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TIMEDEMANDSANDBADFAITHFORFAILURETOSETTLEINGEORGIA

JamesT.BrieskeGRAY,RUST,ST.AMAND,MOFFETT&BRIESKE,LLP

1700AtlantaPlaza950EastPacesFerryRoadAtlanta,Georgia30326(404)870‐7387Direct

(404)870‐7374Facsimilejbrieske@grsmb.com

TABLEOFCONTENTS

I. Introduction................................................................................................................................................2

II. TheApplicableLaw..................................................................................................................................2

III. CurrentStatusofTimeDemandsinGeorgia................................................................................6

IV. InvestigatingaCasepriortoaPre‐SuitTimeDemand............................................................8

V. TimeDemands101...................................................................................................................................9

VI. CaseEvaluationintheFaceofaTimeDemand.........................................................................13

VII. BustingtheLimits:StrategiesforAvoidingBadFaithSetUps..........................................17

VIII. O.C.G.A.§9‐11‐67.1:ACureor“ABand‐AidonanOpenChestWound”.......................19

IX. TheRamificationsofNegligentFailuretoSettle........................................................................21

X. Conclusion..................................................................................................................................................22   

 

 

 

 

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Withinthelastfiveyears,counselprosecutinganddefendingpersonalinjuryclaims

have seenadramatic increaseof theuseof time limitedHolt demands to either settle a

stubborn case or to “set up” an insurance company for bad faith failure to settle a case

againstitsinsuredwithinpolicylimits.Inparticular,inthesecondhalfof2012,afloodof

policylimitsdemandsfueledbyappellatedecisionsaddressingwhetherornotaninsurer

has made a counter offer to a time limited demand landed on the desks of claims

professionalswhosoughttheadviceofinsurancedefenseandbadfaithcounsel.Thelarge

increase in the use of time limiteddemands and complaints fromdefense attorneys and

insurancecarrierseventuallyledtothepassageofO.C.G.A.§9‐11‐67.1duringthelegislative

sessionof2013.

I. Introduction

Thispresentationwasoriginallydirectedtowardseducatingclaimsprofessionalson

howtohandlepolicy limits timedemandssubmittedunderSouthernGeneralv.Holt,262

Ga. 267, 416 S.E.2d 274 (1992). This paperwill address the applicable law concerning

negligent bad faith failure to settlewithin policy limits claims, the types of time limited

demands thatare typicallyseenbydefensecounseland insurancecarriers, strategies for

respondingtodemandsandinsurancecarriers,andtheeffect,ofthepassageofO.C.G.A.§9‐

11‐67.1onclarifyingorprovidingguidancetoallcounselandclaimsprofessionalsonhow

todraftandproperlyrespondtopolicylimitstimedemands.

II. TheApplicableLaw

Themostcommonexampleofaninsurancecompany’sliabilityforbadfaitharises

whentheinsurancecompanyfailstotakeadvantageofareasonableopportunitytosettlea

claimagainstitsinsuredwithinpolicylimits.Underthemajorityofinsurancepolicies,the

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insurercontrolsthedecisionwhethertosettle,andprotectitsinsuredagainstapotential

excess judgment. Becausetheliabilityinsurershasexclusivecontroloverthedecisionto

settle,Georgiacourtsholdthattotheinsurerhasadutytomakesettlementdecisionsnon‐

negligentlyandingoodfaith. Thisgoodfaithdutyfirstestablished,andwelldiscussedin

threeseparate,butrelatedfederalcourtdecisionsissuedbythe5thCircuitCourtofAppeals

applyingGeorgialawfrom1962to1967. See,Smootv.StateFarmMut.AutoIns.Co.,299

F.2d525 (5thCir.1962); 337F.2d223 (5thCir.1964);and381F2d.331 (5thCir.1967).

From the “Smoot trilogy,” the insurer’s duty to settlewhen presentedwith a reasonable

opportunitybegantobetestedbytheuseoftimelimitedsettlementdemands.

UnitedStatesFidelityGuar.Co.v.Evans,116Ga.App.93,156S.E.2d809(1967),first

discussed the equal consideration rule as a standard by which an insurance company’s

decisionnottosettleaclaimwithinitspolicylimitsagainstitsinsuredwouldbemeasured.

TheEvans court held, “As a professional in the defense of suits, the insurermust use a

degreeof skill commensuratewith suchprofessional standards. As the championof the

insured,theinsurermustconsiderasparamounthisinterests,ratherthanitsown,andmay

notgamblewithhisfunds.”Thecourtalsostatedthattheinsurermustaccordtheinterest

ofitsinsuredwiththesamefaithfulconsiderationasitgivesitsowninterest. Evans,116

Ga.App.93atp.96–97.

