Most car accident lawsuits in Georgia are handled by the negligent driver’s insurance company. If an insurer refuses to settle a personal injury claim “in bad faith,” said insurer may be liable for any judgment against the insured in excess of the policy’s normal limits. In other words, the insurance company may not place its own interests ahead of those of its policyholders by dragging its feet to avoid settling an apparently valid personal injury claim.
Linthicum v. Mendakota Insurance Company
But an insurance company’s obligation is only to act reasonably when attempting to negotiate a settlement. It is not necessarily liable just because no settlement is reached. A recent decision by a federal judge in Savannah illustrates this point.
This case involves a fatal car accident that took place in 2008. The plaintiffs are the parents of the victim. The negligent driver fled from the scene but was later apprehended by law enforcement and charged with a DUI. The driver had an automobile insurance policy with a $25,000 limit.
A few months after the accident, the insurance company sent the plaintiffs a letter offering to settle any legal claims against the driver for the full $25,000 limit. The plaintiffs did not immediately respond. Instead, approximately seven months later—and 19 months after the accident—the plaintiffs offered to accept the $25,000 in exchange for a release of any potential “wrongful death” claim against the driver.
When the plaintiffs did not hear back from the insurance company by the deadline stated in their demand letter, they filed a wrongful death lawsuit. A month later, the insurance company reiterated its initial offer to settle all personal injury claims, not just wrongful death, for $25,000, but the plaintiffs balked. The driver and the plaintiffs stipulated to a $1.2 million judgment on the wrongful death claim. The plaintiffs then sued the insurer to collect this judgment, alleging it acted in “bad faith” in refusing their earlier offer to settle the wrongful death claim for $25,000.
On September 22, U.S. District Judge William T. Moore, Jr., granted summary judgment to the insurer and dismissed the plaintiffs’ complaint. Judge Moore said the insurer here did not act unreasonably or in bad faith. Rather, it offered the plaintiffs a timely settlement to resolve all outstanding personal injury claims against the driver. The plaintiffs then waited 19 months to respond to that offer.
The plaintiffs’ response in this context, to settle only their potential wrongful death claim, was a “counter-offer,” the judge explained, and under Georgia law, “an insurer has no duty to respond to an offer that fails to fully settle the claims against its insured within the policy limits.” An insurance company is only obliged to act as any “ordinarily prudent insurer would” in similar circumstances. Accordingly, the insurance company in this case is not liable for the balance of the $1.2 judgment beyond the $25,000 policy limit.