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Demand Letters and Insurance Bad Faith Claims

The 2021 New Demand Letter Law in Georgia; When is the Insurance Company Acting in Bad Faith

For years, case law governing what duties an insurance company has when faced with policy limits demand by an accident victim has been evolving through a series of Appellate judicial decisions. Chief among those decisions were:

Southern General vs. Holt, 262 Ga.267, 416 S.E.2d 274 (1992):

If an insurance company refused to pay their policy limits to a victim when requested and the jury returned a verdict for the injuries in excess of the insurance policy, it allowed a new lawsuit to proceed directly against the insurance company to consider whether the refusal to pay was in “bad faith” in that the insurance company did not shield their client when they could have.

Cotton States v. Brightman 276 Ga. 683,580 S.E. 2d. 519 (2003):

Clarified that the insurer had to be judged not only on the bad faith issue but also on whether or not they negligently adjusted the claim.

Over the years, stupid Plaintiffs lawyers played fast and loose with these rulings and sent less and less reasonable demands, sometimes employing trickery in the demand language until one fool gloated on the front page of the Legal Newspaper about his “success” in tricking insurance companies. The natural result was action by the legislature and a return to sanity.

Here is the new law: OCGA §9-11-67.1 as revised in 2021:

It applies to all ” settlement offers and agreements for personal injury, bodily injury, and
death from motor vehicle, and payment methods,

9-11-67.1.
(a) Prior to the filing of an answer, any offer to settle a tort claim for personal
injury, bodily injury, or death arising from the use of a motor vehicle and prepared by or
with the assistance of an attorney on behalf of a claimant or claimants shall be in writing
and

(1) Shall contain the following material terms:

(A) The time period within which such offer must be accepted, which shall be not
less than 30 days from receipt of the offer;
(B) Amount of monetary payment;
(C) The party or parties the claimant or claimants will release if such offer is accepted;
(D) For any type of release whether the release is full or limited and an
itemization of what the claimant or claimants will provide to each releasee; and
(E) The claims to be released;

(2) Shall include medical or other records in the offeror’s possession incurred as a result
of the subject claim that are sufficient to allow the recipient to evaluate the claim; and

(3) May include a term requiring that in order to settle the claim the recipient shall
provide the offeror a statement, under oath, regarding whether all liability and casualty
insurance issued by the recipient that provides coverage or that may provide coverage for
the claim at issue has been disclosed to the offeror.

(b)(1) Unless otherwise agreed by both the offeror and the recipients in writing, the terms
outlined in subsection (a) of this Code section shall be the only terms which can be
included in an offer to settle made under this Code section.

(2) The recipients of an offer to settle made under this Code section may accept the same
by providing written acceptance of the material terms outlined in subsection (a) of this
Code section in their entirety.
(c) Nothing in this Code section is intended to prohibit parties from reaching a settlement
agreement in a manner and under terms otherwise agreeable to both the offeror and
recipient of the offer.
(d) Upon receipt of an offer to settle set forth in subsection (a) of this Code section, the
recipients shall have the right to seek clarification regarding the terms, the terms of the
release, liens, subrogation claims, standing to release claims, medical bills, medical
records, and other relevant facts. An attempt to seek reasonable clarification shall be in
writing and shall not be deemed a counteroffer. In addition, if a release is not provided
with an offer to settle, a recipient’s providing of a proposed release shall not be deemed a
counteroffer.

(e) An offer to settle made pursuant to this Code section shall be sent by certified mail or
statutory overnight delivery, return receipt requested, and shall specifically reference this
Code section, and shall include an address or a facsimile number or email address to which
a written acceptance pursuant to subsection (b) of this Code section may be provided.

(f) The person or entity providing payment to satisfy the material term set forth in
subparagraph (a)(1)(B) of this Code section may elect to
provide payment by any one or more of the following means:
(1) Cash;
(2) Money order;
(3) Wire transfer;
(4) A cashier’s check issued by a bank or other financial institution;
(5) A draft or bank check issued by an insurance company; or
(6) Electronic funds transfer or other method of electronic payment.

(g) Nothing in this Code section shall prohibit a party making an offer to settle from
requiring payment within a specified period; provided, however, that such date shall not be less
than 40 days from the receipt of the offer.
(h) This Code section shall apply to causes of action for personal injury, bodily injury, and
death arising from the use of a motor vehicle on or after July 1, 2021.”

