Georgia Supreme Court Hands Major Victory to Insurance Companies in Bad Faith Failure to Settle Cases – by Robb Cruser and Timothy Mitchell

In a game-changing decision, the Georgia Supreme Court eliminated bad-faith failure to settle cases absent a “valid offer” from the injured party. In First Acceptance, the Georgia Supreme Court ruled as follows:

“We also asked the parties to address whether an insurer’s duty to settle arises only when the injured party presents a valid offer to settle within the insured’s policy limits or whether, even absent such an offer, a duty arises when the insurer knows or reasonably should know that settlement within the insured’s policy limits is possible. As to this threshold issue, we conclude that an insurer’s duty to settle arises only when the injured party presents a valid offer to settle within the insured’s policy limits.”  (S18G0517, decided March 11, 2019)

Prior to First Acceptance, it was argued that an insurer’s duty to settle arose when it knew or reasonably should have known that a settlement within policy limits was possible, absent an offer. Kingsley v. State Farm Mut. Auto Ins. Co., 353 F. Supp. 2nd 1242 (N.D. Ga 2005). That argument is now dead. If there is no “valid offer” by the injured party, there can be no viable bad faith failure to settle claim against the insurer.

Insurers still need relief from abusive “recipe” demands and a move away from a mere “negligence” bad faith standard, but First Acceptance is a good step in reining in overheated Georgia third-party bad faith litigation.

If you have any questions about the decision or how it applies to bad faith claims handling in Georgia, please feel free to contact Robb Cruser at (404) 881-2626 or rcruser@cmlawfirm.com.

Read the Court’s opinion: Hughes v. First Acceptance – Ga Supreme Ct Opinion