Statute of Limitations
Actions upon written contracts must be brought within six years. The six-year period of limitations applies to insurance policies. On its face, O.C.G.A. § 33-4-6 does not include its own statute of limitations. The six-year statute of limitations for simple written contracts applies to bad-faith actions, because the action is “based upon rights arising from [the] contract of insurance.” Care should be taken, however, because some insurance policies contain contractual terms that effectively limit the statute of limitations.
Amount of the Bad-Faith Penalty
If the insured proves that the insurer acted in bad faith, the insured is entitled to recover “in addition to the loss, not more than 50 percent of the liability of the insurer for the loss or $5,000.00, whichever is greater.” The Court of Appeals has held that if bad faith is found to exist, the amount of bad-faith damages can be determined by the trial court as a matter of law based solely on the amount of the insured loss. The insurance company had argued on appeal that the amount of bad-faith damages should be left to the jury, which could award as bad-faith damages “up to” 50 percent of the loss or $5,000, whichever is greater. The Court of Appeals disagreed, holding that “[t]he clear language of the statute provided for a payment of either 50 percent of the amount of the loss … or $5,000, whichever was greater.” The court further wrote that the insurance company’s “argument to the contrary is based on an inaccurate parsing of the statute.” Arguably, however, the reasoning in Atlantic Title Ins. Co. v. Aegis Funding Corp. fails to take into account the phrase “not more than” that appears in the statute and adds the word “either,” which does not appear in the statute. In addition, physical precedent indicates that the Court of Appeals has approved bad-faith verdicts in amounts lower than the applicable percentage set forth in the statute.
If a single “loss” is comprised of many small amounts totaling less than $10,000 (for example, multiple medical bills resulting from a single accident), only a single $5,000 penalty is appropriate rather than a separate $5,000 penalty for each medical bill the insurance company failed to pay.
O.C.G.A. § 33-4-6 expressly states that “[t]he amount of any reasonable attorney’s fees shall be determined by the trial jury and shall be included in any judgment which is rendered in the action.” Thus, even in cases where the court finds that the insurance company acted in bad faith as a matter of law and awards the bad-faith penalty, the issue of attorney’s fees goes to the jury. Although the statute gives the trial court “discretion, if [the trial court] finds the jury verdict fixing attorney’s fees to be greatly excessive or inadequate, to review and amend the portion of the verdict fixing attorney’s fees,” the failure to submit the issue of fees to the jury in the first instance is reversible error.
The statute bases the amount of the attorney fee award on “the reasonable value of the services based on the time spent and legal and factual issues involved in accordance with prevailing fees in the locality where the action is pending.” An award of fees may be in excess of the amount of the insured loss, so long as it is reasonable under the circumstances. Reserve Life Ins. Co. v. Ayers involved hospital insurance for loss caused by illness. The plaintiff got sick and incurred hospital bills that the insurance company did not pay. The plaintiff sued the insurance company and was awarded $565.10 as unpaid benefits. The insured’s attorney testified that he had expended “great effort” in litigating the claim, preparing the complaint and several amendments and trying the case twice. After the first trial the case had gone up to the court of appeals and come back for a second trial. The attorney also had to make several trips that entailed considerable expense. He estimated the value of his services at $9,293.62. The jury found bad faith and awarded $8,000.00 in attorney’s fees. The Supreme Court of Georgia rejected the notion that the award was “clearly excessive in view of the amount of the principal sued for.”
The statute also requires that any award of attorney fees “shall be fixed on the basis of competent expert evidence.” The authors are aware of no reported decision from the Court of Appeals stating that the attorney prosecuting the case may not be his or her own expert and testify about their fees “standing in their place.” In some courts, practitioners are being allowed to present such evidence “standing in their place” while others are designating third-party experts. The authors urge litigants to consider how fees are to be proved early in the litigation. Presentation by an objective expert that explains the reasonable costs of the legal services rendered may be more persuasive to a jury.
If there is a finding of bad faith in the trial court, attorneys’ fees incurred defending the finding on appeal are also awardable under O.C.G.A. § 33-4-6. In such a case, the ap-pellate court should direct the trial court to conduct further proceedings for the purpose of assessing post-trial fees.
As to statutory bad faith, the penalties contained in O.C.G.A. § 33-4-6 are the exclusive remedies for an insurer’s bad faith refusal to pay insurance proceeds. In Great Southwest Exp. Co. Inc. v. Great Am. Ins. Co. of New York, the insured was a common carrier whose biggest customer was Goodyear Tire and Rubber Company. Several trailers loaded with tires were stolen from the insured’s premises. The common carrier’s property insurer denied coverage, arguing that an “unattended vehicle exclusion” barred coverage. The insured disputed whether the exclusion was part of the policy. During the coverage dispute, Goodyear stopped doing business with the common carrier, forcing the common carrier out of business. In the ensuing coverage litigation, the insured sought lost profits and punitive damages. The Court of Appeals approved the trial court’s grant of summary judgment against the common carrier on that issue, reasoning that the insured’s recovery was limited to its damages under the bad-faith statute: “[A]bsent some special relationship beyond the relation of insurer and insured, O.C.G.A. § 33-4-6 provides the exclusive remedy.”
Similarly, allegations that a fire insurer delayed payment in bad faith does not entitle an insured to additional living expenses or other consequential damages not provided for in the policy or otherwise recoverable under O.C.G.A. § 33-4-6. The bad-faith statute is the exclusive remedy for an insurance company’s bad faith failure to pay, precluding recovery for attorneys’ fees under O.C.G.A. § 13-6-11 and O.C.G.A. § 9-15-14.
Several courts have held that the right to recover penalties and attorneys’ fees under O.C.G.A. § 33-4-6 belongs to the insured and is not assignable. Other courts have stated, without holding, that the opposite is true. A third-party claimant cannot step into the place of the insured and recover under the bad-faith statute. “Although it is also possible to construe O.C.G.A. § 33-4-6 as referring exclusively to  the named holder of the insurance policy, a construction of the statute which recognizes the assignee of benefits as the holder of the policy is preferable under the present facts [assignment of insurance benefits by patient to hospital] because it conforms the operation of the statute to the common law applicable to assignments.”