As with the prior version, the statute does not define “bad faith” or outline what insurance behavior makes negligent claims handling cases. What it does do is say unless this law is complied with, there cannot be bad faith as a matter of law. There can be no “bad faith” or negligence claim for failure to timely pay down the road because the demand has no effect.

ANALYSIS:

The first section says the law only applies if the lawsuit has not been filed. The door is open for the Plaintiff’s attorney to file suit and then send a non-compliant demand after the Answer is filed.  The more likely pothole in the statute is where an unrepresented party sends the demand without the assistance of counsel. That is a scenario in which insurers need to be more careful. If done without guile and the insurer

ANALYSIS:

Troublesome clauses:

 

(2) Shall include medical or other records in the offeror’s possession incurred as a result
of the subject claim that are sufficient to allow the recipient to evaluate the claim; and

(d) Upon receipt of an offer to settle set forth in subsection (a) of this Code section, the
recipients shall have the right to seek clarification regarding the terms, the terms of the
release, liens, subrogation claims, standing to release claims, medical bills, medical
records, and other relevant facts. An attempt to seek reasonable clarification shall be in
writing and shall not be deemed a counteroffer. In addition, if a release is not provided
with an offer to settle, a recipient’s providing of a proposed release shall not be deemed a
counteroffer.

This is going to be the hotbed of disagreement. “The right to seek clarification” and “other relevant facts” are terms that are completely open for debate. I foresee a world where the insurer will stall and use these catchphrases in the response letters to buy as much time as they want. We live in a world where medical providers outsource record production and it can take as much as 60 days to get them in. In serious cases where the injury clearly merits paying the claim and the victim is not making money in the interim, the statute can be used for delay and leverage.

In the drafter’s defense, it’s hard to envision better language but I still see a sea of litigation over this language.

“(e) An offer to settle made pursuant to this Code section shall be sent by certified mail or statutory overnight delivery, return receipt requested, and shall specifically reference this Code section.

(f) The person or entity providing payment to satisfy the material term set forth in paragraph (2) of subsection (a) of this Code section may elect to provide payment by anyone or more of the following means:

  1. Cash;
  2. Money order;
  3. Wire transfer;
  4. A cashier’s check issued by a bank or other financial institution;
  5. A draft or bank check issued by an insurance company; or
  6. Electronic funds transfer or another method of electronic payment.”

ANALYSIS:

Now this is important, it does not apply to dog bites, slip and falls and the other myriad claims that exist out there. That was kind of short-sighted don’t you think?

Lawyers, be sure your demands comply with the new statute for new crashes. Heck, you might want to get into the habit now, even though it is not required. Insurance adjusters, be on your toes because as the months go by and you get comfortable with your latitude under the new law, you may forget it only applies to post July 1, 2021 crashes.

 

SAMPLE BAD FAITH DEMAND LETTER

CERTIFIED MAIL – RETURN RECEIPT REQUESTED

Geico Casualty Company Claims
One Geico Center
Macon, GA 31296-0001

Re: Our Client: Peggy P
Your Insureds: De Youi
Policy No.: 4602-77-
Claim No.: 0263007
Date of Loss: December 23, 2020

O.C.G.A. § 9-11-67.1 DEMAND FOR POLICY LIMITS

Dear Andrew:

As you know, we represent Peggy P for an accident involving your insured driver on December 23, 2020.  This letter is being sent to you pursuant to O.C.G.A. § 9-11-67.1 and O.C.G.A. § 51-12-14 and is in the nature of a demand for purposes of settlement and compromise only.  It shall not be admissible for any purpose in the event that we are unable to resolve the case.  I am including a copy of the accident report for your review. 

OUR CLIENT:

Peggy is a sixty-eight (68) year old resident of Racoon City, Georgia.  As a result of this accident, she suffered injuries to her shoulders, neck, and back and has incurred over $20,000.00 in medical expenses to date, in addition to mental and emotional suffering.  

