GEICO Attorney Questions Insurer’s Policies

     HONOLULU (CN) – A GEICO attorney claims the insurer defamed and harassed him for informing policyholders of their legal rights, and unconstitutionally monitored his attorney-client communication with clients.
     Stephen Keawe Roy sued GEICO, two of its agents and a claims manager in Oahu First Circuit Court. Roy’s wife also is a plaintiff.
     Roy claims the defendants get bonuses from the unethical program, which has been “instituted by GEICO in other locations throughout the U.S. and is extremely profitable.”
     He claims GEICO policies conflict with his legal ethics and judgment, and that the company sends dishonest letters to customers under his letterhead without his permission.
     Roy has been managing attorney for GEICO’s Honolulu law office and has been representing GEICO customers since 1996, he says in the complaint.
     It states: “Plaintiffs bring this action as a result of defendants’ harassment, retaliation and coercion affecting the terms and conditions of employment that directly and proximately resulted from Mr. Roy’s reports and attempts to change GEICO’s policy and practice of: (1) prohibiting him from informing his clients, GEICO’s insureds, that GEICO would indemnify them in excess of policy limits if they were subjected to an excess judgment or award after a policy limits demand had been rejected; and (2) prohibiting him from following Hawaii’s statutory mandates to enter into binding arbitration at the request of his clients. Mr. Roy also questioned GEICO’s practice of monitoring and/or recording his confidential attorney-client communications with GEICO’s insureds. Finally, Mr. Roy reported what he reasonably believed to be unlawful collections practices by GEICO, instituted by [defendant BEICO agent] Mr. [Timothy] Dayton, which violated the Fair Debt Collections Practices Act 15 U.S.C. § 1692 (hereafter ‘FDCPA’) and its Hawai’i analogue, Haw. Rev. Stat. § 480D-3, that ‘included, without limitation, sending letters on Mr. Roy’s letterhead to GEICO’s insureds, without his permission and without his review of their files, falsely stating the insureds owed premiums and that if they did not pay the amount reflected in their letter, GEICO would seek legal redress through the court system and recover treble damages, along with, attorneys’ fees and other charges to which GEICO was not entitled.
     “After Mr. Roy reported these unethical and unlawful policies and practices, he was subjected to harassment, retaliation and coercion by GEICO and the individual defendants. The harassment, retaliation and coercion by GEICO and the individual defendants included, without limitation, being placed on two performance ‘improvement’ plans (‘PIP’s), denying Mr. Roy pay he would have received, but for defendants’ conduct and being forced to work under terms and conditions that jeopardized Mr. Roy’s license to practice law and interfered with his ethical obligations, independent judgment and attorney-client relationships.”
     Roy claims that GEICO, Dayton and defendant GEICO agent Richard Dwyer began retaliating, harassing and coercing him in July 2012 to prevent him from blowing the whistle on GEICO. GEICO agent John Dornan also is named as a defendant.
     The complaint states: “Mr. Dornan frequently approaches the claims adjusters to ask if they have any cases with a select group of plaintiffs’ attorneys. He will take such files involving these plaintiffs’ attorneys from the adjusters and these cases settle without the protracted disputes in which GEICO usually engages.”
     Roy claims that GEICO deters adjusters from settling claims, specifically in cases where GEICO “refused to pay a policy limit demand,” to encourage insureds to go to jury trial.
     GEICO then pays the insured less than the award, Roy claims.
     He claims that GEICO audited his office in 2011 and found that GEICO’s claims personnel were “interfering with the legal staff’s independent judgment and attorney-client relationships.”
     Roy claims that the auditor told him that Dayton and Dwyer’s supervisor had instructed him to “sanitize” the audit report and remove criticisms from it.
     The lawsuit states: “In August 2012, Mr. Roy reported to his supervisor, Richard Dwyer, who also is an attorney, that he opposed and would not adhere to GEICO’s policy prohibiting him from informing his clients, GEICO’s insureds, that GEICO would indemnify them in excess of policy limits if they were subjected to an excess judgment or award after a policy limits demand had been rejected.
     “Mr. Roy sought to do so to establish: (1) that his clients’ personal assets would not be at risk if GEICO claims personnel refused offers of settlement within the limits of insurance purchased and paid for by his clients; (2) to discharge his ethical obligations to fully inform his clients of their right to such excess coverage where GEICO refused to settle; and (3) to provide his clients peace of mind.”
     Roy claims he expressed his concern in a letter to Dwyer, which stated, in part:
     “[Your response] glosses over the basic problem I have ethically and professionally as GEICO’s in-house counsel when representing a GEICO insured client in a third party case in which GEICO has refused to pay a policy limit demand.
     “In that situation Hawaii law and our code of professional responsibilities impose ethical and legal duties on me to my client – not GEICO. You told me that even in a third party case my client -‘only client’ is ‘GEICO’, not our insured. That is not true, at least under Hawaii law.
     “Every GEICO insured client I have ever represented would much prefer it if GEICO would settle their case within policy limits, rather than go to trial. The personal, emotional cost to them of going to trial is astoundingly high.
     “GEICO is wrong to instruct me as in-house counsel that I cannot inform my client (our insured) that GEICO’s policy is, in every case, to pay an excess judgment if one is rendered by a jury, in a case in which GEICO refused to pay a policy limit demand. This non-disclosure by me of the truth to my client violates my legal and ethical duties to my client, and Hawaii Code of Professional Responsibilities and Hawaii case law. It is also legal malpractice by me.
     “I request you and GEICO change this policy. I understand GEICO will not issue ‘Blue Sky’ letters to our clients. However, not allowing me to tell my clients (our insured) the truth, is instructing me to violate the Hawaii Law, and my ethical and legal obligations to my clients. (Brackets and parentheses in complaint.)
     Roy claims that Dayton and Dwyer responded: “[Y]ou retain certain duties to your employer. These include a duty not to divulge confidential business information, such as GEICO’s history of payments and/or settlements in third-party cases. Moreover, the scope of your representation when defending GEICO’s insureds is limited to the defense of the subject liability action. The scope or representation does not include advising the client on insurance coverage issues or the respective obligations of insurers and insureds. As you are aware, Hawaii law does not require an insurer to cover an excess judgment simply because the insurer did not accede to a policy limits demand. Rather, an insurer’s potential liability for an excess judgment depends on the reasonableness of the insurer’s actions. Again, that question is beyond the scope of your representation of GEICO’s insureds.”
     But Roy claims that the opinion of GEICO’s Disciplinary Counsel conflicts with that response, and that GEICO attorneys must use their professional judgment and decline representation if policy provisions or guidelines are ethically unacceptable.
     Roy claims that GEICO has sent letters to policyholders, including active-duty military overseas, on his letterhead, “falsely stating the insureds owe premiums” and that it charges former policyholders “premiums” for not turning in their insurance cards.
     As a result of the unauthorized letters, Roy claims, he and his associates frequently receive calls and threats of legal action from people distressed by the demands.
     Roy claims that Dayton conceived of the letters program, and that he and claims manager John Dornan receive bonuses from it.
     Roy claims that when he asked the defendants to stop this practice, they started using an outside collections agency but continue to use his letterhead and electronic signature.
     He claims they also put him on a retaliatory and unreasonable performance improvement plan and are monitoring and recording his telephone calls.
     Roy seeks an injunction and punitive damages for whistleblower violations, defamation, violations of public policy, intentional infliction of emotional distress, and loss of consortium.
     He is represented by Carl Varady.

%d bloggers like this: