Bad Faith and Claims by a Third Party for Property Damage to Automobile
A statute modeled after O.C.G.A. § 33-4-6 provides a remedy for third parties with claims for property damage under a tortfeasor’s automobile liability policy. O.C.G.A. § 33-4-7(a) provides:
In the event of a loss because of injury to or destruction of property covered by a motor vehicle liability insurance policy, the insurer issuing such policy has an affirmative duty to adjust that loss fairly and promptly, to make a reasonable effort to investigate and evaluate the claim, and, where liability is reasonably clear, to make a good faith effort to settle with the claimant potentially entitled to recover against the insured under such policy. Any insurer who breaches this duty may be liable to pay the claimant, in addition to the loss, not more than 50 percent of the liability of the insured for the loss or $5,000.00, whichever is greater, and all reasonable attorney’s fees for the prosecution of the action.
The statute has its own 60-day demand requirement, requiring the third party to demand an “amount certain” via certified mail or statutory overnight delivery. If the demand is not paid within 60 days, the claimant may proceed against the insurer, who will be an unnamed party. If the claimant recovers more than or equal to the amount of the demand, the trial shall be recommenced to determine the insurer’s bad faith.
A third party cannot bring an action against an insurer under this statute for failure to make a good-faith effort to settle a personal injury claim as opposed to a property loss.
Bad Faith and UM Claims
Another statute modeled after O.C.G.A. § 33-4-6 provides a remedy for insureds who are improperly denied uninsured or underinsured motorist benefits. “UM” coverage is an optional coverage that an insured may purchase to cover the insured who is injured by the negligence of another person who has no liability coverage or insufficient liability coverage to compensate the insured for his or her injuries. O.C.G.A. § 33-7-11(j) provides:
If the insurer shall refuse to pay any insured any loss covered by this Code section within 60 days after a demand has been made by the insured and a finding has been made that such refusal was made in bad faith, the insurer shall be liable to the insured in addition to any recovery under this Code section for not more than 25 percent of the recovery and all reasonable attorney’s fees for the prosecution of the case under this Code section. The question of bad faith, the amount of the penalty, if any, and the reasonable attorney’s fees, if any, shall be determined in a separate action filed by the insured against the insurer after a judgment has been rendered against the uninsured motorist in the original tort action. The attorney’s fees shall be fixed on the basis of competent expert evidence as to 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. The trial court shall have the discretion, if it finds such jury verdict fixing attorney’s fees to be greatly excessive or inadequate, to review and amend such portion of the verdict fixing attorney’s fees without the necessity of disapproving the entire verdict. The limitations contained in this subsection in reference to the amount of attorney’s fees are not controlling as to the fees which may be agreed upon by the plaintiff and his attorney for the services of the attorney in the action against the insurer.
Unlike the other bad-faith statutes, the one applicable to UM carriers contemplates two lawsuits. The first against the uninsured or underinsured tortfeasor, fixing liability, and a second against the insured’s UM carrier. It is clear that an insured plaintiff must obtain a judgment against the uninsured motorist [pursuant to other subsections of O.C.G.A. § 33-7-11] before filing suit against the UM carrier. It does not follow, however, that the insured must make its 60-day demand to the UM carrier prior to that lawsuit. The Supreme Court of Georgia has ruled that the purpose of the statute is to encourage insurers to make a good-faith examination of claims and to promptly pay all valid claims. The purpose would not be fulfilled if the UM carrier did not have to evaluate the claim until liability is fixed in the lawsuit against the uninsured tortfeasor. Rather, the UM carrier must evaluate the claim upon demand so as to create a possibility that no action against the uninsured tortfeasor is necessary and that the insured victim be compensated.
The penalty of “25 percent of the recovery” refers to the amount of UM coverage, not the recovery against the uninsured tortfeasor.
An insured is not entitled to recover damages from its UM carrier for the tortfeasor’s bad faith and stubborn litigiousness in the insured’s action against the tortfeasor. The statute provides a cause of action for the policyholder who has UM coverage, not for the underinsured motorist subject to a lawsuit that the UM carrier had an opportunity to settle.