CAUSE OF INJURY: 

On the afternoon of December 23, 2020, my client was traveling in the westbound lanes of Georgia Highway 20 in Racoon city, Georgia.  Near the intersection with Industrial Parkway, she had to stop for traffic in front of her.  Simultaneously, Mr. Youi, who was traveling in the lane behind my client and not paying attention, ran into the back of my client’s car, causing this collision.  The force of the impact caused significant damage to both vehicles, resulting in repairs of over $4,300.00 to Ms. Ps car. 

LIABILITY:

The investigating officer found that your insured driver was responsible for the crash and cited him for following too closely.  Therefore, the only issue for the jury’s determination will be the value of my client’s injuries.  

DAMAGES:

As you can see from the attached medical bill table, Ms. P endured over ten months of treatment following this incident.  Her care was overseen by an orthopedist and included injection therapy and PT.  Her claim for pain and suffering on top of her medical costs is also substantial. Attached please find the medical records and bills in our possession to date, which document my client’s claims. 

STATEMENT OF KNOWN LIENS AND SUBROGATION CLAIMS:

Our client has agreed to leave funds in the escrow account sufficient to cover all valid medical liens until such time as those claims can be negotiated and resolved. The attached release provides for indemnity for valid medical liens. 

STANDING TO RELEASE CLAIMS:

The client is the injured party and is over the age of 18.   

TIME-LIMITED DEMAND FOR POLICY LIMITS:

Based on the nature of the injuries to my client, the amount of her damages to date, and your statutory disclosure that there is no more than $50,000.00 per claimant available in liability insurance to protect your insureds, my client hereby demands the policy limits of $50,000.00

My client also demands the policy limits of any and all insurance policies, including excess insurance policies, whether written by Geico or not, covering your insureds.  You are under a duty to communicate with your insureds to determine if there are other applicable coverages.  Please forward a copy of any such declarations page(s) immediately.

This demand is being sent pursuant to O.C.G.A. § 9-11-67.1.  In exchange for the tender of your policy limits, my client will execute a mutually agreeable limited liability release.  I have attached our proposed limited liability release for your consideration.

This demand is also being sent pursuant to O.C.G.A. § 51-12-14, and my client will be entitled to interest on the unliquidated damages if our offer to settle is not accepted within thirty (30) days of receipt of the demand and the eventual judgment is for an amount not less than this demand.  Please note that the unliquidated damages demand statute requires notice be sent directly to your insureds, but the insurance company may waive this requirement by requesting all correspondence be sent directly to the insurer. Hewett v. Carter, 215 Ga. App. 429, 450 S.E.2d 843 (1994).  If you will not raise a defense regarding the sufficiency of this notice based on failure to mail it directly to your insureds, please let me know within ten (10) days of the receipt of this demand.  Otherwise, I will have to send it directly to your insureds.  

This offer is open for acceptance for 30 days from receipt of this demand. If the offer is accepted in writing, the payment by check will be due in this office on the 41st day after the demand is received by you, and acceptance of the offer is not complete until payment is made.  Timely payment is an essential element of acceptance.  Written acceptance may be provided to the undersigned via email at tyler@simon.law.

Failure to consummate this settlement with written acceptance and payment within the time limits stated herein will be a violation of your duty to use ordinary care and good faith in handling a claim against your insureds.  See, Smoot v. State Farm Mutual Automobile Insurance Company, 299 F.2d. 525, 523 (5th Cir.1962).  As you are aware, you have a duty to give “at least equal consideration to the interests of the insured” and the “same faithful consideration it gives its own interest.”  Southern General Insurance Company v. Holt, 200 Ga. App. 759, 409 S.E.2d 852 (1991); Jones v. Southern Home Insurance Company, 135 Ga. App. 385, 217 S.E.2d 620 (1975); Great American Insurance Company v. Exum, 123, Ga. App. 515, 181 S.E.2d 704 (1971).  Even a negligent failure to compromise a claim may give rise to tort liability to the insured.  Delancy v. St. Paul Fire & Marine Ins. Co., 947 F.2d 1536 (11th Cir. 1991); Home Insurance Co. v. North River Insurance Co., 192 Ga. App. 551, 385 S.E.2d 736 (1989).  Failure to comply with a reasonable time limit for such settlement may also give rise to liability of a liability insurer for the full amount of a jury verdict in the underlying case.  Southern General Insurance Company v. Holt, 200 Ga. App. 759, 409 S.E.2d 852 (1991).

Please send a copy of this demand to your insureds.

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