Guide for Causes of Action for Bad Faith Claims

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Last Updated
July 20, 2021

GA. CODE ANN. §§ 33-6-30 to 33-6-37 (1992).

Georgia’s “Holt demand”

Georgia’s “Holt demand” concerns time-limited demands made against a liability insurance policy. See, Southern General Ins. Co. v. Holt, 262 Ga. 267 (1992), in which the Georgia Supreme Court held that where the insurer has “full knowledge of the insured’s liability” and damages exceeding policy limits, the insurer can be subject to bad faith damages if its failure to settle within policy limits subjects the insured to a judgment in excess of those limits.

The Holt demand was later codified in addressing motor vehicle claims, at O.C.G.A. § 9-11-67.1.

To constitute a valid demand to an insurer under the statute, a claimant must adhere to the following:

  1. the demand must be in writing;
  2. the time period for accepting the demand must be clearly stated, but cannot be less than thirty days;
  3. the specific amount of monetary payment requested must be included;
  4. the demand must specifically outline the party the claimant is willing to release;
  5. the demand must specify the type of release, if any, the claimant is willing to provide;
  6. the demand must specify the claims to be released; and
  7. the demand must be sent by certified mail or overnight delivery, return receipt requested.

The motor vehicle claims statute permits insurers to request further information from the claimant to evaluate the demand, and such requests are not deemed a counteroffer or rejection risking potential bad faith exposure.

Furthermore, insurers still have defenses to a bad faith claim for refusing a settlement demand where (1) the insured’s liability was not clear; and/or (2) there was no confirmation that the damages would be in excess of the policy’s limits.

In September 2016, A DeKalb County State Court dismissed a claim based on a purported Holt demand letter in the automobile context because it “was not a clear demand, let alone a time-limited demand” that could expose the insurer to bad faith for failure to timely respond. The court specifically found that there was no evidence the insurer knew or reasonably should have known the complex claims against the insured could have been settled within the policy limits. The decision was upheld in Hughes v. First Acceptance Ins. Co. of Ga., 353 Ga. App. 320, 836 S. E. 2d 634 (2019).

Plaintiff may not sue in tort for defendant’s mere breach of a duty imposed by a contract. However, if the defendant breaches a duty imposed by tort law independent of a contract and plaintiff sustains damages other than loss of benefit of the contract, plaintiff may sue in tort. DeLance v. St. Paul Fire & Marine Ins. Co., 947 F.2d 1536 (1991). This includes misrepresenting the existence of extent of coverage as well as misrepresentations in the claims handling process.

The statute of limitations for breaches of an insurance contract is six years. OCGA § 9-3-24. There is no case law regarding punitive damages for claims for negligent failure to settle or fraud.

Georgia does not recognize third party bad faith.

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Chartwell Law represents the interests of insurers and employers, as such, we continue to continue to monitor the legal landscape. If you have any questions about issues associated with right of action for bad faith claims, our attorneys are available to help. Please contact your Chartwell Law attorney.