In almost every case that crosses our desks these days, plaintiffs make an offer of settlement and set a time limit for acceptance, striking fear in the heart of my clients who then ask: will a court find that we acted in bad faith by refusing to settle within the time limit? The seminal case on this issue is Southern General Ins. Co. v. Holt, 262 Ga. 267, 416 S.E.2d 274 (1992). In Holt, the plaintiff’s attorney made a time-limited settlement offer for policy limits of $15,000. The plaintiff’s attorney advised the insurer the plaintiff’s medical bills totaled more than $10,000 and the lost wages exceeded $5,000. The letter included a doctor’s report indicating the plaintiff had a herniated disc, and included medical bills totaling over $6,000. The plaintiff’s attorney later sent proof of additional expenses of over $4,000. In a last letter to the insurer, the plaintiff’s attorney extended the offer to settle within policy limits for five additional days and included in the letter a certified copy of the plaintiff’s complete medical records. The insurer neither sought more time to evaluate the claim nor responded to the offer before it expired. The insurer offered to settle the case within limits only after the plaintiff’s attorney had withdrawn the offer. A jury returned a verdict in favor of the plaintiff for $82,000. The insured assigned to the plaintiff her claim against the insurer for negligent or bad faith refusal to settle within the policy limits. The plaintiff in this suit sought the excess of $67,000, plus interest.
In the affirming the judgment for the amount of excess, the Georgia Supreme Court first noted the insurer may be liable to its insured for failing to settle a claim “where the insurer is guilty of negligence, fraud, or bad faith.” 262 Ga. at 268. While reiterating the equal consideration rule, the Court further stated “[a]n insurance company does not act in bad faith solely because it fails to accept a settlement offer within the deadline set by the injured person’s attorney.” Id. at 269. The Court, however, rejected the insurer’s argument “that an insurance company has no duty to its insured to respond to a deadline to settle a claim within policy limits when the company has knowledge of clear liability and special damages exceeding the policy limits.” Id. (emphasis in the original). The Court found the insurer did more than simply fail to settle within the time frame set by the plaintiff’s attorney. The insurer had information, including medical bills and documented lost wages, which showed special damages alone exceeded the limits of the insured’s policy. The insurer’s claims representative acknowledged he had the information, but he testified he needed medical documents to support it. The Court noted, however, that neither the claims representative nor the claims manager requested an extension of time to evaluate the plaintiff’s claim. Thus, there was some evidence for the jury to conclude the insurer did not give equal consideration to the interest of its insured.
The issues raised in Holt have percolated through Georgia courts for the past twenty years. Most recently, the Georgia Court of Appeals ruled that Plaintiff’s policy limit demand, without an agreement to assure satisfaction of hospital liens, constituted an excess demand. See Southern General Ins. Co. v. Wellstar Health Systems, Inc., 315 Ga. App. 26, 34 (2012). The Court noted that “had Southern General verified the validity of the liens, made payment directly to Wellstar, and then paid the remainder of its policy limits to Plaintiff, Southern General would have created a safe harbor from liability under Holt and its progeny.” Unfortunately, Southern General had not done so.
As those of us in the insurance defense business know, Holt demands have been abused by some in the plaintiffs’ bar who attempt to extract large settlements by setting short time frames for responses to their demands. The General Assembly took note and last term considered HB 1175 which proposed giving insurers a minimum of 60 days to respond to offers of settlement before being subjected to a bad faith claim. Additionally, the Bill mandated that such offers include full and complete copies of the claimant’s relevant medical records. After various groups, including the plaintiffs’ bar, made their “contributions” to the Bill, it became too unwieldy to come up for a full chamber vote.
The issue of Holt demands has resurfaced before the General Assembly in 2013 – with both sides of the bar coming together in an attempt to create a standardized practice for communicating settlement offers which provides the defense with all pertinent information as well as the time with which to provide a considered response. While they have fallen a bit shy of the goal, there is at last some light at the end of the tunnel.
A secret group (really) of plaintiffs’ and insurance defense lawyers appointed by the Speaker of the House recently negotiated House Bill 336, which would give insurers at least 30 days to respond to a settlement offer submitted prior to the filing of a lawsuit, before a bad faith claim could be brought. HB 336 would also require that all settlement demands include (1) the specific time period in which the demand must be accepted; (2) the amount of the demand; (3) the identification of all parties the claimant would release; (4) the type of release; and (5) the specific claims to be released. Significantly, HB 336’s application will be limited in its application to claims of personal injury or death arising out of the use of a motor vehicle. Finally, while HB 336 does not require plaintiffs to produce all of their related medical records with their initial demand, it does allow insurers to seek clarification regarding the facts of the case, liens, standing to release the claims, medical records and bills, without these requests constituting a counter-offer.
Those in the know anticipate that HB 336 will move through the House Judiciary Committee unscathed due to its “bipartisan” support. At least HB 336 is a step in the right direction.