InSouthernGeneralv.Holt,supra,theGeorgiaSupremeCourtfurtherdescribedthe

equalconsiderationrule.“Indecidingwhethertosettleaclaimwithinthepolicylimits,the

insurancecompanymustgiveequalconsiderationtotheinterestsofitsinsured.Thejury

generally must decide whether the insurer, in view of the existing circumstances, has

accordedtheinsured“thesamefaithfulconsiderationitgivesitsowninterest.”InCotton

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Statesv.Brightman,276Ga.at683,580S.E.2d519(2003),theSupremeCourtheldthatan

insurerisnegligentinfailingtosettle,iftheordinarilyprudentinsurerwouldconsiderthat

adecisiontotrythecasecreatedanunreasonablerisk.

Smoot, Holt, Evans and Brightman, established the standards under which an

insuredmayrecoverfortheinsurer’sdecisiontofailtosettlewithinlimits.Iftheinsurer

failedtogiveequalconsiderationtotheinterestsoftheinsured;failedtoaccorditsinsured

the same faithful consideration it accords itsown interests; refused to settlebecauseof

anyarbitraryorcapriciousbeliefthattheinsuredwasnotliable;orcapriciouslyrefusedto

entertainasettlementofferwithnoregardgiventothepositionoftheinsured,aninsurer

maybenegligentinfailingtosettle,andbeheldtohaveactedunreasonably.See,Insurance

BadFaith:TheLawinGeorgia,2ndEd.,JamesSadd,RichardDolderandSamanthaJohnson,

(2013),p.60.

The most common failure to settle within policy limits arises from the insurer’s

rejectionofatimelimitedpolicylimitsdemand. The“HoltDemand”isawrittenofferby

which an attorney for the claimant demands a settlement at or below policy limits, and

statesthattheywillfilesuittoobtainanexcessjudgmentagainsttheinsuredifademandis

notmetwithinaspecifictimeperiod.Inadditiontorestatingtheequalconsiderationrule,

the Supreme Court of Georgia established several important statements of law when

decidingHolt. An insurance company does not act in bad faith solely because it fails to

acceptasettlementofferwithinthedeadlinesetbytheinjuredperson’sattorney.Whether

aninsureractedreasonablyinnotpayingademanddependeduponthecircumstancesof

eachcase.

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TheHoltcourtcitedthreespecificfactorsindeterminingwhetherornotaninsurer

wasreasonableindecidingwhetherornottoacceptapolicylimitsdemand.TheHoltcourt

statedthatthestrengthoftheliabilitycaseagainsttheinsured,therisktotheinsuredofan

excess judgment, and thedamages theclaimantmayultimately recoverunderapplicable

law must be considered when deciding whether to settle when presented with a time

demand.

Last, the Supreme Court stated that nothing in theHoltdecisionwas intended to

establisharulethatmeansaplaintiff’sattorneyundersimilarcircumstances,couldsetup

aninsurerforexcessjudgmentmerelybyofferingtosettlewithinthepolicylimits,andby

imposinganunreasonablyshorttimewithinwhichtheofferwouldremainopen.Despite

thislanguage,thetimelimitedHoltdemandservesastheblueprinttosetupaninsurerfor

excessverdicts.

Recentlitigationhascentereduponwhetherornotaninsureracceptedasettlement

ormadeacounteroffer,rejectingthetime limiteddemand. Theappellatecourts lookto

thebasiclawofcontractformationtodeterminewhetheranenforceablesettlementexists.

Inshort,theGeorgiacourtsholdthataclaimant’sattorneymakinganoffermaycondition

the terms under which the offer may be accepted. Failure to accept the offer in strict

compliancewiththetermssetforthinthedemand,oranacceptancethatpurportstovary

asingletermisdeemedarejection.Anycounterofferisarejectionoftheinitialoffer.See,

Herringv.Dunning,213Ga.App.695,446S.E.2d199(1994); Fortnerv.GrangeMut. Ins.

Co.,286Ga.189,686S.E.2d93(2009);Frickeyv.Jones,280Ga.573,630S.E.2d374(2006).

Frickey involvedtheverycommonsituationwhentheinsureracceptsthedemand,

but conditions thepaymentof policy limits on the satisfactionofmedical provider liens.

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The Court ruled that no settlement agreement had been made, because the insurer

purported to accept the offer on the condition that all liens be resolved. The Georgia

SupremeCourtdeemedthisacceptancetobeacounterofferandarejectionofthedemand.

Thisdecisionledtothecommonpracticeoftimelimiteddemandsbeingconditionedupon

releases containing no indemnification language or lien protection for the insurer or

insured.Seealso,McReynoldsv.Krebs,290Ga.850,725S.E.2d584(2012).

III. CurrentStatusofTimeDemandsinGeorgia

AlthoughSouthernGeneralv.Holtwasdecidedin1992,theuseofHolttimelimited

demandssignificantlyincreasedinthelastfewyears,andhasbecomemoreprevalentand

earlyintheclaimsprocess.Recentappellatecourtdecisionshavebeenveryunfriendlyto

insurersinnegligent/badfailuretosettleclaimsbenefittedclaimant’scounselandhelped

to create cottage industry for suing insurance companies for negligent failure to settle.

The scope of damages claimed by bothwronged insureds and successful claimantswho

have been assigned bad faith claims has greatly expanded to include not only the

responsibilityforunderlyingexcessverdict,butpostjudgmentinterest,punitivedamages,

attorneysfeesandotherconsequentialdamages. (See,Thomasv.AtlantaCas.Co.,253Ga.

