GEICO Attorney Questions Insurer’s Policies

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.

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