Articles Tagged with The Smoot Cases

The Georgia Court of Appeals summarized the common-law duty of good faith in dicta more than 60 years ago, noting that a liability insurer may be held liable for damages to its insured for failing to adjust or compromise a claim covered by its policy of insurance, where the insurer is guilty of negligence or of fraud or bad faith in failing to adjust or compromise the claim to the injury of the insured. While this statement of the law endures today, it was the former Fifth Circuit Court of Appeals, applying Georgia law, that gave firm shape to the concept. From 1962 to 1967, the Fifth Circuit issued three decisions in the matter of which describes the duties of the liability insurer to investigate, adjust, and, in the proper case, settle claims against the insured. A detailed examination of the trilogy is a highly instructive primer to the law of common-law bad faith.

The Smoot Cases

The Smoot cases arose from a 1955 automobile accident. Sergeant Smoot was insured by State Farm on an automobile liability policy with limits of $10,000 per person and $20,000 per accident. In November 1955, Smoot was driving, not paying attention and rear-ended Katie Mae Donaldson. The accident involved five cars and was severe enough to knock one of Donaldson’s passengers to the floor of the car. Smoot notified State Farm of the accident and State Farm took a statement from him. Three months after the accident he was assigned to military duty in Guam.

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