Presiding Judge Christopher McFadden, Georgia Court of Appeals (Photo: John Disney/ALM)

Millions of dollars and the potential outcome of future insurance litigation hang on a case the Georgia Supreme Court decided Monday to review.

Courts below took conflicting positions on a bad-faith lawsuit lodged against First Acceptance Insurance Co. of Georgia. The Supreme Court voted unanimously to grant the writ of certiorari, with Justice Nels Peterson not participating. The high court is to decide whether the Court of Appeals, in an opinion from Presiding Judge Christopher McFadden, was correct in reviving the case.

The justices said in the order that they are “particularly concerned” with questions about an insurance company’s duty to settle when presented with policy limit demands on claims that are potentially worth much more—and which could expose the company to bad-faith litigation later on if a verdict exceeds that coverage.

Defendant First Acceptance Insurance Co. of Georgia is represented by J. Stephen Berry and Robin Johnson of Dentons. On Wednesday, Berry cited his petition for cert, which said the Supreme Court “has published relatively little substantive guidance on insurers’ duty to accept time-limited settlement demands” since its 1992 decision in Southern General Insurance v. Holt, 262 Ga. 267.

“Meanwhile, the plaintiff bar has emphasized, over-used, and reinvented the tactic of attorney-driven attempts to manufacture ‘bad faith’ recoveries,” Berry’s brief said. “In response, the Court of Appeals has invented new safe harbors. … This case presents the right opportunity for this Court to weigh in.”

In addition to the precedent for other cases, more than $7 million is at stake in this one, including the $5.4 million judgment, plus interest, according to the lawyers.

The Dentons lawyers’ opponent is Brandon Cathey of Swope Rodante in Tampa, who is licensed in Florida and Georgia and handles insurance bad faith litigation nationally.

“All Georgia law says is the insurance company has to give its insured the same faithful consideration they have to give their own interests,” Cathey said Wednesday. In this case, he added, First Acceptance made no offer to settle for more than 500 days.

“We hope the court will say safe harbor means you’re supposed to do what you can to try to settle the case,” Cathey said.

The case began with a 2008 wreck in Gwinnett County when Ronald Jackson rear-ended a car driven by Julie An, causing a chain-reaction collision involving five vehicles. Jackson died of his injuries nearly two months later. Five claims were filed against Jackson’s estate, including two by An and her 2-year-old daughter, Jina Hong, who was the most seriously injured, incurring more than $327,000 in medical bills, according to the suit. Jackson’s First Acceptance policy carried a limit of $25,000 per person and $50,000 per accident.

The insurer’s investigation quickly revealed that Jackson was liable, and the company tried to set up global settlement discussions, according to court documents. Counsel for An and Hong faxed two letters on June 2, 2009. One letter was a statutory demand to produce Jackson’s insurance information “within thirty days of the date of this letter,” while the second discussed the possible global settlement and concluded that, “if you would rather settle within your insured’s policy limits now, you can do that by providing that release document with all the insurance information as requested” for Jackson’s policy.

According to Acceptance’s filings, its counsel reviewed the letters, determining “neither of them was a time-limited settlement demand,” and filed them with other case records. Nearly six weeks later, the plaintiffs’ counsel sent a letter revoking the settlement offer and filed a complaint in DeKalb County State Court. The case went to trial in 2011 and ended with a jury award of more than $5.4 million against Jackson’s estate.

In 2014, the estate’s administrator, Robert Hughes Jr., sued Acceptance for negligence and bad faith in refusing to settle An and Hong’s claims within the 30-day window offered. Under the guidelines of the Holt decision, an insurer that fails to timely respond to a policy limit request when the likely damages would exceed those limits can be found to have acted in bad faith and held liable for damages exceeding those limits.

Assurance countered that the letter did not meet Holt’s requirement of certainty regarding the demand.

DeKalb County State Court Judge Michael Jacobs agreed with the insurance company and dismissed the case in 2016. The judge ruled that the demand was not clear and that Georgia case law requires that an insurer know that a settlement is possible before it can be held liable for bad-faith failure to settle.

“If the Hong and An claimants had been the only claimants, this would have been a simpler matter,” Jacobs wrote. “However, that is not the case here, and summary judgment is appropriate because there is no evidence of record the insurer knew or reasonably should have known complex claims against Mr. Jackson could have been settled within the available policy limits.”

Cathey of Swope Rodante represented Hughes, the administrator of the Jackson estate, on appeal, winning a reversal from the Georgia Court of Appeals in 2017. McFadden ruled that Jacobs was wrong to toss the bad-faith lawsuit. “There are genuine issues of material fact as to the failure-to-settle claim,” McFadden said, writing for a panel that included Judges Elizabeth Branch and Charlie Bethel.

In his decision, McFadden cited Holt and Cotton States Mutual Ins. Co. v. Brightman, 276 Ga. 683 (2003). He quoted this passage from Cotton States Mutual Ins. Co.: “Judged 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.” As for bad faith, McFadden added, “the general rule [is] that the issue of an insurer’s bad faith depends on whether the insurance company acted reasonably in responding to a settlement offer.” Citing Holt, McFadden also said: “In deciding whether to settle a claim within the policy limits, the insurance company must give equal consideration to the interests of the insured.”

The Supreme Court said Monday it wants the lawyers to brief two questions:

  • “Did the Court of Appeals err in reversing the grant of summary judgment to the insurer on the insured’s failure-to-settle claim, on the basis that questions of fact existed for the jury to determine as to whether the injured party offered to settle her claims within the policy limits, and established a 30-day deadline to accept the offer?
  • “Does an insurer’s duty to settle arise when it knows or reasonably should know settlement within the insured’s policy limits is possible with an injured party or only when the injured party presents a valid offer to settle within the insured’s policy limits?”

Oral arguments will be scheduled for the September calendar.

The case is Hughes v. First Acceptance, Court of Appeals No. A17A0735.