Justice Nels Peterson, Supreme Court of Georgia. (Ashley Stollar)
A divided Georgia Supreme Court on Monday ruled that plaintiffs reaching a settlement agreement with an insurer over a motor vehicle accident can require the performance of a specific action—in this case, the time-limited payment of the demand.
Two justices dissented. The ruling expands the array of conditions plaintiffs attorneys may impose upon insurers, who may face bad-faith claims if they don’t agree to settle within the statutory requirements of the law.
The majority opinion, written by Justice Nels Peterson, said an insurance company that otherwise met all of the settlement demands but failed to deliver the insured’s policy limits due to an alleged address snafu had in fact failed to accept the offer.
A dissent by Justice Harold Melton, with the concurrence of Justice Keith Blackwell, said the majority had ignored the “plain language” of a 2013 statute governing motor vehicle claim demands, which “prohibits a claimant from conditioning acceptance of a pre-suit offer upon the making of a timely payment” of the demand.
The ruling was requested by the 11th Circuit Court of Appeals, which is hearing a case involving a fatal 2014 wreck in which a car driven by Thomas Dempsey hit a pickup driven by Boris Woodard, injuring Woodard and killing his daughter, a passenger. The lawyer for Woodard and his wife, T. Shane Peagler of the Law Offices of Michael L. Neff, sent Dempsey’s insurer a demand for Dempsey’s $100,000 policy limits with a list of conditions, among them that the insurer had 30 days to accept the offer and another 10 days to deliver the money.
“Timely payment is an essential element of acceptance,” the letter noted.
One day before the offer expired, Grange Mutual’s representative emailed Peagler accepting the offer, and a few days later she notified him that the checks were being issued that day.
Two weeks later, Peagler told the claims representative that the checks had not arrived, and that therefore no binding settlement agreement had been reached.
The insurance representative apologized and said there had been an address issue, and offered to reissue the checks and overnight them, but Peagler declined the offer.
Grange reissued the checks anyway and sent them to Peagler, who returned them uncashed.
Grange sued Woodard and his wife in federal court for breach of contract. Both sides moved for summary judgment citing OCGA 9-11-67.1, a 2013 statute which lays out the requirements for pre-suit settlement demands in motor vehicle actions, including a proviso that the plaintiff allows at least 30 days for the insurer to accept the offer.
“Nothing in this code section shall prohibit a party making an offer to settle from requiring payment within a specified period,” the statute says, “provided, however, that such period shall be not less than 10 days after the written acceptance of the offer to settle.”
The statute also says that nothing in it “is intended to prohibit parties from reaching a settlement agreement in a manner and under terms otherwise agreeable to the parties.”
U.S. District Judge Richard Story granted the Woodards’ summary judgment, ruling that nothing in the law barred their making payment a condition of acceptance. Story also rejected the insurer’s argument that, if the payment demand was a valid element of acceptance, it had met that demand by issuing the checks.
On appeal, the 11th Circuit observed that the statute seemed ambiguous, since it “appears to contemplate that an offeree will accept an offer in writing, such that payment would be a term of contract performance, not contract formation.”
“On the other hand,” wrote Peterson, citing the federal opinion, the law “arguably permits the parties to reach an agreement as they see fit, including ‘by contracting around’ the procedure” laid out in the statute.
The 11th Circuit certified four questions to the Georgia Supreme Court: Did Grange’s acceptance of the Woodards’ offer create a binding settlement agreement? Does Georgia law permit unilateral contracts requiring the performance of a specific act as part of the contract? Did the Woodards’ demand for timely payment as a condition of acceptance comport with Georgia law? And if there was a binding agreement, did Grange Mutual breach it?
In his 22-page majority opinion, Peterson recalled that the 2013 statute had been crafted in part to address insurers’ complaints that plaintiffs attorneys were abusing time-limited settlement demands, known as Holt demands, to “set up” insurers for bad faith claims by mandating unreasonably short deadlines.
Under the Georgia Supreme Court’s 1992 decision in Southern General Insurance v. Holt, 416 S.E. 2nd 274, an insurer that fails to timely respond to a policy limit request when the likely damages exceeded those limits can be found to have acted in bad faith and held liable for damages exceeding those limits.
That decision, wrote Peterson, “spawned much litigation over, among other things, what constitutes an offer to which an insurer must respond, when an insurer’s inquiry about medical liens amounts to a counteroffer, and how much time an offeror must provide for a response in order to trigger an insurer’s duty to respond.”
In response, OCGA 9-11-67.1 “sets forth certain terms that, at a minimum, must be included in a pre-suit offer, and … how those terms must be accepted.”
But the law does not bar a plaintiff from adding other conditions necessary to consider an offer accepted, Peterson wrote.
Thus, he said, the Georgia statute does permit “unilateral” contracts such as the one at issues, and “does not preclude a pre-suit offer from demanding timely payment as a condition of acceptance.”
The Georgia court declined to rule upon the 11th Circuit’s questions “to the extent that they call us to decide the ultimate issues in the case.”
Melton’s dissent said the majority opinion misread the law.
The Legislature clearly “intended to separate the payment component of an already formed settlement agreement from the acceptance of an offer that creates an enforceable settlement agreement in the first instance,” wrote Melton. “Indeed, a party making an offer to settle may only ‘requir[e] payment within a specified period [of not less than 10 days] after the written acceptance of the offer to settle’ has already taken place.”
When the case was argued before the Georgia Supreme Court, the Woodards were represented by Slappey & Sadd partners Jay Sadd and Rich Dolder.
The lawyers said the opinion simply confirmed long-standing contract law allowing parties to enter into agreements as they see fit.
“The insurance company is allowed to have deadlines for policy holders to pay premiums in order to create a contract for insurance, and people who have valid claims are allowed to have deadlines to pay in order to create contracts to settle,” Dolder said.
“OCGA 9-11-67.1 was designed to give insurance companies 30 days to decide to pay, then 10 days to pay. [Grange Mutual] just didn’t; they were trying to hold onto their money as long as possible even though they knew their insured was in jeopardy for accidentally killing a young lady,” Dolder said.
Grange Mutual is represented by Martin Snow partner Thomas Allen III and associate William Davis. In an email, Allen declined to discuss the ruling because the litigation is ongoing.