Silvin v. GEICO General Insurance Company et al

Filing 29

ORDER granting 28 Motion for Recusal. The Undersigned recuses himself from this case and refer[s] the matter to the Clerk of the Court for permanent reassignment to another Judge in accordance with the blind random assignment system, pursuant to this Districts Internal Operating Procedures, IOP 2.16.00. See ORDER for further details. Signed by Judge Robert N. Scola, Jr. on 4/30/2012. (jky)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 11-cv-24128-SCOLA
ERIC O. SILVIN
Plaintiff,
v.
GEICO GENERAL
INSURANCE
COMPANY et al.,
Defendants.
_____________________________________/
ORDER OF RECUSAL
THIS MATTER is before the Court upon the Motion for Recusal [ECF No. 28], filed by
Defendants GEICO General Insurance Co., GEICO Indemnity Co., and GEICO Casualty Co.
(together, “GEICO”). For the reasons set forth below, this Motion must be granted.
Introduction
Following a hearing on GEICO’s Motion to Dismiss, the undersigned realized that he and
his family are insured under auto policies issued by GEICO that may be substantially similar to
the one held by the Plaintiff in this case. Accordingly, the Court directed the parties to weigh in
on whether, by virtue of being a policyholder, the Court has a “financial interest” in the subject
matter of this litigation, as that term is used in 28 U.S.C. § 455(b)(4) and the Canon 3C(1) of the
Code of Conduct for United States Judges. In considering this question, the Court asked the
parties to consider Advisory Opinion No. 26 from the 2009 Guide to Judiciary Policy, Vol. 2B,
Ch. 2 Page 26-1 Committee on Codes of Conduct, which provides that:
[W]hen an insurance company is a party, the judge ordinarily need not recuse
unless the judge has a financial interest in the company. The judge has a financial
interest in the company only if the outcome of the proceeding could substantially
affect the value of the judge’s interest in the company. This could occur if, as a
result of a judgment against the insurance company in the particular case, the
judge’s premiums could be significantly increased or coverage substantially
reduced. . . . .
See 2009 Guide to Judiciary Policy, Vol. 2B, Ch. 2 Pg. 26-1 (emphasis supplied).

Now pending before the Court is GEICO’s Motion for Recusal. GEICO attaches a
declaration to its Motion indicating that the undersigned’s policy is identical to the one held by
the Plaintiff. J. Seawell Decl. ¶ 5. As such, GEICO argues that the Court must recuse because
the undersigned will be required “to construe and interpret an insurance policy form that is the
same form under which he has legal rights.” Recusal Mot. at 3. According to GEICO, the Court
“has a direct ‘financial interest’ in the subject matter in controversy,” pursuant to
section 455(b)(4), because “[a] ruling in favor of Plaintiff in this case could substantially
increase the level of Comprehensive and Collision coverage required to be provided under the
policy form at issue.” Recusal Mot. at 3. In other words, GEICO contends that the Court stands
to benefit from greater or lesser coverage under the policy, depending on the manner in which
the policy language is construed.
Legal Standard
While recusal under 28 U.S.C. § 455(a) “may be waived by the parties after full
disclosure,” “section 455(b) is a per se rule that lists particular circumstances requiring recusal.”
Parker v. Connors Steel Co., 855 F.2d 1510, 1520 (11th Cir. 1988). “[T]he parties cannot waive
a ground for a judge’s recusal when that ground is a judge’s financial interest in a party to the
proceeding.” Emerson Elec. Co. v. General Elec. Co., 846 F.2d 1324, 1327 n.4 (11th Cir. 1988).
Section 455(b)(4) of the recusal statute requires a judge to disqualify himself when “[h]e knows
that he, individually or as a fiduciary, or his spouse or minor child residing in his household, has
a financial interest in the subject matter in controversy or in a party to the proceeding, or any
other interest that could be substantially affected by the outcome of the proceeding.” 28 U.S.C.
§ 455(b)(4).
Legal Analysis
The Court finds recusal is required under section 455(b)(4). As Advisory Opinion No. 26
makes clear, recusal is not required merely because a judge holds a policy from an insurance
company involved in a pending matter. 2009 Guide to Judiciary Policy, Vol. 2B, Ch. 2 Pg. 26-1.
Rather, recusal is mandatory “only if the outcome of the proceeding could substantially affect the
value of the judge’s interest in the company.” Id. Such circumstances “could occur if, as a result
of a judgment against the insurance company in the particular case, the judge’s premiums could
be significantly increased or coverage substantially reduced.” Id. (emphasis supplied). Where
a judge’s interest under an insurance policy is concerned, the relevant inquiry is therefore

