Insurance Company Faces “Bad Faith” Lawsuit Over Failure to Settle Drunk Driving Accident Claim

Georgia law requires insurance companies to act in good faith when resolving auto accident claims. For example, if you are injured in an accident caused by another driver’s clear negligence, the other driver’s insurance company is expected to make a good-faith effort to negotiate a settlement, especially when your damages meets or exceeds the limits of the actual policy. Conversely, if the insurer acts in bad faith, you can file a lawsuit and seek additional damages.

Kemper v. Equity Insurance Company

For example, a federal appeals court recently revived a bad-faith lawsuit brought against an insurance company by the victim of a motorcycle accident. The plaintiff in this case, Kemper v. Equity Insurance Company, was driving her bike down a road in Coweta County, Georgia. Another driver, who it turned out was intoxicated, crossed the centerline of the road and crashed into the plaintiff, causing her serious injuries.

The drunk driver’s insurance company asked the plaintiff for documentation related to her injuries before deciding whether or not to make her a settlement offer. The plaintiff hired an attorney, who helped her draft a response. The plaintiff ultimately sent the insurance company a letter, in which she offered to sign a “limited release” in exchange for the insurer paying the $25,000 limit of the drunk driver’s policy. The plaintiff’s letter further stated she did not want the insurer to contact her or her friends directly.

The insurance company replied by sending a $25,000 check, but with the condition that the plaintiff place the money in escrow to cover any potential hospital liens filed against her. The plaintiff’s attorney advised her to reject this conditional counter-offer. She took that advice and proceeded to sue the drunk driver directly in Georgia state court. Eventually, the plaintiff and the drunk driver agreed to a $10 million consent judgment.

The plaintiff then filed a separate lawsuit against the insurance company, alleging it acted in bad faith and demanding it pay the $10 million consent judgment. A federal judge, however, dismissed the plaintiff’s lawsuit on the insurance company’s motion for summary judgment. The plaintiff then appealed that ruling to the U.S. 11th Circuit Court of Appeals in Atlanta.

In an August 28 decision, the 11th Circuit reversed the trial judge’s order and returned the case for trial. The Court noted this case turned on the application of a 2012 ruling from the Georgia Court of Appeals, Southern General Insurance Co. v. Wellstar Health Systems Inc. In Wellstar, the state court created a “safe harbor” from bad-faith lawsuits when an insurance company’s “sole reason” for failing to settle was a plaintiff’s “unreasonable refusal to assure the satisfaction of any outstanding hospital liens.”

The problem here, the 11th Circuit explained, was that there were still “too many disputed issues” regarding the exact reasons the parties could not reach a settlement. For example, the insurance company knew that the plaintiff was a state government employee, which meant she likely had adequate health insurance and thus “no reasonable basis to fear liens or claims from her medical providers.” Additionally, while the insurance company claimed the plaintiff’s “no contact” demand made it impossible for it to ascertain the potential existence of any hospital liens, the appellate court pointed out the insurer’s own claims director “could not identify how” additional contact with the plaintiff would have made any difference.

In short, the 11th Circuit said there was enough uncertainty surrounding the facts of this case to warrant sending it to a jury.

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