Lawyers for plaintiffs and insurance interests appear to have compromised on a bill that would make it somewhat harder for plaintiffs to bring bad faith claims against defendants’ insurance companies.
Bill Clark, the chief lobbyist for the Georgia Trial Lawyers Association, said his group won’t fight the bill.
"It is a well-reasoned approach to a perceived problem, and we appreciate the House leadership’s undertaking this issue and allowing real lawyers with practical experience to work on the problem and provide input to the solution," Clark said.
Likewise, insurance defense lawyers are on board. "It’s not everything they [insurers] wanted, but it brings some structure to a problem that has been without standards or structure or much guidance from the courts for a long time," said William Custer IV, a Bryan Cave partner whose commercial litigation practice includes insurance defense.
House Bill 336 is is the result of negotiations among a secret group of lawyers from both plaintiffs’ and insurance defense practices commissioned by the speaker of the House. Its lead sponsor is Rep. Jay Powell, R-Camilla, a general practice lawyer and former mayor, but four other lawyer-legislators have joined him.
The Georgia Chamber of Commerce and the insurance industry have been beating the drum for limits on so-called Holt demands. They are named for a 1992 case of the Georgia Supreme Court that established how a plaintiff could bring a bad faith claim against a defendant’s insurer if the insurer does not respond to a plaintiff’s time-limited offer to settle a case for the full amount of the defendant’s policy.
Some insurance defense lawyers began telling tales of unreasonable demands that gave them just days to respond to settlement offers, while the plaintiffs’ bar dismissed them as exaggerations, stating that no court has upheld a bad faith claim based on an unreasonable demand.
The Georgia General Assembly considered legislation related to bad faith claims and Holt demands last session, including House Bill 1175, which would have allowed an insurer at least 60 days to respond to an offer of settlement and required settlement offers to include copies of medical records and billing statements. The legislation failed, and each side blamed the other for being unwilling to yield.
"They looked like they might have some potential, but the two sides could never come together," said Powell.
HB 336 would give insurers at least 30 days to respond to a settlement offer before a bad faith claim could be brought against them. It also would require that all settlement offers contain the specific time period in which the offers must be accepted, the amount of payment, the parties the claimants would release, the type of release and the claims to be released.
GTLA President Jay Sadd, a name partner at Atlanta personal injury firm Slappey & Sadd, said plaintiffs lawyers maintain that such legislation is unnecessary, though they wanted to have a voice in the negotiations.
"The current state of bad faith law in Georgia, I think, treats every side of the equation fairly. So, we think that there is no need for legislation at all," said Sadd. "It may be that legislation is inevitable and, for that reason, GTLA was asked to participate in helping to craft something that is fairer to both sides.
"The issues that we have is that every case is different, and it’s very difficult to legislate a one-size-fits-all solution to something that is really not a problem," he added.
Plaintiffs’ lawyers appear to have been successful in narrowing the scope of the regulations.
HB 336 pertains only to torts claiming personal injury, bodily injury or death arising from the use of a motor vehicle. It also is limited to regulating offers of settlement submitted prior to the filing of a lawsuit.
Custer said a majority of Georgia’s tort claims involve motor vehicles. So, even though the bill’s scope is limited, it should cover a vast amount of bad faith claims.
"I think from the perspective of insurers in the state of Georgia, and certainly those selling automobile insurance, this is a very good development," he said. "
Even though the insurance community liked the 60-day window suggested in last session’s legislation, Custer said 30 days is "better than the short trigger which we have now." Currently, the law does not mandate any time frame for responding to a settlement offer.
Sadd said plaintiff’s lawyers were very opposed to last year’s proposal because the 60-day time frame applied to any stage of litigation, no matter the circumstances. The time frame in the current bill is more palatable because it is restricted to offers submitted before a lawsuit is filed, he said.
"There are many times in which less than 30 days is reasonable," he said. "You could be in mediation and all offers are made. Do you give them 30 days every time to make an offer? You could be in a trial and the evidence clearly shows [the insurer should pay]. You can’t give them 30 days to settle; the trial would be over with."
The bill also would allow insurers to seek clarification regarding facts of the case, including term limits, liens, subrogation and standing to release claims, and medical bills and records, without insurers’ requests constituting a counteroffer.
"Everybody has the right to ask for clarification," Sadd said. "Whether the request for clarification is reasonable has to be decided on a case-by-case basis."
Powell said he believes the legislation gives the trial judge room to do that. "It’s not as regimented as the bill last year, but it is flexible enough that a court can make a decision on what is a reasonable request for clarification."
Custer said insurers would prefer to have all records available in order to determine whether the proffered settlement amount is appropriate in light of the plaintiffs’ injuries, but at least HB 336 would allow them to ask for records without penalty.
"In many cases, the plaintiff’s bar is playing for the fumble," he said. "If the insurer asks any questions they [plaintiff's lawyers] will take the position that, by merely asking about liens, that constitutes rejection of their offer. And since the insurer rejected the offer, they [plaintiff's lawyers] will take the position that they can assert bad faith failure to settle. This statute does at least alleviate that problem."
HB 336 has been assigned to the House Judiciary Committee but has not yet been slated for a hearing. The bill’s other sponsors include Rules Committee Chairman and insurance salesman John Meadows, R-Calhoun; Insurance Committee Chairman Richard Smith, R-Columbus; House Minority Leader and lawyer Stacey Abrams, D-Atlanta; bankruptcy lawyer Mike Jacobs, R-Brookhaven; and solo practitioner Tom Weldon, R-Ringgold.
"I am hopeful, because of the fact that it is a brokered agreement, it will bypass the subcommittee," Powell said.
Speaker David Ralston convened the negotiating panel, reportedly by asking GTLA and the insurance industry in Georgia to suggest practicing lawyers. Neither the speaker’s office nor association representatives are willing to identify the lawyers who negotiated.
While the bill is expected to calm the waters for now, the Legislature may revisit the issue of bad faith claims, such as weighing whether to extend the proposed law to other types of torts, Powell said.
"I would imagine what we would do is sit here for two or three years and see how it works," said Powell. "If it works, we might try it elsewhere."