Bad Faith Insurance Denial Claims in Georgia

Georgia law sets three different statutory penalties for an insurer’s bad faith, each with its own claimant, its own trigger, and its own ceiling, and separate case law addresses an insurer’s refusal to settle a bodily-injury claim within policy limits, where the exposure is an excess judgment rather than a statutory penalty. Which one applies turns on who is asking (a policyholder, a claimant on the other side of a collision, or an insured injured by an uninsured driver) and on what was lost (a covered loss, damaged property, or a bodily-injury claim).

Three Statutes, Three Different Claimants

Statute	Who may claim	Loss involved	Trigger	Amount above the loss
OCGA 33-4-6	The holder of the policy	A loss covered by a policy of insurance	Refusal to pay within 60 days after a demand by the holder, and a finding that the refusal was in bad faith	Not more than 50 percent of the insurer's liability for the loss or $5,000, whichever is greater, plus reasonable attorney's fees
OCGA 33-4-7	A claimant potentially entitled to recover against the insured under a motor vehicle liability policy	Injury to or destruction of property	A demand letter offering to settle for an amount certain, refusal within 60 days of receipt, a recovery equal to or above the demand, and a finding of bad faith in handling the attempted settlement	Not more than 50 percent of the insured's liability for the loss or $5,000, whichever is greater, plus reasonable attorney's fees
OCGA 33-7-11(j)	The insured	A loss covered by the uninsured-motorist statute	Refusal to pay within 60 days after a demand by the insured, and a finding of bad faith	Not more than 25 percent of the recovery or $25,000, whichever is greater (the "$25,000" alternative was added by a 2021 amendment applicable to causes of action accruing on or after July 1, 2021), plus reasonable attorney's fees

The measures differ in a detail that changes the arithmetic. Section 33-4-6 measures the penalty against “the liability of the insurer for the loss,” Section 33-4-7 against “the liability of the insured for the loss,” and Section 33-7-11(j) against “the recovery.” Each amount is a ceiling (“not more than”), stated as the greater of a percentage and a fixed sum. The timing also differs: under Section 33-7-11(j), bad faith, the penalty, and the fees are decided in a separate action the insured files against the insurer after a judgment against the uninsured motorist in the original tort action.

How a First-Party Claim Under OCGA 33-4-6 Runs

The subsection applies “[i]n the event of a loss which is covered by a policy of insurance and the refusal of the insurer to pay the same within 60 days after a demand has been made by the holder of the policy and a finding has been made that such refusal was in bad faith” (OCGA 33-4-6(a)). The trial jury sets the reasonable attorney’s fees, which “shall be fixed on the basis of competent expert evidence as to the reasonable value of the services,” and the trial court may amend a fee verdict it finds “greatly excessive or inadequate” without disapproving the entire verdict. The statute’s limits on fees “are not controlling as to the fees which may be agreed upon by the plaintiff and the plaintiff’s attorney for the services of the attorney in the action against the insurer” (OCGA 33-4-6(a)).

Within 20 days of bringing the action, the plaintiff must mail the Commissioner of Insurance a copy of the demand and complaint by first-class mail, in addition to service of process, and a failure to comply “may be cured by delivering same” (OCGA 33-4-6(b)).

Property-Damage Claims Under OCGA 33-4-7

Section 33-4-7 applies to “a loss because of injury to or destruction of property covered by a motor vehicle liability insurance policy.” The insurer “has an affirmative duty to adjust that loss fairly and promptly, to make a reasonable effort to investigate and evaluate the claim, and, where liability is reasonably clear, to make a good faith effort to settle with the claimant potentially entitled to recover against the insured under such policy.” The claimant in that sentence is the person on the other side of the collision, not the policyholder.

The duty is breached “when, after investigation of the claim, liability has become reasonably clear and the insurer in bad faith offers less than the amount reasonably owed under all the circumstances of which the insurer is aware” (OCGA 33-4-7(b)). A claimant recovers under the statute if the claimant or the claimant’s attorney delivered a demand letter “by statutory overnight delivery or certified mail, return receipt requested, offering to settle for an amount certain”; the insurer refused within 60 days of receipt, “thereby compelling the claimant to institute or continue suit to recover”; and the claimant “ultimately recovers an amount equal to or in excess of the claimant’s demand” (OCGA 33-4-7(c)).