App. 199, 558 S.E. 2d 432 (2001), for an excellent discussion of what consequential

damagescanberecoveredasaresultofthefailuretotimelysettle).Last,veryaggressive

and intelligentbad faith lawyersarenowmotivated toeducateothers in theuseof time

limitedpolicylimitsdemandsandmarketingtoprosecutenegligentfailuretosettleclaims

againstinsurancecompanies.

Earlyintheclaimsprocess,moreattorneysarenowworkingtosetinsurersupwith

time limits demands to remove policy limits. Early policy limits demands frequently

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containnumerousconditionswhichtheinsurermustcomplywithtomeetthetermsofthe

demandwithin thespecified termbasedupon theholdingofFrickeyv. Jones, supra. The

demandsfrequentlystatethat,anyfailuretocomplywiththeexacttermssetforthinthe

demandisdeemedtobeacounterofferandarejectionofaoneandonlyopportunityto

settle which results in an immediate and permanent withdrawal of the demand and a

lawsuitinwhichtheplaintiffseeksanexcessverdict.Last,the“equalconsiderationrule“

hasbecome the standard relieduponby the claimants attorney inwhich the an insurer,

whenconsideringapolicylimitstimedemand,mustgiveequalconsiderationtoitsinsured

inmakingadecisiontosettle.Stateddifferently,theinsurermustconsiderwhateffectan

excessverdictwillhaveagainstitsinsuredwhenrespondingtoatimelimiteddemand.

Prior to the filing of suit, the claimant’s attorney controls the flowof information

availableforaclaimsprofessionalanddefensecounseltoevaluatetheclaim. Frequently,

claims professionals are provided with a limited number of bills, medical records, and

supportinglostwagedocumentationwhenaskedtomeetapolicylimitstimedemand.Of

course, counsel for the claimant has had an opportunity tomeetwith their client, speak

with their doctors andhas personal knowledge of their clients injuries to allow them to

predict the eventual value of the claimbefore a jury as their client continues treatment.

Although,theinsurermaynotbeprovidedwiththemostrecentandinformativemedical

records, policy limits time demands frequently include allegations of future surgery and

continuingmedicalexpenseswhichwill“mostcertainlycause”specialdamagestoexceed

thepolicyholders’ liability limits. Therearealsomedicalprofessionalswhoarehappyto

assistcounselbyperformingaone‐timeexaminationoftheclaimant,andpredictinwriting

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that a surgery is needed. The doctors will outline exorbitant future medical costs to

supportapolicylimitstimedemand.

Anotherrecentdevelopmentinfailuretosettlecasesisthegrowthofthefirstparty

failure to settle a claim. Historically, an insuredwho had an excess verdict against him

assigned their right to file a bad faith suit against the insurer to a successful plaintiff, in

exchangeforareleasefrompersonalliability.Thatplaintiffthenstoodintheshoesofthe

injured policyholder and sought the full amount of the excess verdict, post judgment

interest,attorneysfeesandcostsassociatedwiththelitigation.However,therecenttrend

isfortheharmedpolicyholdertohireabadfaithlawyertoprosecuteafirstpartyfailureto

settletheclaim.Thishasseriousramificationsfortheinsurer.Themostseriousisthata

firstpartyclaimantcanrecoverpunitivedamagesagainsttheinsurancecompanywhicha

successfulplaintiffholdinganassignmentcannotdounderHolt. Theinsuredalsoargues

that theyareentitled to recover consequentialdamages resulting fromanexcessverdict

which include damage to credit, ability to seek employment, andmental and emotional

suffering. Last, the harmed policyholder sitting at the plaintiff’s table, who was not

protected from an excess verdict by the defendant insurance company, provides a huge

strategic and sympathetic advantage before jurors that are not familiar with the claims

process.

IV. InvestigatingaCasepriortoaPre‐SuitTimeDemand

Prior to the instigation of a lawsuit, and the ability of an insurance company to

conduct discovery, claimant’s counsel enjoys a very uneven playing field. Claimant’s

counselcontrols the informationprovidedto the insurancecompany,and frequentlywill

refusetoallowrecordedstatements,orgiveexecutedmedicalorlostwageauthorizations.

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Discovery in failure to settle lawsuits typically centers uponwhether the insurer

promptly and thoroughly investigated the liability case against the insured, and the

damages sought by the claimant. Therefore, claims professionals and defense counsel

handlingclaimsmustbeproactivepriortothereceiptofatimelimiteddemand,Adjusters

mustsendcorrespondencetocounsel,andspecificallyaskforallmedicalrecords,bills,and

recorded statements, and executed medical and lost wage authorizations. Claims

professionals should be advised to continually document their files showing their

investigation and efforts to secure information from counsel representing the claimant.

Claimant’s counsel’s refusal toprovide this informationmust alsobedocumented. Most

importantly, the insurance carrier as well as defense counsel should always keep their

insuredpolicyholderinformedoftheinvestigationoftheclaim,andreceiptoftimelimited

demands.

