Insurers in Georgia can be subject to “bad faith” claims depending on how they respond to a settlement demand sent to multiple insurers. When multiple insurers are involved, an insurer likely will avoid a subsequent claim for bad faith if it unequivocally meets the portion of the demand over which it has control and then lets the claimant negotiate with the remaining insurers.
This issue arose in the recent case of Fortner v. Grange Mutual Casualty Co., __ Ga.App. __, Case No. A08A0983, 2008 WL 4334613 (Sept. 24, 2008). There, Fortner was injured in an automobile accident due to the negligence of Arnsdorff. Arnsdorff was insured by Grange Mutual under a policy with a bodily injury liability limit of $50,000, and his plumbing business was insured by Auto Owners under a policy with $1.0 million in liability limits. Fortner’s attorney offered to settle all claims against Arnsdorff for Grange’s policy limits of $50,000 and a contribution by Auto Owners in the amount of $750,000, so long as the offer was accepted in writing within 15 days. Auto Owners did not respond in time, but Grange agreed to pay the $50,000 if Fortner signed a full release, including indemnification language, and dismissed his claim against Arnsdorff with prejudice. Fortner deemed this response by Grange as a rejection, and he proceeded to trial where he won a $7.0 million verdict against Arnsdorff. Arnsdorff then assigned his claim for bad faith against Grange to Fortner. The bad faith claim eventually went to trial where the jury returned a verdict in favor of Grange.
On appeal, Fortner objected to the following charge which was given to the jury:
In responding to a settlement demand, which demand is conditional upon the response of another insurance company, an insurance company can offer its policy limits in response to the demand and then let the plaintiff negotiate with the remaining insurers. In that situation, the insurance company would have given equal consideration to its insured’s financial interest and fulfilled its duty to him. And you would return your verdict in favor of the defendant.
The Georgia Court of Appeals held that this charge was a correct statement of the law and affirmed the verdict in favor of Grange.
Although the holding in Fortner reaffirms the principle of Georgia law that an insurer typically avoids liability for bad faith by meeting the portion of a demand over which it has control, the case also demonstrates the risk associated with adding contingencies to the acceptance of an offer to settle within the policy limits when there is a risk of an excess verdict that could lead to a bad faith claim. In such a situation, the claimant closely scrutinizes the language of any attempted acceptance for new conditions that would allow him or her to consider the insurer’s response to be a counter-offer and thus a rejection of the offer to settle within the policy limits. Therefore, when an insurer is responding to a settlement offer, it should analyze whether it is accepting the offer on the same terms communicated by the claimant or if it is adding any new terms to its attempted acceptance.
For more information, please contact Denny Brown at (404) 633-9230.