Subsection (d) sets the insurer’s place at trial. After the 60 days, the claimant may serve the insurer with the complaint, and the insurer “shall be an unnamed party, not disclosed to the jury, until there has been a verdict resulting in recovery equal to or in excess of the claimant’s demand”; if that occurs, “the trial shall be recommenced” for the trier of fact to decide whether bad faith existed in the handling or adjustment of the attempted settlement (OCGA 33-4-7(d)). The recovery, including any reasonable attorney’s fees, is entered in a separate judgment against the insurer (OCGA 33-4-7(f)), and subsection (g) requires the plaintiff to mail the Commissioner a copy of the demand and complaint within 20 days of bringing the action.

When an Insurer Refuses a Bodily-Injury Settlement Within Limits

This remedy comes from case law rather than a penalty statute. “An insurance company may be liable for damages to its insured for failing to settle the claim of an injured person where the insurer is guilty of negligence, fraud, or bad faith in failing to compromise the claim” (Southern General Insurance Co. v. Holt, 262 Ga. 267 (1992), citing McCall v. Allstate Insurance Co., 251 Ga. 869 (1984)), and “[i]n deciding whether to settle a claim within the policy limits, the insurance company must give equal consideration to the interests of the insured” (Holt). The exposure is the excess judgment: an insurer “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 claim within the policy limits” (Cotton States Mutual Insurance Co. v. Brightman, 276 Ga. 683 (2003)).

The Supreme Court of Georgia has explained why the duty exists: “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. The insured is interested in protecting itself against an excess judgment; the insurer has less incentive to settle because litigation may result in a verdict below the policy limits or a defense verdict” (Brightman). The measure is reasonableness: “[j]udged by the standard of the ordinarily prudent insurer, the insurer is negligent in failing to settle if the ordinarily prudent insurer would consider choosing to try the case created an unreasonable risk” (Brightman).

Holt applied those rules to a time-limited offer. The insured had driven through a stop sign, and liability for the collision was undisputed. The injured person’s attorney offered to settle for the policy limits, sent medical documentation, kept the offer open for ten days, and then extended it for five more days; the insurer did not seek more time or respond before the offer expired. After the offer was withdrawn, the insurer twice offered its $15,000 limits, and both offers were rejected. A jury later returned a verdict of $82,000. The Court rejected the insurer’s argument that it had no duty “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,” and agreed with the lower courts that a jury question was presented on the insurer’s negligent or bad-faith refusal to settle.

The claim belongs to the insured. In Holt, Brightman, and Fortner v. Grange Mutual Casualty Co., 286 Ga. 189 (2009), the insured assigned it to the injured person, who then sued the insurer.

Demands With a Condition the Insurer Cannot Control

An insurer facing a settlement demand that depends on another insurer’s payment can protect itself by meeting the part of the demand it controls. In Brightman, the injured driver offered to settle for the $300,000 limits of the van owner’s policy, contingent on the van driver’s own insurer also tendering its $100,000 limits, within ten days. Neither insurer tendered within that period. The first insurer offered its limits about six weeks later, in exchange for a general release and a dismissal with prejudice, and the case went to trial. The Court held that an insurer facing a demand that involves multiple insurers “can create a safe harbor from liability for an insured’s bad faith claim under Holt by meeting the portion of the demand over which it has control, thus doing what it can to effectuate the settlement of the claims against its insured,” and it found evidence supporting the jury’s verdict against the insurer.