V. TimeDemands101

The most frequent mistake I see made by claims professionals and attorneys

handlingtimedemandsisafailuretocarefullyandrepeatedlyreadawrittendemand.Ifa

claimsprofessionalasksyoutoprovideadviceonatimedemand,immediatelyaskthemto

provide youwith a copy of the demand, rather than simply reciting the contents. Many

demandsarewellwritten,fullofconditions,orflatouttricky.Myadviceistoreadthetime

demand several times, bullet point all terms and conditions, determine and highlight

deadlines, and list any items for which you need to seek clarification from claimant’s

counselwhicharenotclearfromthebodyofthedemand.

A timedemandmustbegivennumberonepriority. Late reviewand response to

timelimiteddemandswillnotappeartobereasonable.It isoftenconfusingtodetermine

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exactlywhenthetimedemandisdue.Ihaveseendemandsdatedforaday,mailedorfaxed

twodayslater,andthenfinallyreviewedbytheinsuranceadjuster7to10dayslaterafter

ithasbeenscannedintotheirsystem.Although,O.C.G.A.§9‐11‐67.1providesaset30day

deadline,afrequentproblemisdeterminingexactlywhenthe30daysbeginstorun.Tobe

safe,diarythenumberofdaysfromwhichthedatethedemandiswritten,andthenclarify

ifthereisacertainduedatesetinthebodyofthedemand,orifthedemandstatestheoffer

tosettleexpiresacertainnumberofdaysfromitsreceipt.Alwaysobtainandsecureproof

ofwhenthedemandwasreceived. Ifthereiscontradictionconcerningaduedatewithin

the demand, one should immediately seek clarification for plaintiff’s counsel, and then

documentyourconversation.

Oncetheconditionscontainedwithinthetimedemandaredetermined,andthedue

dateestablished,one should immediatelydeterminewhich conditions canbemetbefore

thedemandexpires,andworktomeetthoseconditions.Frequently,thereareconditions

whichtheinsurercannotalwaysmeet,becausetheyaredependentuponthecooperation

of the insured or other factors. In particular,many demands require executed no other

insurance,andorfinancialaffidavitsthatmustbereceivedalongwiththesettlementcheck

tomeet the termsof thedemand.Thus,onemust contact the insured immediately, send

themacopyofthedemand,explainitscontentsandramifications,andaskforcooperation

in completing the affidavits. Certainly, all conditions cannot all be met within the time

deadline.However,theinsureranddefensecounselshouldattheveryleastsendacopyof

anyproposedno‐otherinsuranceaffidavitorfinancialaffidavittotheinsuredwellbefore

the deadline expires. Another lesson fromCotton States v.Brightman is that an insurer

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mustmeet those conditionsoverwhich ithas control to createa “safeharbor” frombad

faith.

V. CaseEvaluationintheFaceofaPolicyLimitsTimeDemand

When faced with a time limits demand, the most important question and focus

shouldbeon theamountof thepolicy limits. Obviously, if thepolicy limitsarehigher,a

claimsadjusterhasmore freedomto investigateaclaim,especiallywhen investigationof

priormedicalconditions,injuriesandcollectionofpasttreatmentrecordsareessentialto

evaluateaclaimant.Ontheotherhand,ifthepolicylimitsarelow,themarginforerrorin

meetingademandismuchgreater.Claimsprofessionalsmaynothavethetimetocollect

alltherecordstheyneedtoproperlyevaluatethecase,whenlimitsarelow.

Again, the standard in Georgia for responding to a time demand is negligence, as

wellasbadfaith.Essentially,ajuryorfactorfinderwillultimatelybecalledupontodecide

whetherornotaclaimsprofessional’sactionsinpayingornotpayingaclaim,orrequesting

additionalmedicalandlostwagerecordswerereasonableunderthecircumstances.

Historically,thestandardfordecidingtopayatimedemandrelieduponbyinsurers

were factorsdiscussed inSouthernGeneralv.Holt. TheHolt court stated thatwhen the

liability of the insured is reasonably clear, and special damages will exceed the policy

limits, the insurer may be guilty of bad faith or negligence by failing to settle. More

recently, theequalconsiderationrulehasbeenrelieduponastheapplicablestandardby

boththeappellatecourtsandclaimant’scounselwritingdemandsastowhetheraninsurer

actedreasonablyinrefusingtopayatimelimiteddemand.

In cases with low limits where the margin for error is much greater, special

considerationmustbegiventoimmediateandthoroughviewofatimedemand.Although,

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insurancecarriersmayusecomputergeneratedcaseevaluationsoftwaretoreviewclaims,

manual reviews of all policy limits time demands are strongly advised, especially if a

decision is made not to settle for policy limits. Round table reviews of demands and

consultationwithlocaldefensecounselisstronglyadvised.

