Insurance Bad Faith

Insurance companies have a duty of good faith and fair dealing (also known as an implied covenant of good faith and fair dealing). Pursuant to Southern General Ins. Co. v. Holt, 262 Ga. 267 (1992) and Cotton States Mut. Ins. Co. v. Brightman, 2003 Fulton County D. Rep. 1402 (Ga. 2003), insurance companies in Georgia must not put their own interests ahead of that of their insured. They must also take all reasonable steps to properly evaluate the claims and make a settlement payment, when they can. For instance, if it is in the insured’s best interest to settle a claim within policy limits, the insurance company has a duty to accept a demand for settlement. Failure to do so often subjects the insurance company to a claim of bad faith failure to settle. If the insured is successful in bringing this claim, then the insurance company must pay the full amount of any judgment received by the injured party against the insured. The reasoning behind this law is that the claim would not have gone forward had the insurance company acted in good faith and settled the claim when it had a chance to do so within he policy limits. So, in a case like this, the policy holder may sue the insurance company for the “bad faith” tort as well as for breach of contract (after all, all insurance policies are a contract between the insurance company and the insured). This type of action allows the insured to recover against the insurance company for an amount larger than the policy limits. While this situation is somewhat rare, we do occasionally handle this type of situation for existing clients who we represent in the underlying action. The underlying action is typically a personal injury, medical malpractice or dental malpractice case.

In Georgia, insurance companies are subject to bad faith and breach of contract lawsuits in the following situations:

• Improperly denying insurance coverage when a proper claim is submitted
• Denying payment even though the insurance company has not conducted a thorough investigation (either to the insured or to a 3rd party claimant who is making a claims against the insured policy)
• Failing to settle when liability is clear (this is known as the “so sue me” attitude)
• Failing to respond to a policy limits demand within the allotted time set out in the demand
• Failing to properly disclose all available insurance and the proper policy limits of each

As always, the insured must be especially diligent to make sure that they comply with all duties under the policy. Failure to do this may forfeit your right to sue for bad faith. We handle these types of claims only in conjunction with cases in which we are currently representing clients. If you would like to discuss your situation in complete confidence with one of our experienced Atlanta insurance lawyers, call us at (404) 525-5150 or contact us online.