(Article from Insurance Law Alert, March 2019)
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The Supreme Court of Georgia ruled that an insurer did not act unreasonably in failing to accept a settlement offer before it was withdrawn because the offer did not include a deadline for acceptance. First Acceptance Ins. Co. of Georgia v. Hughes, 2019 WL 1103831 (Ga. Mar. 11, 2019).
The coverage dispute arose out of a car accident that resulted in the death of Ronald Jackson. Jackson’s automobile insurer was advised that several other individuals were seriously injured by the accident, including Julie An and her daughter. First Acceptance retained counsel and notified all injured parties that it hoped to “reach a global settlement.” Thereafter, An’s counsel sent two letters to First Acceptance. The letters expressed interest in attending a global settlement conference or settling for policy limits. First Acceptance inadvertently misfiled those letters. Forty-one days after sending the letters, An revoked the settlement offer and sued Jackson’s estate. Thereafter, First Acceptance offered to settle An’s claims for the $50,000 policy limit, which she rejected. A trial court later awarded An and her daughter $5.3 million. Jackson’s estate administrator sued First Acceptance, alleging negligence and bad faith failure to settle.
A Georgia trial court granted First Acceptance’s summary judgment motion. The Court of Appeals reversed on the failure-to-settle claim, finding there were issues of fact as to whether An’s settlement offer included a thirty-day deadline for responding, and whether First Acceptance breached its duty to settle by failing to respond within thirty days. The Georgia Supreme Court reversed.
Addressing a preliminary matter, the Georgia Supreme Court held that an insurer’s duty to settle arises only when an injured party presents a valid offer to settle within policy limits, not when an insurer knows or reasonably should know that a settlement is possible. Turning to the factual record, the court concluded that First Acceptance did not act negligently or in bad faith in failing to accept An’s settlement offer. The court ruled as a matter of law that the settlement offer was not expressly subject to a time limit for acceptance. Although one of the letters requested insurance information within thirty days, it also stated that any settlement would be conditioned upon receipt of that information. The court therefore held that First Acceptance was not put on notice that its failure to accept the offer within a specific time frame would constitute a refusal. Further, the court held that First Acceptance could not have reasonably known that it needed to respond within 41 days or risk exposure to a judgment in excess of policy limits, particularly given that An expressed willingness to attend settlement conferences in the offer letters.