When drafting an initial response to a demand a claims professional should

determinewhatconditionsexist inthedemandthatcanorcannotbemet. Although,no

other insuranceaffidavitsare frequentlystraightforward, financialaffidavitscanbequite

involved,andwillask forconfidentialandpersonal informationconcerning the insured’s

assets. Theinsured,whoultimatelymayhaveaclaimfornegligentfailuretosettle,may

refuse to provide this confidential information or simply not want to go through the

process of filing out a financial affidavit to complywith the termsof thedemand. This

presentsaproblemtotheinsurer,sincetheydonothavetheabilitytocontroltheactions

ofthe insuredtocomplywiththeconditionsset forth inthepolicy limitsdemand. Thus,

theinsurancecompanymustshowitmadeanearlyandreasonableefforttosecurethese

affidavits from the insured, andexplain to them thatplaintiff’s counselhasmade this an

expressconditionofhisagreementtoprotectthemfromexcessexposure.Ultimately,ifthe

insured fails to provide these affidavits, documenting the file to show that a reasonable

efforthasbeenmadebytheinsurertosecuretheaffidavitsmayinsulatetheinsurerfroma

badfaithclaim.

Whenthetermsofthedemandareunclear,especiallyastoconditionssetforth in

the demand, early verbal contact with plaintiff’s counsel seeking clarification of these

conditionsisessential.Inaddition,adiscussionofwhatconditionscanbecompliedwith

bytheinsurer,andwhichcannotsuchassecuringfinancialaffidavitsisadvisable.Last,if

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anextensionoftimeisneededtoobtainadditionalinformationonpriormedicalrecordsor

furtherinvestigateliability,oneshouldverballyaskplaintiff’scounselforanextensionas

soon as possible. Last minute extensions will not be given, and will not appear to be

reasonable. On the other hand, if an early request for an extension of time to seek

reasonable information to evaluate the demand is rejected by counsel, confirming this

rejectioninwritingwillhelpstobuildtoadefenseforabadfaithcase.

VI. BustingtheLimits:StrategiesforAvoidingSetups

Seriousinjurycaseswithlargemedicalandlostwagespecialdamagesareripefor

policylimitsdemands. Inthesecases,manyclaimants’attorneyswillattempttobustthe

limits, and set up the insurer for anexcess claim tomaximize their client’s recovery. In

fairness,plaintiff’scounsel,knowingthattheirclienthassufferedseriousinjuriesandthat

onlyalowlimitspolicyisavailabletocompensatethem,contendthattheyhaveanethical

dutytoobtainasmuchinsurancemoneyaspossibletocompensatetheirclient.UnderHolt

and subsequent cases, existing lawprovides a blueprint tomake a policy limits demand

whichmayremove thepolicy limits,andresult inmorecompensation for theirseriously

injured clients. Thus, low limits serious injury claims frequently draw time limited

demands that contain numerous conditions, tricks and require a claims professional or

defensecounseltopredicttheultimateoutcomeofclaim.

Plaintiff’s counsel ismost familiarwith their client’s injuries and canmore easily

predict futuremedical care or even surgery after meeting and speaking to their clients

and/or their medical providers. Defense counsel and claims professionals do not have

access to this important information, and frequently are only given vague details of the

injuries,whilecounselhintsat futuremedicalcareand futurespecialdamages. Inshort,

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plaintiff’s counsel knows better what his case may be worth and will use this to his

advantageindraftingtimedemands.In“CrystalBallDemands,"theinsureriscalledupon

topredictwhatmayhappentotheclaimfromanexposurestandpointbaseduponlimited

informationthatisprovidedbyplaintiff’scounsel.

The Crystal Ball Demands are time limited demands which contains little or no

information prior to a demand being made, but allegations of a bad injury, and future

medical expenses. Counsel will not typically allow any statements or medical

authorizations. Thewrittendemandis thensent tothe insurerwith limitedinformation,

medicalrecordsandbills,butallegationsofcontinuingmedical treatmentandwage loss.

Frequently, plaintiff’s counsel baits the claims professional to ask for additional

informationratherthanpayingthedemandwhichwillbedeemedtobeacounterofferand

a rejection of a one and only opportunity to settle case for policy limits to protect its

insured.

InordertoavoidtheCrystalBallsetup,theinsurermustrespondtothedemandas

early as possible, and contact plaintiff’s counsel to ask him for additional information

concerninghisallegationsof futuremedical treatmentandwage loss. The insurermust

ask formedicaland lostwageauthorizations toobtain that informationon theirown. If

plaintiff’scounselrefusestoprovidethisinformation,theclaimsprofessionalshouldfollow

up in writing to document the file in order to defend a potential bad faith claim. In

addition,aswithalldemands,theinsurershouldinformtheinsuredofthedemand,send

themacopyandaskforinput.

A typical scenario is a policy limits demand which alleges future surgeries and

medicalexpenseswhichwillgreatlyexceedlowpolicylimits.Theclaimantmayhavejust

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started treatment and incurred only minimal medical bills after an emergency room

treatment, diagnostic testing and physical therapy which are not helping the injury.

