Clarity and Precision And Avoidance of Bad Faith

Whether by design or by accident, bad faith causes of action are occurring in cases where the damages far exceed the policy limits, and the liability insurer clearly intended to pay its policy limits to resolve the case and terminate its exposure.  While the Georgia appellate courts afford insurers certain safe harbors for protection against bad faith, plaintiffs’ counsel have become very adept at exploiting any deviation from the protocol and the appellate courts are not forgiving when the insurer fails to follow, with precision, the requirements for the safe harbors.

In Fortner v. Grange Mutual Ins. Co., Grange placed additional conditions on the requirement for settlement, and the Supreme Court held it was for the jury to determine whether Grange’s additional conditions in response to Fortner’s policy limits settlement demand met the standard of care for the prudent insurer.  This decision followed Jones v. Frickey, where the Court of Appeals found no meeting of the minds regarding a settlement.  The Court stated,

“[a]n answer to an offer will not amount to an acceptance, so as to result in a contract, unless it is unconditional and identical with the terms of the offer. To constitute a contract, the offer must be accepted unequivocally and without variance of any sort.”  Jones, at 401.

Most recently, in Penn v. Muktar, Judge Andrews, in which Judge Phipps and Doyle concurred, held that the parties failed to reach a meeting of the minds regarding a settlement.  The Penns offered to settle their bodily injury claims for the bodily injury policy limits, but when State Farm tendered its policy limits, the proposed release, in effect, asserted a counteroffer in that it contained language that not only released the bodily injury claims, but the property damage claims and any other claims resulting from the collision.

The Penns refused to sign the release and returned the $50,000 settlement check.  The Penns had an uninsured motorist claim which they clearly intended to pursue, but would have been eliminated with the execution of the proposed release forwarded by State Farm.

These cases highlight the importance of clarity and precision in resolving liability claims, so as ensure a meeting of the minds, and not inadvertently create a potential bad faith cause of action.  In each case, bad faith, if pursued may ultimately be avoided, but it is much simpler to avoid a potential bad faith claim altogether by meeting plaintiff’s demand with clarity and precision.

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