A federal court in North Carolina has dismissed a receiver’s second attempt to plead bad faith and related claims against Government Employees Insurance Co. (Geico) arising from a catastrophic motorcycle collision and a subsequent $2.8 million consent judgment against Geico’s insured. The dispute centered on whether Geico mishandled time-sensitive settlement negotiations by allegedly prioritizing its own interests and failing to follow industry standards when policy limits were inadequate for the severity of the injuries. While the court agreed the action was timely under an accrual rule tied to the excess judgment, it found the allegations still did not plausibly show that Geico rejected a settlement opportunity or otherwise acted in a manner supporting contract, bad faith, or unfair trade practice liability.
The Underlying Crash and Settlement Negotiations
The claims trace back to a 2020 crash in Harnett County, North Carolina, in which Bryce Aaron Rhodes struck Kourtnie Schober’s Harley-Davidson motorcycle, leaving Schober catastrophically injured and resulting in the partial amputation of her left leg. According to court filings, Geico insured Rhodes with liability limits of $100,000. Within roughly two months of the collision, Geico tendered the full policy limits to Schober and mailed a check, reflecting an effort to resolve the claim in light of substantial apparent damages.
Schober, through counsel, considered the tender and made a counterproposal that altered the terms of the resolution. The receiver, John F. Bloss, later alleged that Geico’s inclusion of a release in its initial offer reflected self-protection and that the insurer should have promptly accepted a counteroffer that removed or modified the release. The allegations framed Geico’s conduct as a failure to seize an opportunity to extinguish extensive exposure for the policy limit and as “gambling” with Rhodes’ financial risk, though the pleadings also acknowledged that Schober’s counsel ultimately returned the check and revoked offers during the negotiation sequence.
The Excess Judgment and Receiver’s Bad Faith Theory
After settlement efforts failed, Schober sued Rhodes in March 2021. In October 2022, the state court entered a consent judgment against Rhodes for $2.8 million. Bloss, as court-appointed receiver, then pursued Geico for breach of an asserted contractual duty to settle and for extra-contractual theories including bad faith refusal to settle and unfair and deceptive trade practices. The complaints emphasized the mismatch between the $100,000 limits and the severity of loss, contending that industry standards required heightened diligence and rapid acceptance of settlement terms to protect the insured from an excess outcome.
The first action was dismissed, and Bloss refiled weeks later to address pleading deficiencies. In the renewed complaint, he continued to argue that Geico either rejected Schober’s offer or allowed it to expire by not accepting the counteroffer before it was revoked, and that its approach to releases, adjuster handling, and timing during negotiations constituted aggravating conduct. Geico, represented by Teague Campbell Dennis & Gorham LLP, moved to dismiss, disputing both the timeliness of the action and the sufficiency of the pleaded facts to establish a plausible breach, bad faith, or unfair trade practice claim under North Carolina law.
The Court’s Dismissal for Failure to State a Claim
U.S. Magistrate Judge JoAnna Gibson McFadden recommended dismissal on May 20, concluding that the pleadings did not plausibly show Geico breached a duty to settle or engaged in bad faith or deceptive conduct. U.S. District Judge David A. Bragdon later adopted that recommendation, finding no error in the analysis. A central factual point was that Geico tendered the policy limits quickly and, as characterized by the court, never rejected the counteroffer before Schober withdrew it. The recommendation described Geico as having conducted a reasonable investigation, validated the claim within a short period, and responded to communications within days at multiple points in the negotiation timeline.
On limitations, the court accepted the receiver’s position that accrual for the breach of contract and unfair and deceptive trade practices theories was tied to entry of the excess judgment rather than the earlier withdrawal of settlement communications in March 2021. Even with that favorable accrual ruling, the claims failed on plausibility. The court treated the theory that Geico “failed to settle” as speculative where the pleadings did not allege an actual rejection of a demand or refusal to pay after recognizing the validity of the claim, particularly given the acknowledged policy-limits tender.
Bad Faith, Unfair Trade Practices, and the Fees Ruling
The receiver’s bad faith theories also depended on showing willful refusal to settle or conduct beyond ordinary claims handling. The court relied on Fourth Circuit principles allowing an insurer a reasonable time to investigate and evaluate a claim, and found the pleaded timeline—tendering limits in under two months and engaging in negotiation exchanges—undercut assertions of unreasonable delay or willful stonewalling. The court also rejected the argument that requesting a release or taking time to review a counteroffer, by itself, constituted bad faith, noting that revisions in a counteroffer may affect legal rights and obligations and therefore warrant review.
The unfair and deceptive trade practices theory likewise failed where the allegations did not connect the challenged conduct—such as a roughly two-week review period or purportedly insufficient training of adjusters—to a plausible causal explanation for why Schober revoked offers or why settlement failed. Although the insurer sought attorney fees, the court declined to award them, agreeing with the magistrate judge that the refiled suit was not frivolous or malicious. The litigation proceeds no further on these pleadings, but the rulings underscore the pleading burden for receiver-driven bad faith and UDTPA claims when the complaint acknowledges a prompt policy-limits tender and lacks allegations of an explicit rejection of a settlement demand under North Carolina litigation standards and in cases where accident reconstruction issues may drive liability and damages.