Claimant’scounselwilltelltheinsuranceprofessionalthatphysicaltherapyhasfailed,and

painmanagement, including epidural injections and all sorts of expensive treatment are

forthcoming.Manytimes,thispromisedtreatmenthasalreadybegun,buttherecordsare

notprovided.Claimant’scounselwillalsohavetheadvantageofknowingwhetherornot

theepiduralshaveresolvedthepain,andifnotwhetheritislikelytheclaimantisheading

forsurgery.Atimedemandfollowsstatingitisaoneandonlyopportunitytoprotectthe

insuredbysettlingforpolicylimits.

Theinsurerisputintoatoughpositiononwhetherornottomakeofferbasedupon

the information they have, or to simply ask claimant’s counsel to provide themwith an

extensionof timetorespondto thepredicteddemanduntil the treatmentoccurs,andall

bills are provided to determine whether payment of policy limits is warranted. This

decisionshouldbeaddressedonacasebycasebasis.Insomeinstances,itmaybebetter

nottoofferanythingbasedupontheinformationprovidedtoavoidtheappearanceoflow

ball counteroffer to thedemand. The insurermaydecide it ismore reasonablewant to

evaluate the case aspolicy limits case, onceall the informationalleged in thedemand is

provided.

Nobrainerpolicylimitscaseswithseriousinjuries,deathsandlowpolicylimitsare

ripe forConditionalDemands. In thesecases, the insurerknows that theywillpay their

limits. Plaintiff’s counsel knows that the limits are low, and seeks an opportunity to

removethepolicylimitswithatimedemand.TheseConditionalDemandsarelongdetailed

demandswithnumerousconditionswhichtheinsurermustmeetinadditiontotendering

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policy limits tomeetthetermsof thedemand. Counseldictatesthe formofreleases, the

partiesandclaimsthattheywillreleaseandwhetherornottheywillagreetosatisfaction

of liens. Counsel alsodictate that the checkmustbe received inhandbya certaindate.

Appellatecasesholdthataninsurerinsistinguponpaymentofmedicalorhospitalliensas

a part of the demand has rejected the demand. These cases also hold that the response

mustmirrorthetermsofthedemandtoresultinanenforceablepolicylimitssettlement.

ToavoidaConditionalDemandsetup,theclaimsprofessionalanddefensecounsel

should read thedemand thoroughlyand repeatedly, and listall conditions. If conditions

arevague,oneshouldcontacttheplaintiff’scounselasearlyaspossibletoattempttoseek

clarification.UnderBrightmanv.CottonStates,aninsurermustcomplywithallreasonable

conditions that they canmeet that are listed in a timedemand. Again, demandswhich

insistuponexecutionofnootherinsuranceorfinancialaffidavits,oranyotherconditions

whichcallforthecooperationoftheinsured,requirethattheinsurerinformtheinsured,

andaskforearlyassistance.

Sometimelimiteddemandsarejustsneaky. Theselongdetaileddemandscontain

vagueorhiddenconditionsconcerningtheformofrelease,indemnificationanddeliveryof

check in hand. Frequently, these terms often appear to contradict each other, and are

hiddenwithinthebodyof thedemandwhichcangounnoticed ifnotcarefullyread. The

sneakysetupoften involvesgamesmanshipconcerningwhenthedemandisdue. It isno

coincidencethatDecemberisthetimedemandseason.Claimsprofessionalswilllikelybe

onvacation,and/ormissdaysfromworkduetoChristmasEve,ChristmasDay,NewYear’s

EveandNewYear’sDay. Essentially, thesedemandsaretimedtoburnasmanydaysas

possiblewhenthecasecanbereviewed.

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Last, there has beenmuchdebate as towhether or not awritten timedemand is

requiredtosupportafailuretosettleclaim,oraverbaldemandforpolicylimitswithina

certaindate issufficient. InKingsleyv.StateFarm,353F.Supp.2d.1242(N.D.Ga.2005),

the U.S. District Court stated that although the best and most certain determination of

whether there is an opportunity to settle is in a written time limited demand, it is not

required.However,thereisnobadfaithasamatteroflaw,eveninaseriousinjurycase,

unlessthereisanopportunitytosettlecommunicatedtotheinsurer.

Reviewingthesneakydemandearlyandoftenisalwaysagoodwaytoavoidbeing

setupforabadfaithclaim.Listtheconditionsandcalltheplaintiff’scounseltoclarifythe

termsofdemand,duedatesandwhatconditionsmustbemettomeetthedemand.Always

contacttheinsuredtodiscussthedemand,andtheresponse.Typically,thesneakysetup

involvesa low limitsandserious injurycaseddesignedopen the limitsbysettingup the

insured.

VII. TimeDemandsandLiens

Aproblemoftenfacedbyaclaimsprofessionalaretimelimiteddemandsinserious

injuryclaimswithlowlimits,inwhichasizablehospitallienexists.Inessence,theinsurer

iscalleduponpicktheirpoisonbyeitherpayingademandwhenplaintiff’scounselinsists

thatnolienindemnificationbegiventoavoidapotentialbadfaithclaim,ortofacealarge

medicalexpenselienclaimfromamedicalprovider.

