Affirmative Duty to Fairly and Promptly Adjust in Incidents Covered by Motor Vehicle Liability Policies; Actions for Bad Faith; Notice to Commissioner and Consumers' Insurance Advocate

  1. Law
  2. Georgia Code
  3. Insurance
  4. Actions Against Insurance Companies
  5. Affirmative Duty to Fairly and Promptly Adjust in Incidents Covered by Motor Vehicle Liability Policies; Actions for Bad Faith; Notice to Commissioner and Consumers' Insurance Advocate

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  1. In the event of a loss because of injury to or destruction of property covered by a motor vehicle liability insurance policy, the insurer issuing such policy has an affirmative duty to adjust that loss fairly and promptly, to make a reasonable effort to investigate and evaluate the claim, and, where liability is reasonably clear, to make a good faith effort to settle with the claimant potentially entitled to recover against the insured under such policy. Any insurer who breaches this duty may be liable to pay the claimant, in addition to the loss, not more than 50 percent of the liability of the insured for the loss or $5,000.00, whichever is greater, and all reasonable attorney's fees for the prosecution of the action.
  2. An insurer breaches the duty of subsection (a) of this Code section when, after investigation of the claim, liability has become reasonably clear and the insurer in bad faith offers less than the amount reasonably owed under all the circumstances of which the insurer is aware.
  3. A claimant shall be entitled to recover under subsection (a) of this Code section if the claimant or the claimant's attorney has delivered to the insurer a demand letter, by statutory overnight delivery or certified mail, return receipt requested, offering to settle for an amount certain; the insurer has refused or declined to do so within 60 days of receipt of such demand, thereby compelling the claimant to institute or continue suit to recover; and the claimant ultimately recovers an amount equal to or in excess of the claimant's demand.
  4. At the expiration of the 60 days set forth in subsection (c) of this Code section, the claimant may serve the insurer issuing such policy by service of the complaint in accordance with law. The insurer shall be an unnamed party, not disclosed to the jury, until there has been a verdict resulting in recovery equal to or in excess of the claimant's demand. If that occurs, the trial shall be recommenced in order for the trier of fact to receive evidence to make a determination as to whether bad faith existed in the handling or adjustment of the attempted settlement of the claim or action in question.
  5. The action for bad faith shall not be abated by payment after the 60 day period nor shall the testimony or opinion of an expert witness be the sole basis for a summary judgment or directed verdict on the issue of bad faith.
  6. The amount of recovery, including reasonable attorney's fees, if any, shall be determined by the trier of fact and included in a separate judgment against the insurer rendered in the action; provided, however, that the attorney's fees shall be fixed on the basis of competent expert evidence as to the reasonable value of the services based on the time spent and legal and factual issues involved in accordance with prevailing fees in the locality where the action is pending; provided, further, that the trial court shall have the discretion, if it finds the jury verdict fixing attorney's fees to be greatly excessive or inadequate, to review and amend the portion of the verdict fixing attorney's fees without the necessity of disapproving the entire verdict. The limitations contained in this Code section in reference to the amount of attorney's fees are not controlling as to the fees which may be agreed upon by the plaintiff and his or her attorney for the services of the attorney.
  7. In any action brought pursuant to subsection (b) of this Code section, and within 20 days of bringing such action, the plaintiff shall, in addition to service of process in accordance with Code Section 9-11-4, mail to the Commissioner a copy of the demand and complaint by first-class mail. Failure to comply with this subsection may be cured by delivering same.

(Code 1981, §33-4-7, enacted by Ga. L. 2001, p. 784, § 1; Ga. L. 2015, p. 1088, § 22/SB 148; Ga. L. 2016, p. 864, § 33/HB 737; Ga. L. 2019, p. 337, § 1-22/SB 132.)

The 2019 amendment, effective July 1, 2019, deleted "of Insurance" following "Commissioner" in the first sentence of subsection (g).

Code Commission notes.

- Pursuant to Code Section 28-9-5, in 2001, a semicolon was substituted for a comma twice in subsection (c), "of this Code section" was inserted following "subsection (c)" in subsection (d), and "first-class mail" was substituted for "first class mail" in subsection (g).

