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in failing to accept the offer before it was withdrawn by the claimants.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.
