Insurer Liable Only When There is a Clear Demand to Settle Within Limits and a Reasonable Deadline to Respond

The Supreme Court of Georgia issued a unanimous decision clarifying Georgia law regarding an insurer’s duty to settle.  Reversing the Court of Appeals’ decision, the Supreme Court concluded that the insurer was entitled to summary judgment and could not be sued for failing to settle a claim against its policyholder within policy limits unless it was presented with a “valid offer to settle.”  A valid offer to settle must include not only a clear demand to settle within the policy limits, but also a reasonable deadline for the insurer to act.

The Georgia Supreme Court found that the insurer, First Acceptance Insurance Co. (“First Acceptance”), did not act negligently or in bad faith when it failed to settle two individuals’ personal injury claims against the estate of the late policyholder, Ronald Jackson, who caused a multi-vehicle crash that killed Jackson and injured five others.  At the time of the crash, Jackson was insured by an automobile policy issued by First Acceptance with liability limits of $25,000 per person and $50,000 per accident.

An attorney who represented two of the injured individuals – Julie An and Jina Hong – sent two letters to First Acceptance.  In the first letter, the attorney stated his clients would be interested in attending a settlement conference, and, in the alternative, offered to settle their claims for the available policy limits.  First Acceptance did not respond to the letters.

Soon after, An and Hong’s attorney stated that the offer to settle had been revoked and they refused to participate in a settlement conference.  Although First Acceptance later offered to settle An and Hong’s claims for policy limits, that offer was rejected.  Hong and An proceeded with litigation against Jackson’s estate, which resulted in a jury award of over $5.3 million.

Robert Hughes, the administrator of Jackson’s estate proceeded to file suit against First Acceptance, alleging negligence and bad faith in First Acceptance’s failure to settle An and Hong’s claims within the policy limits.  The trial court denied Hughes’s motion for summary judgment and granted First Acceptance’s motion for summary judgment on all claims.  Hughes appealed, and the Court of Appeals reversed and found in favor of Hughes.  The Georgia Supreme Court granted certiorari and held that First Acceptance was entitled to summary judgment.

The Georgia Supreme Court clarified that an insurer does not have a duty to settle a claim within policy limits unless and until there is a valid offer from the claimant to do so.  The Georgia Supreme Court acknowledged that the two letters constituted an offer to settle Hong and An’s claims; however, they failed to specify when acceptance of the offer was required.

The Georgia Supreme Court found that First Acceptance’s failure to promptly accept the settlement offer was reasonable, as an ordinary prudent insurer could not be expected to anticipate that, having specified no deadline for the acceptance of their offer, An and Hong “would abruptly withdraw their offer and refuse to participate in the settlement conference.”  First Acceptance Ins. Co. of Georgia, Inc. v. Hughes, No. S18G0517 (Ga. Mar. 11, 2019).