Law reviews.

- For article, "Bad Faith in Insurance Claim Handling in Georgia: An Overview and Update," see 9 Ga. St. B.J. 10 (2003). For annual survey on insurance, see 65 Mercer L. Rev. 135 (2013). For annual survey on insurance law, see 68 Mercer L. Rev. 133 (2016). For note on the 2001 enactment of this Code section, see 18 Ga. St. U.L. Rev. 167 (2001).

JUDICIAL DECISIONS

Construction with § 33-4-6. - Because a party mischaracterized O.C.G.A. § 33-4-7 as a "companion" to O.C.G.A. § 33-4-6 and erroneously contended that the General Assembly intended to extend the same rights to a third party, or a party other than the policy holder, and thus, the appellate court should therefore read § 33-4-7 as applying, like § 33-4-6, in the event of any covered loss, those arguments were rejected as specious. Mills v. Allstate Ins. Co., 288 Ga. App. 257, 653 S.E.2d 850 (2007).

Use of 17(c) formula.

- Trial court erred when the court denied the defense insurer's motion for partial summary judgment as to the plaintiffs' bad faith claim under O.C.G.A. § 33-4-7 because the insurer's proposed adjustment of the plaintiffs' diminished value claim was reasonable and provided it with good cause as a matter of law for the insurer's refusal to pay the amount demanded by the plaintiffs since it was undisputed that the insurer's adjuster used the 17(c) formula as part of the subjective determination of the lost value of the car at issue. Amica Mut. Ins. Co. v. Sanders, 335 Ga. App. 245, 779 S.E.2d 459 (2015).

Proposed adjustment of diminished value claim is reasonable and provides good cause as a matter of law for the insurer's refusal to pay the amount demanded when it is undisputed that the adjuster used the 17(c) formula as part of the subjective determination of the lost value of the car at issue. Amica Mut. Ins. Co. v. Sanders, 335 Ga. App. 245, 779 S.E.2d 459 (2015).

Bad faith not shown.

- Summary judgment for an insurance company on a motorist's claim against it was proper since there was no evidence of bad faith; the insurance company did not settle the motorist's property damage claim because its adjuster believed that, at the motorist's request, the motorist's insurer was assuming responsibility for settling the claim; an adjuster with the motorist's insurer confirmed that the motorist's insurer had "handled" the motorist's claim, and, further, the motorist sent a demand letter to the motorist's insurer on the same day that the motorist sent a demand letter to the insurance company, indicating that the motorist was still looking to the motorist's own insurer for payment. King v. Atlanta Cas. Ins. Co., 279 Ga. App. 554, 631 S.E.2d 786 (2006).

Statute applied to property, not personal injury, claims.

- Because O.C.G.A. § 33-4-7 applied only to an insurer's bad faith in responding to claims for property damage, an insurer was properly granted a judgment on the pleadings as a complaint asserting that it acted in bad faith in responding to a claimant's claims for personal injury failed to state a claim upon which relief under the statute could be granted. Mills v. Allstate Ins. Co., 288 Ga. App. 257, 653 S.E.2d 850 (2007).

Statute did not apply.

- Because the damage claimed by the company was subject to a cargo liability policy that the underwriters had issued to the insured, and not a motor vehicle liability insurance policy, O.C.G.A. § 33-4-7 provided no authority for the imposition of any penalty for the underwriters' alleged bad faith in connection with the claim. Equipco Int'l, LLC v. Certain Underwriters at Lloyd's, 320 Ga. App. 345, 739 S.E.2d 797 (2013).

RESEARCH REFERENCES

Am. Jur. 2d.

- 7A Am. Jur. 2d, Automobile Insurance, § 367 et seq.

