A recent decision from the Georgia Supreme Court has clarified when an insurance company may be held liable for engaging in a bad faith denial of claims. The case arose from a multiple-vehicle accident that injured five people. Two of the victims, Julie An and her minor daughter Jina Hong, suffered very serious injuries and brought a claim against the man who caused the accident and his insurance company. Ms. An and her daughter attempted to settle the case for amounts within the policy limits but were unsuccessful. They proceeded to trial where they were awarded $5.3 million in compensation for their injuries. Once that judgment was entered, the original insured (who had caused the accident and had since died) sued the insurance company asserting that it had acted in bad faith for not settling the claim.
What is Bad Faith?
We’ve written about bad faith before, but it may be helpful to revisit the topic. An insurance company acts in bad faith whenever it refuses to honor the contractual obligations of the insurance policy. Bad faith occurs whenever the insurance company unreasonably refuses to pay a legitimate claim or there are unreasonable delays in how it handles the claim.
There Must First Be an Offer
First, the Georgia Supreme Court clarified that insurance companies do not have an obligation to settle claims within policy limits unless the other party has made an offer to settle for that amount. In other words, the insurance company does not have to initiate the offer to settle the claim for an amount within the policy limits.
The Insurance Company Must Reject the Offer
The Court also held that the insurance company must reject the settlement offer before it can be held liable for acting in bad faith. This was important in the case before the court because it was unclear as to whether there was a deadline to reject the offer, or that a failure to accept the offer would constitute a rejection.
The Implications of the Decision
To give some context to the decision, it’s important to understand that the estate of the person who caused the accident sued the insurance company. They did this because the jury awarded Ms. An and Ms. Hong damages that exceeded the policy limits, thus making the estate liable for the amounts not covered by insurance. When the Georgia Supreme Court determined that the insurance company did not act in bad faith, it effectively determined that the estate must pay all amounts due to Ms. An and Ms. Hong that were not covered by insurance.
A great deal of the opinion was spent closely analyzing two letters that contained the offer of settlement. It may be clear what the parties intended from their actions, but there was enough ambiguity that the court found that the insurance company did not act unreasonably. Another takeaway from this case, therefore, is the importance of carefully drafted correspondence.
Slappey & Sadd – Georgia Bad Faith Insurance Attorneys
Bad faith insurance claims are a complex area of the law. If you think your insurance company is handling your claim in bad faith, the attorneys at Slappey & Sadd can help. We’ve been helping people across the state of Georgia get the compensation they deserve since 1992, and we bring our knowledge and experience to every case we handle. If you’d like to schedule a free consultation, call us at 888-474-9616 or contact us online to discuss how we can help you.