INDUSTRY NEWS

Source: <a href=”https://cases.justia.com/georgia/supreme-court/2019-s18g0517.pdf?ts=1552306358″ target=”blank”>First Acceptance Insurance Company of Georgia, Inc. v. Hughes</a>

On August 29, 2008, Ronald Jackson caused a multi-vehicle collision; he later died from his injuries. At the time of the collision, Jackson was insured by an automobile policy issued by First Acceptance Insurance Company of Georgia, Inc., with bodily injury liability limits of $25,000 per person and $50,000 per accident….

First Acceptance adjusters determined that its policy provided coverage to Jackson for the collision, and they assessed early in their investigation that Jackson was liable for the loss and that his exposure for claims exceeded the policy limits….

On February 19, 2010, First Acceptance offered to settle Hong’s claim for $25,000. On September 24, 2010, First Acceptance offered to settle An’s and Hong’s claims for $25,000 each, which equaled the $50,000 policy limit. The offers were rejected. In a July 2012 trial, the jury returned a verdict in favor of An and Hong. The trial court entered judgment in favor of An and Hong and against the then-administrator of Jackson’s estate, including an award of over $5.3 million for Hong’s injuries.

Robert W. Hughes, Jr., as administrator of Jackson’s estate, filed this suit against First Acceptance in June 2014, alleging negligence and bad faith in First Acceptance’s failure to settle Hong’s claim within the policy limits. Hughes sought to recover $5,309,220.25, the amount of the judgment attributable to Hong’s injuries which remained unpaid, as well as punitive damages and attorney fees. First Acceptance moved for summary judgment, and Hughes moved for partial summary judgment on the issues of liability and compensatory damages.

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The Georgia Supreme Court granted certiorari in this case to review whether the Court of Appeals erred in reversing the grant of summary judgment to the insurer on the insured’s failure-to-settle claim.

The Court also asked the parties to address 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.

As to this threshold issue, the Court concluded an insurer’s duty to settle arises only when the injured party presents a valid offer to settle within the insured’s policy limits. Applying the applicable rules of contract construction to correspondence from two injured parties in the instant case, the Court concluded the injured parties presented to the insurer a valid offer to settle within the insured’s policy limits but that the offer did not include any deadline for accepting the offer.

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Based on the undisputed evidence, as a matter of law, the insurer did not act unreasonably in failing to accept the offer before it was withdrawn by the injured parties. As the insurer was entitled to summary judgment, the Court reversed the decision of the Court of Appeals.