Recently, the Supreme Court of Georgia came down with another important ruling in the long line of "bad faith" cases in Georgia. In this most recent case, First Acceptance Insurance Company of Georgia, Inc. v. Hughes, S180517, the Court asked the parties to address whether an insurer's duty to settle only arises when an 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. The Court concluded that an insurer's duty to settle only arises when the injured party presents a valid offer to settle within the insured's policy limits.
In this particular case, the injured parties presented the insurer with a valid offer to settle within the insured's policy limits, but they did not include a deadline for response. It was concluded as a matter of law that the insurer could not have acted unreasonably in failing to accept the offer before it was withdrawn. The reasoning being that prior rulings on this issue express that "[a]n insurance company may be liable for the excess judgment entered against its insured based on the insurer's bad faith or negligent refusal to settle a personal injury claim within its policy limits." Cotton States Mut. Ins. Co. v. Brightman, 276 Ga. 683, 684(1), 580 S.E. 2d 519 (2003). The Court in Brightman further stated that an "insurer is negligent in failing to settle if the ordinarily prudent insurer would consider choosing to try the case created an unreasonable risk. The rationale is that the interests of the insurer and insured diverge when a plaintiff offers to settle a claim for the limits of the insurance policy." Id. at 685(1). The Court in Hughes further applied that an insurance company's bad faith refusal to settle a claim depends on whether the insurer "acted reasonably in responding to a settlement offer," and whether the insurer accorded its own interests and the interests of its insured equally. See Fortner v. Grange Mut. Ins. 286 Ga. 189, 190, 686 S.E. 2d 93 (2009).
The undisputed fact pattern showed that First Acceptance retained counsel to assist with the settling of multiple claims arising from a bad accident with multiple injuries. On January 15, 2009, First Acceptance's attorney sent a letter to all injured parties and invited them to attend a settlement conference. On February 2, 2009, First Acceptance's counsel sent another letter to the injured parties' counsel letting them know that one of that injured parties was interested in attending the settlement conference. On June 2, 2009, counsel for Julie An and Jina Hong sent two separate letters to counsel for First Acceptance. In the letters, he expressed interest in attending the settlement conference, or in the alternative, offered to settle his clients' claims for the available policy limits. On July 10, 2009, An and Hong filed a Complaint, and on July 13, 2009, their counsel sent a letter to First Acceptance stating that "it has now been 41 days since [he sent his] letter, and [he] had received nothing." He withdrew his clients' offer to settle, refused to attend the eventual settlement conference, and refused to accept eventual policy limit offers from First Acceptance of $25,000.00 per person. These Plaintiffs proceeded to eventually obtain a verdict in the amount of $5.3 million.
The Court's primary focus was on the two letters sent by counsel for An and Hong on June 2, 2009. The first letter acknowledged the receipt of First Acceptance's January 15, 2009, letter concerning a potential settlement conference, and expressing his clients' interest in resolving their claims within the applicable policy limits and their interests in attending the settlement conference. The letter then goes on to discuss his clients' UM benefits, and the fact that An and Hong would be willing to resolve his clients' claims for all of First Acceptance's applicable policy limits, and if First Acceptance would provide release documents with requested insurance information, along with its insured's available bodily injury liability insurance proceeds. The second letter stated that "[w]e hereby request that [First Acceptance] provide within thirty days of the date of this letter," certain insurance information.
In applying its prior rulings, the Supreme Court offered that to the extent any confusion or lack of clarity has existed to date, its ruling in Hughes will now serve as a clarification that an insurer's duty to settle arises when the injured party presents a valid offer to settle within the insured's policy limits. In other words, the insurer has to receive a valid demand before they can be considered to be in bad faith. In order to be a valid demand, the demand will need to be something the insurer can indeed respond to with some level of specificity, i.e., there has to be a known deadline.
In Hughes, the Court added clarity to the long-standing question of what constitutes an offer. The Court reaffirmed that it is the mechanism for determining the interpretation of an offer. See Weill v. Brown, 197 Ga. 328, 332, 29 S.E. 2d 54 (1944). If an offer is too indefinite for a court to so determine, there can be no assent thereto. See Herring v. Dunning, 213 Ga. App. 695, 697, 446 S.E. 2d 199 (1994). Using the rules of contract construction, as the Court determined it was appropriate given that there was ambiguity contained in the fact pattern at issue, the Court determined that the letter sent by the injured parties' counsel to their insurer did not constitute a time-limited offer that the insurer could accept. In particular, the Court stated that the letter did not provide a specific deadline within which the insurer could have accepted any demand, if one had in fact existed, and that the 30 day deadline set forth in the second letter did not apply to the offer to settle set forth in the first letter. As such, no time limit existed for acceptance of the offer to settle, and First Acceptance could not have been unreasonable in its lack of response to An and Hongs' offer to settle.