whether “the judge’s premiums could be significantly increased or coverage substantially
reduced,” depending on the outcome of the litigation. Id.
The undersigned’s auto insurance policy is identical to the Plaintiff’s in this action.
Plaintiff is asking for declaratory and injunctive relief on behalf of himself and a putative class of
policyholders regarding GEICO’s application of a “betterment” reduction to insurance benefits
under the policy. Specifically, Plaintiff alleges that “while the deduction of the deductible
amount under the policy is appropriate, the deduction for the ‘betterment charge’ or ‘depreciation
charge’ is not allowed under the insurance policy. . . when a vehicle is repaired and is therefore
unlawful.” Compl. ¶ 15.
The Court agrees with GEICO that resolution of Plaintiff’s claims in this action puts
directly at issue the extent of the undersigned’s coverage under the exact same insurance
contract. Were the Court to construe the policy in the manner advocated by the Plaintiff, the
Court stands to benefit financially. As GEICO states, “a declaration prohibiting the application
of betterment adjustments to claims arising under the policy form at issue when a car is repaired
will effectively result in an increase in coverage under the policy form.” Recusal Mot. at 6.
While Advisory Opinion No. 26, discussed above, provides that recusal may be triggered where
insurance coverage could be substantially reduced by the judge’s ruling, it seems even more
obvious that recusal must follow where, as here, the judge’s coverage could actually be increased
by his ruling.1
In addition, the Court notes GEICO’s argument that a ruling in Plaintiff’s favor may
result in a premium increase to offset the greater obligations assumed by the insurer under the
Court’s policy interpretation. Recusal Mot. at 9 n.5. Although the specter of a premium increase
is not presently quantifiable, the Court recognizes it as a plausible outcome of a hypothetical
ruling in Plaintiff’s favor. Under standard principles of insurance, if GEICO did not subjectively
intend for its policies to be construed as Plaintiff advocates, and did not actuarially account for
that extent of coverage, then premiums will likely rise to meet the demands of the greater extent
of coverage. Cf. Ironworkers Local Union 68 v. AstraZeneca Pharm., LP, 634 F.3d 1352, 1364
(11th Cir. 2011) (“Typically, insurers adjust premiums to compensate for known risks assumed

1

The Court, of course, makes no comment on which way the policy language ought to
be, or ultimately will be, construed. That is irrelevant to the Court’s analysis here, and it will be
properly left for the judge to whom this matter is reassigned.

under [the insurance] coverage.”); Float-Away Door Co. v. Cont’l Cas. Co., 372 F.2d 701, 705
(5th Cir. 1966) (“An insured gets the coverage he pays for, and, if the coverage is to be increased
beyond that which he needs or for which the policy provides, the premiums will necessarily be
increased.”) (citation omitted).
Conclusion
Upon due consideration, the Court concludes, for the reasons explained above, that
recusal is required under section 455(b).

Accordingly, it is hereby ORDERED and

ADJUDGED that GEICO’s Motion for Recusal is GRANTED.

The undersigned recuses

himself from this case and “refer[s] the matter to the Clerk of the Court for permanent
reassignment to another Judge in accordance with the blind random assignment system,”
pursuant to this District’s Internal Operating Procedures, IOP 2.16.00.
DONE and ORDERED in chambers, at Miami, Florida on April 30, 2012.

________________________________
ROBERT N. SCOLA, JR.
UNITED STATES DISTRICT JUDGE
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Counsel of record