legal conclusion. However, GEICO does not quibble with that
    proposition. GEICO proffered the evidence because the agreement of a federal
    judge and three Florida appellate judges with GEICO’s conclusion indicates, from
    an objective standpoint, that the conclusion was reasonable, considered existing
    law, and was reached in good faith.
    The district court also seemed to indicate, and Garcia contends, that allowing
    the evidence would constitute improper bolstering. A court may exclude evidence
    as improper bolstering when the purpose of the evidence is to vouch for a witness’s
    credibility. See United States v. Bernal-Benitez, 
    594 F.3d 1303
    , 1313–14 (11th
    Cir. 2010) (explaining improper bolstering in the context of an appeal of a criminal
    conviction). To begin with, bolstering typically comes up in criminal cases.
    Moreover, the evidence GEICO sought to admit said nothing about the expert
    witness’s credibility. Instead, it went to the heart of the issue: whether GEICO’s
    denial of coverage was reasonable and supported by Florida law, or at least not in
    direct conflict with it. The mere fact that it would have corroborated the expert’s
    opinion does not mean that “the prestige of the government [was placed] behind
    11
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    the witness, or . . . [that counsel for GEICO would have] indicat[ed] that
    information not before the jury support[ed] the witness’s credibility.” 8 See 
    id. C. Garcia
    offers two alternative arguments for affirming the district court: (1)
    the exclusion was harmless, see Hearn v. McKay, 
    603 F.3d 897
    , 904 n.11 (11th
    Cir. 2010) (per curiam); and (2) the exclusion did not result in substantial prejudice
    to GEICO, see Cynergy, LLC v. First Am. Title Ins. Co., 
    706 F.3d 1321
    , 1326 (11th
    Cir. 2013). As to the first argument, Garcia contends that the exclusion was
    harmless because the jury found GEICO liable under the alternative theory of bad
    faith in handling the investigation of the claim, notifying of potential excess
    liability, taking steps to reduce potential excess liability, and attempting to settle.
    GEICO responds that these are not alternative theories of bad faith under Florida
    law; rather, they are only factors to be considered in reaching the ultimate
    determination of bad faith. Assuming arguendo that Garcia is correct, we still
    doubt that the exclusion was harmless. Whether GEICO was under any duty to
    investigate, notify, take steps to reduce potential excess liability, or attempt to
    8
    In fact, the Federal Rules of Evidence specifically contemplate the admission of this
    type of evidence when an expert testifies, even in cases where it might otherwise be
    inadmissible. See Fed. R. Evid. 703 (“[I]f the facts or data [on which the expert relied] would
    otherwise be inadmissible, the [expert] may disclose them to the jury only if their probative value
    in helping the jury evaluate the opinion substantially outweighs their prejudicial effect.”); Fed. R.
    Evid. 705 (“[A]n expert may state an opinion—and give the reasons for it—without first
    testifying to the underlying facts or data. But the expert may be required to disclose those facts
    or data on cross-examination.”).
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    settle depends on whether any coverage existed. Cf. Fed. Ins. Co. v. Applestein,
    
    377 So. 2d 229
    , 231 (Fla. Dist. Ct. App. 1979) (“No obligation to defend the
    action, much less to pay any resulting judgment, arises when the pleading in
    question shows either the non-existence of coverage or the applicability of a policy
    exclusion.”). If the jury concluded that GEICO did not act in bad faith in denying
    coverage, that finding would heavily influence its verdict on the alternative charge.
    Similarly, the exclusion substantially prejudiced GEICO. A jury would no
    doubt find it exceedingly relevant that Florida law on implied consent was in a
    state of flux, or that a panel of Florida’s First District Court of Appeal and a United
    States District Judge for the Southern District of Florida supported GEICO’s
    conclusion regarding implied consent. And the Florida Supreme Court’s decision
    in Chandler would allow GEICO and its expert to explain to the jury how Florida
    law on implied consent became clear only after GEICO’s coverage determination.
    The exclusion, then, certainly “substantial[ly] influence[d] . . . the outcome of the
    case.” See 
    Hearn, 603 F.3d at 904
    n.11 (internal quotation marks omitted).
    III.
    Ultimately, where the “weight of legal authority on the coverage issue” and
    the reasonableness of the coverage decision are at issue, see 
    Robinson, 583 So. 2d at 1068
    , we would expect opinions considering, applying, and clarifying such legal
    authority to be relevant. Because the evidence was relevant, and because any other
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    basis for exclusion raised by the district court or by Garcia is insufficient as a
    matter of law, the exclusion was an abuse of discretion. We therefore vacate the
    final judgment and remand for a new trial consistent with this opinion.
    VACATED and REMANDED.
    14