Fortner marked the limit of that rule. The at-fault driver had a $50,000 bodily-injury policy with one insurer, and the driver’s plumbing business had $1 million in liability coverage with another. The injured person offered to settle for the $50,000, contingent on the second insurer paying $750,000. The first insurer answered that it would pay its $50,000 only if the injured person signed “a full release with indemnification language” and dismissed the claim against the driver with prejudice; the case went to trial and produced a $7 million verdict. Because those conditions “clearly were within the insurer’s control,” the jury should have been allowed to weigh whether adding them was reasonable, and a charge requiring a verdict for the insurer based solely on its tender of the limits, without regard to the added conditions, was error. The Court offered no opinion on whether the insurer in fact acted reasonably.

Pre-Answer Offers in Motor Vehicle Injury Claims

For a claim for personal injury, bodily injury, or death arising from a motor vehicle collision, OCGA 9-11-67.1 regulates the settlement offer. An offer made before the defendants answer, and prepared by or with the help of an attorney, must be in writing, must carry the material terms the statute lists, including an acceptance date at least 30 days from receipt, and must be sent by certified mail or statutory overnight delivery with a reference to the Code section (OCGA 9-11-67.1(b), (g)). Subsection (i) bars a civil action for failure to settle when the recipient, by the dates in the offer, accepts the material terms in writing except the amount of payment, provides any required sworn statement about coverage, and pays the lesser of the amount demanded or the available bodily injury limits; that protection reaches any offer to settle such a claim, subject to the exception in paragraph (3) (OCGA 9-11-67.1(i)).

Frequently Asked Questions

Does paying the claim late end a bad-faith action?
No. Under OCGA 33-4-6(a), the action “shall not be abated by payment after the 60 day period,” and OCGA 33-4-7(e) says the same for property-damage claims.

Can an expert’s opinion alone decide bad faith before trial?
No. Under both statutes, the testimony or opinion of an expert witness may not be “the sole basis for a summary judgment or directed verdict on the issue of bad faith” (OCGA 33-4-6(a); OCGA 33-4-7(e)).

Is missing a settlement deadline bad faith by itself?
No. “An 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” (Holt). Quoting a federal decision, Grumbling v. Medallion Insurance Co., 392 F. Supp. 717 (D. Or. 1975), the Court added that nothing in its ruling means a plaintiff’s attorney “could ‘set up’ an insurer for an excess judgment merely by offering to settle within the policy limits and by imposing an unreasonably short time within which the offer would remain open.”

Must an insurer negotiate a demand above its policy limits?
The Supreme Court of Georgia disapproved language “placing an affirmative duty on the company to engage in negotiations concerning a settlement demand that is in excess of the insurance policy’s limits,” and it declined to require a counteroffer “to every settlement demand that involves a condition beyond their control” (Brightman).

Can the insured still seek punitive damages after assigning the claim?
Not on that claim. “An assignment is a complete transfer of all rights, title, and interest in property,” and by assigning the right to recover for the insurer’s refusal to settle, the insured in Holt forfeited the right to sue the insurer for punitive damages based on that claim, because punitive damages need a valid claim for compensatory damages to attach to (Holt).

Sources and Legal Authorities

• OCGA 33-4-6(a), (b); OCGA 33-4-7(a) through (g); OCGA 33-7-11(j)
• Southern General Insurance Co. v. Holt, 262 Ga. 267, 416 S.E.2d 274 (1992) (citing McCall v. Allstate Insurance Co., 251 Ga. 869 (1984), and quoting Grumbling v. Medallion Insurance Co., 392 F. Supp. 717 (D. Or. 1975))
• Cotton States Mutual Insurance Co. v. Brightman, 276 Ga. 683, 580 S.E.2d 519 (2003)
• Fortner v. Grange Mutual Casualty Co., 286 Ga. 189, 686 S.E.2d 93 (2009)
• OCGA 9-11-67.1(b), (g), (i)

Disclaimer

This article provides general information about bad-faith insurance claims under Georgia law. It is not legal advice and does not create an attorney-client relationship. Whether an insurer’s conduct constitutes bad faith depends on the specific facts, the policy, and what the insurer knew, and the statutes above impose demand and notice steps that can affect a claim. A person dealing with a denied or delayed claim in Georgia should consult a licensed Georgia attorney about the particular situation.