March 15th, 2019
coverage
GEORGIA SUPREME COURT RULES IN FAVOR OF INSURER ON FAILURE TO SETTLE CLAIM

The Georgia Supreme Court granted certiorari in Hughes v. First Acceptance Ins. Co. of Ga., Inc., 343 Ga. App. 693, 808 S.E.2d 103 (2017), 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. The Court concluded that an insurer’s duty to settle arises only when the injured party presents a valid offer to settle within the insured’s policy limits.

In the context of the Hughes lawsuit, the Court found the offer was not valid in that it did not include any deadline for accepting the offer. The Court also found the insurer did not act unreasonably in failing to accept the offer before it was withdrawn by the claimants. The Court stated that if an offer is silent as to the time given for acceptance, the offer will be construed to remain open for a reasonable time.

The recent Hughes decision limits the risk of insurer bad faith by providing some clarity on the scope of an insurer’s duty to settle under Georgia law. Instead of requiring an insurer to settle a claim within policy limits if the insurer knows, or reasonably should know, that a settlement within policy limits is possible, the Georgia Supreme Court held a valid offer is required.

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