CHAPTER 5 REGULATION OF UNAUTHORIZED INSURERS Article 1 General Provisions.
  • 33-5-1. Representation of unauthorized insurers prohibited.
  • 33-5-2. Validity of contracts effectuated by unauthorized insurers; dissemination of advertising for or on behalf of unauthorized insurers.
  • 33-5-3. Penalty for violations of chapter.
Article 2 Surplus Line Insurance. Part 1 GENERAL PROVISIONS.
  • 33-5-20. Short title.
  • 33-5-20.1. Definitions.
  • 33-5-20.2. Criteria for domestic surplus lines insurer; construction with federal provisions; eligibility to write insurance; taxes; protection; financial and solvency requirements; exemption from statutory requirements.
  • 33-5-21. Authorization of procurement of surplus line insurance; conditions; procuring or placing nonadmitted insurance for exempt commercial purchaser.
  • 33-5-21.1. Application of Chapter 9 or Code Section 33-24-9.
  • 33-5-22. Licensing of surplus line brokers generally.
  • 33-5-23. Revocation or suspension of broker's license.
  • 33-5-24. Acceptance and placement of business by surplus line brokers generally.
  • 33-5-25. Broker to ascertain financial condition of unauthorized insurer prior to placement of insurance therewith; placement of insurance with foreign or alien insurers.
  • 33-5-26. Endorsement of insurance contract by broker.
  • 33-5-27. Issuance to insured by broker of evidence of insurance; issuance of substitute certificate or endorsement; delivery of policy to insured; penalties.
  • 33-5-28. Maintenance by broker of records of policies written or renewed.
  • 33-5-29. Filing of quarterly affidavits by surplus line brokers; filing of reports of affairs and operations by brokers.
  • 33-5-30. Validity and enforceability of contracts procured as surplus line insurance.
  • 33-5-31. Payment by broker of tax for privilege of doing business; computation and allocation of tax.
  • 33-5-32. Penalty for failure to file quarterly affidavit or remit tax within time prescribed by law; collection and disposition of penalty.
  • 33-5-33. Filing of report by persons procuring insurance with unauthorized insurers; levy, collection, and disposition of tax by persons procuring such insurance.
  • 33-5-34. Venue of actions against unauthorized insurers issuing surplus line policies; service of process; filing of pleading by insurer.
  • 33-5-35. Applicability of article.
Part 2 Interstate Cooperation for Collection and Disbursement of Premium Taxes. Article 3
  • 33-5-40. Legislative findings.
  • 33-5-41. Governor authorized to enter into cooperative agreement, compact, or reciprocal agreement for collection of insurance premium taxes.
  • 33-5-42. Agreement to substantially follow form of model Surplus Lines Insurance Multi-State Compliance Compact.
  • 33-5-43. Governor to select agreement providing best financial advantage.
  • 33-5-44. Notice; report.
Unauthorized Insurers Process Act. ALR. - Constitutionality of statutes relating to insurance contracts made and to be performed out of state, upon property or life within state, 32 A.L.R. 636.
  • 33-5-50. Short title; construction.
  • 33-5-51. Purpose of article.
  • 33-5-52. Acts by insurer which constitute appointment of Commissioner as agent for service.
  • 33-5-53. Service of action and process upon Commissioner; sending of notice of service to defendant; applicability.
  • 33-5-54. Service of process upon solicitor, collector, or other agent of insurer.
  • 33-5-55. Mode of service prescribed by article cumulative.
  • 33-5-56. Right of plaintiff or complainant to default judgment or judgment with leave to prove damages.
  • 33-5-57. Conditions precedent to filing of pleadings by insurer generally; granting of postponements; filing by insurer of motion to quash writ or set aside service.
  • 33-5-58. Recovery of penalty and attorney's fees by plaintiff; effect of failure of insurer to defend action.
  • 33-5-59. Applicability of article.
RESEARCH REFERENCES

Full faith and credit provision as affecting insurance contracts, 41 A.L.R. 1386; 114 A.L.R. 250; 119 A.L.R. 483; 173 A.L.R. 1138.

Collateral business activities incident to, or in aid of, interstate transportation, as related to interstate commerce, 152 A.L.R. 1078.

Decision of United States Supreme Court that insurance is interstate commerce as affecting state statutes relating to foreign insurance companies, 164 A.L.R. 500.

ARTICLE 1 GENERAL PROVISIONS


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