On Monday, the Supreme Court of Georgia made it easier for insurance customers to sue their insurance companies when the company has acted in bad faith during settlement negotiations. The Court ruled that an insurer that offers the full amount of its policy in a settlement involving multiple insurers is not automatically immunized from a bad faith claim, because an insurer must still act reasonably in regards to any conditions it attaches to the offer.
A bad faith settlement claim essentially alleges that an insurance company has not fulfilled its duties to its customer, because it wrongfully exposed the customer to a verdict at trial which goes beyond policy coverage instead of settling the case before trial.
In the case before the Court, the plaintiff, Fortner, was injured by the defendant in an auto wreck. The defendant had two insurers: the first, Grange Mutual Casualty, with a policy of $50,000 and the second with a policy of $1,000,000. Fortner offered to settle the case with Grange for $50,000 if the second insurer paid $750,000. Grange responded by offering $50,000 if Fortner would sign a full release with indemnification language and dismiss his claim against the defendant with prejudice. No settlement occurred and Fortner won $7,000,000 at trial. After trial, the defendant assigned Fortner any cause of action he may have against Grange for bad faith in failing to settle.
Fortner sued Grange for bad faith but lost in a jury trial. The instructions the jury received basically stated that an insurer only needs to offer the maximum amount of its policy limits to fulfill its duty to its customer. Fortner’s attorney, Robert B. Turner of the Savannah firm Savage, Turner, Pinson & Karsman, argued the instructions were erroneous, since they didn’t say that Grange had to act reasonably. The Supreme Court agreed. Georgia law requires that an insurance company act reasonably. When a plaintiff makes an offer with a condition beyond the control of an insurer, an insurer can avoid bad faith liability by offering the portion of the demand over which it has control. Grange would have escaped liability if it had responded to Fortner’s offer by offering its policy limits. Instead, Grange put conditions on its offer by demanding that Fortner sign a full release of his claims with indemnification language and dismiss his suit against the defendant. Accepting such an offer would have prevented the $7,000,000 verdict against the defendant. The Court ruled that the settlement conditions were within Grange’s control, and as a result, the jury should be able to decide if the settlement conditions were reasonable.
Our personal injury attorneys have successfully represented clients that were the victims of an insurance company’s bad faith refusal to settle a claim. In our experience, bad faith practices by insurance companies are unfortunately common, and customers must be ever vigilant to ensure that they are not being taken advantage of. While this case highlights and corrects some of the abuses which occurred during settlement negotiations, it is important to understand that insurance customers may also have bad faith claims against their insurance companies for other unfair practices such as refusing to pay benefits that are owed or causing payments to be unreasonably delayed.
Pate & Brody is an accomplished Georgia law firm with offices in Atlanta, Macon and Madison. Our lawyers are dedicated to pursuing justice for crime victims, people who have been defrauded by deceptive business practices, or injured through the fault of others. Our lawyers have been recognized on the list of Georgia's "Super Lawyers", and included among Georgia's "Legal Elite" by Georgia Trend Magazine.