InSouthernGeneralv.Wellstar,315Ga.App.26,726S.E.2d488(2012),theGeorgia

CourtofAppealsstatedthatinsurersfacedwithatimedemand,andarefusaltopayalien

by claimant’s counsel may be able to create a safe harbor from aHolt bad faith claim.

However,theholdingspeaksinhypotheticals,andfromthewordingofthecase,theinsurer

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mustbeextremelycarefultoensurethattheonlyreasonthattheycannotmeetthedemand

iscounsel’sunreasonablerefusaltohonorthe lien. Thisdecisionwas furtherclarified in

Torresv.Elkins,371Ga.App.135,730S.E.2d518(2012). InTorres,theinsurerwasalso

facedwithatimedemand,butconditionedpaymentofpolicylimitsonsatisfactionofliens.

TheCourtheldthattheinsurerdidnothaveanenforceablesettlementtopreventalawsuit,

andapotentialexcessclaimagainst their insured. TheCourtdidmention, ina footnote,

thattheinsurermayhaveadefensetoabadfaithclaimbasedontherefusaltopaythelien

byclaimant’scounsel.

Due to the uncertainty of Wellstar, and the fact that Torres v. Elkins, held no

enforceable settlement exists, if the insurer insists upon satisfaction of the lien, these

demandsshouldbetreatedonacase‐by‐casebasis.Mostoften,itmaybebettertoresolve

the injuredparty’s case,protect the insured fromanexcessverdict and thendealwitha

cappedlienandamuchlesssympatheticplaintiffattheendoftheday.Ontheotherhand,

ifthereisalargeandsizeablelien,andtheonlyreasonforlackofpolicylimitssettlementis

that plaintiff’s counsel refusal to satisfy the lien, the insurermay choose to not pay the

claimanddefendabadfaithclaimbaseduponSouthernGeneralv.Wellstar.

However, the trend now amongmedical providers is to enforce a lien by filing a

direct suit against the insurerwhohasknownassets rather than insuredwho likelyhas

none. O.C.G.A. §44‐14‐473, expressly allowsadirect claimagainst an insurer, to enforce

thelien.Thus,aninsured,mayarguethattheinsurershouldhavepaidthetimedemandto

protect them, and in doing so, the insurer put its interest above the policyholder, in

violationoftheequalconsiderationrule.”

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VIII. O.C.G.A.§9‐11‐67.1:ACureor“ABand‐AidonanOpenChestWound”

Inresponsetothedramatic increase intheuseofpolicy limitstimedemands,and

theuncertaintyof the lawcreatedbyappellatedecisions, theGeorgia legislature in2013

passed a new time demand statute, O.C.G.A. §9‐11‐67.1. The passage of this legislation

known as HB 336, and the ultimate enactment of the statute received a good deal of

attention fromthe legalandbusinesscommunity. Pressure fromthe insurance industry,

businesses,chambersofcommerce,andthedefensebarandoppositionfromtheGeorgia

TrialLawyersAssociationresultedinagroupofplaintiffanddefenselawyerscooperating

as a secret committee to draft a compromise bill. The bill was ultimately drafted after

muchdiscussionwhich includedtestimony,whichwasfilledwithstoriesof five‐daytime

demandsandunreasonableconditions.Theplaintiff’sbararguedthatthefurorovertime

demandswasaperceivedproblem,anddismissedstoriesoffive‐daydemandsasisolated

incidents. However, the trial lawyers were willing to compromise and work towards

formation of a bill. Ultimately, O.C.G.A. §9‐11‐67.1was enacted and signed into law by

GovernorNathanDeal.

However, O.C.G.A. §9‐11‐67.1 only established procedures for pre‐suit time

demandsinmotorvehicleaccidentcases.Thenewcodesectiononlyappliesto“causesof

action forpersonal injury,bodily injuryordeatharising from theuseof amotorvehicle

after July1,2013.” Thedemandmustbe inwriting, senteitherby certifiedor statutory

overnightreturnreceiptrequested,andcontainthefollowingmaterialterms:

1. A 30 day time demand period from the receipt of the offer in which the

demandmustbeaccepted;

2. Thespecificamountofthepayment;

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3. Thespecificpartyorpartiestobereleased;

4. Thetypeofreleasetobeacceptedinexchangeforpayment;and

5. Theclaimstobereleased.

Thecodesectionalsostatesthattheinsurancecarrier“shallhavetherighttoseek

clarification regarding the terms, liens, subrogation claims, standing to release claims,

medicalbills and records, andother relevant factswith this attempt to seek “reasonable

clarification”withoutthiseffortbeingdeemedtobeacounterofferandarejectionofthe

demand.Last,thecodesectionspecifiesformsofpaymentthatareacceptable.

