SUPREME COURT OF GEORGIA HOLDS THAT INSURER’S DUTY TO SETTLE ARISES ONLY WHEN THE INJURED PARTY PRESENTS A VALID OFFER TO SETTLE WITHIN POLICY LIMITS
On August 29, 2008, Ronald Jackson (Jackson) caused a multi-vehicle collision. He later died from his injuries. At the time of the collision, First Acceptance Insurance Company of Georgia Inc. (First Acceptance) insured Jackson under a policy with bodily injury liability limits of $25,000 per person/$50,000 per accident. After the collision, First Acceptance was notified that five individuals, including Julie An (An) and her minor daughter Jina Hong (Hong), had been injured. First Acceptance determined that its policy provided coverage to Jackson for the collision, that Jackson was liable for the loss, and that the loss exceeded the limits of Jackson’s policy.
First Acceptance retained counsel in hopes of reaching a “global settlement” with the five injured individuals and planned to have a “global settlement conference” in an effort to resolve the claims. On June 2, 2009, An and Hong’s counsel sent two letters to First Acceptance stating that An and Hong were interested in attending a settlement conference, and in the alternative, offered to settle their claims for the available policy limits (the “June 2 Letters”). Subsequently, on July 10, 2009, An and Hong filed a complaint seeking damages arising from the collision. Thereafter, First Acceptance invited An and Hong to attend the global settlement conference, but their counsel declined. On September 24, 2010, First Acceptance offered to settle An and Hong’s claims for $25,000 each – a settlement that would have equaled Jackson’s $50,000 policy limit. An and Hong rejected the offer.
In 2012, a jury returned a verdict in favor of An and Hong and against the administrator of Jackson’s estate that included an award of over $5.3 million for Hong’s injuries. Thereafter, the administrator of Jackson’s estate sued First Acceptance alleging negligence and bad faith in failing to settle Hong’s claim within the policy limits. Both parties moved for summary judgment, and the trial court granted summary judgment in favor of First Acceptance on all claims. On appeal, the Court of Appeals reversed the grant of summary judgment in favor of First Acceptance on the failure-to-settle claim.
The Supreme Court of Georgia granted certiorari to review whether the Court of Appeals erred in reversing the grant of summary judgment and asked the parties to address the following question: whether an insurer’s duty to settle arises only when the injured party presents a valid offer to settle within the insured’s policy limits or whether, even absent such an offer, a duty arises when the insurer knows or reasonably should know that settlement within the insured’s policy limits is possible. First Acceptance Ins. Co. of Georgia, Inc. v. Hughes, No. S18G0517, 2019 WL 1103831 (Ga. Mar. 11, 2019).
In its analysis, the court took the opportunity to clarify that “an insurer’s duty to settle arises when the injured party presents a valid offer to settle within the insured’s policy limits.” Therefore, the outcome of this case turned on whether An and Hong had made a valid offer that First Acceptance failed to accept negligently or in bad faith – a legal question to be determined in accordance with applicable rules of contract interpretation.
The parties disputed whether the June 2 Letters constituted a valid offer. On the one hand, An and Hong argued that First Acceptance failed to respond to the offer within the “30-day deadline.” On the other hand, First Acceptance argued that there was no deadline to respond and that the 30-day deadline only applied to An and Hong’s request for insurance information. While the Court found that An and Hong presented First Acceptance with a valid offer to settle within the policy limits, the offer did not include any deadline for acceptance, leaving the offer open for a “reasonable time” pursuant to applicable rules of contract interpretation. The Court went on to find that First Acceptance’s failure to promptly accept the offer was reasonable as an ordinarily prudent insurer could not be expected to anticipate that the offer – without a specified deadline – would be abruptly withdrawn and that An and Hong would refuse to participate in the global settlement conference. The Court therefore concluded that First Acceptance did not act unreasonably in failing to accept the offer in the June 2 Letters before it was withdrawn and held that the Court of Appeals erred when it reversed the trial court’s grant of summary judgment in favor of First Acceptance.