Thepassageofthisbillwaswelcomedbysomeasafirststepinprovidingstructure

to pre‐suit time demands, and itwas hoped that the new statutewould curb the use of

trickyandexcessive tactics toremove limitsandclaims. However, thenewcodesection

doesnotapplytocasesthatdonotarisefromcaraccidents. Moreover,aftersuit isfiled,

thestatutedoesnotapplyandanythinggoes.Thecodesectionwasalsocharacterizedby

many as flawed, and as a mere “Band‐Aid on a sucking chest wound,” since it did not

provideanycapsonpenaltiesorattorney’sfeesasisthecaseformostinsurancebadfaith

claimscreatedbystatuteinGeorgia.

The passage of this bill has bred a different type of time demand. The new time

demandfollowsthestrictrequirementsofO.C.G.A.§9‐11‐67.1,andgoestogreatlengthsto

spelloutthematerialterms. However,anexaminationoftheacceptablereleaseiswhere

the focusmustbe centered. Although, the timedemand itself tracks the languageof the

newstatute, itwillalsostatethat inordertomeetdemand,the insurermustagreetoan

attached limited release. The release itselfmay not contain the specific parties that the

insurer needs to be released, may exclude other claims, and often fails to address lien

21 

indemnification. Thus, in addition to carefully reading the demand, the contents of the

attachedlimitedreleaseneedstobethoroughlyexamined.

IX. TheRamificationsofNegligentFailuretoSettle

Firstandforemost,ifaninsurerdoesnotmeetthetermsofatimedemand,thereis

noagreementtoprotecttheinsuredfromanexcessverdictandasuitinmostcaseswillbe

filed.Thelawsuitwillbeprosecutedtoitsend,andtheultimategoalofcounselisobtainan

excessverdict. Asstatedabove, inthepast,thesuccessfulplaintiff’sattorneywouldthen

approachthe insuredtoseekassignmentofhisnegligent failure/bad faithclaimsagainst

the insurer. However, it hasbecomemore common for thewronged insured to findhis

waytoabadfaithattorneyinwhichthescopeofdamagesisgreatlyexpanded,andamore

sympatheticpartywillbesuingtheinsurancecompany.

Ifacaseistriedtoverdict,andanexcessverdictisreached,thepolicylimitsandany

applicable interest must be paid and the insurer must advise the insured of the

ramifications of the excess verdict, personal exposure and advise him of the need to

personallyconsultcounsel. Priortoaverdict, if thecasewasapolicy limitscase,but for

somereasonthetermsofthedemandcouldnotbemet,itisadvisabletocontinuetooffer

policylimitstobuildyourfile.Ifrecordsthatwerenotpreviouslyavailabletotheinsurer

during the life of the demand are produced or discovered, offer the policy limits and

explainwhyyouarenowdoingso.

Onceabadfaithcaseisfiledagainsttheinsurer,mostofthesecasesareremovedto

federalcourt.Typically,theseclaimswillexceedthejurisdictionalamount($75,000),and

most often better judgeswill decide summary judgmentmotions in federal court, and a

more conservative and less hostile jury pool will be found. However, an insurance

22 

company as a defendant, especially against a wronged insured does not enjoy the

advantageofsympathy,andmayoftenfindahostileenvironment.

Inbadfaithlitigation,discoveryisbroadandcaselawholdsthattheplaintiffwillbe

entitled to the claims notes, correspondence, as well as many other internal insurance

companydocumentsthatarenotnormallysubjecttodiscovery. Eachentryintheclaims

noteswillbecarefullyexamined,andquestionedatdepositions. Thedepositionswillbe

longandstressful,andateachstepadjusters,supervisorsandotherinsurancecompany’s

representativeswillbecalledupontoexplaintheirreasonsfornotpayinglimitsintheface

of a timedemand. In addition, the trainingqualifications and claimsprocedureswill be

carefully examined, andmost often, subject to discovery. When defending these claims,

immediatelyrequest theclaimsnotes,and inpreparingdeponents,specificentries in the

claimsnotesbecomethefocusofyourpreparation.

X.Conclusion

Although, O.C.G.A. §9‐11‐67.1 provides some structure to addressing pre‐suit

demands inmotor vehicle accident claims, it has not slowed the use of the demands to

attempt to make the limits of the insurer disappear in serious injury cases. From this

writer’sexperience,thestatutehasnotstemmedthetideoftimedemands,orthefactthat

thedemandsorattachedreleasescanstillcontainmanyconditionsandtricks.Thiswriter

has also seen the use of time limited demands and other personal injury lawsuits not

involvingmotorvehicles,wherenoneoftheproceduresinO.C.G.A.§9‐11.67.1apply.Last,

the two year anniversary of the application of the statute is July 1, 2015, so expect

numeroustimedemandsduringthelatterhalfof2014,andfirsthalfof2015.

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However, I have found that defense and insurance professionals have now

developed better procedures for responding to time demands, and promptly and

thoroughlyevaluatingclaims. Insurersnowmorecarefullyexamine timedemands,have

better procedures in place, and know to consult counsel when in doubt. Insurers now

better engage their own insured,who ultimatelywill have the initial claim for failure to

settle,inthesettlementnegotiationprocessandadvisethemtoseekindividualcounselto

consultthemifneeded.Lawyersbynaturearecreative,andthusstrategiesforresponding

totimedemandsmustcontinuetobefluid.