In any action against an unauthorized foreign or alien insurer upon a contract of insurance issued or delivered in this state or to a resident of this state or to a corporation authorized to do business in this state, if the insurer has failed for 30 days after demand prior to the commencement of the action to make payment in accordance with the terms of the contract, and it appears that such refusal was vexatious and without reasonable cause, the said insurer shall be subject to a penalty of not more than 25 percent of the liability of the insurer for the loss and an allowance for reasonable attorney's fees. The attorney's fees shall be determined by the trial court and shall be included in any judgment which is rendered in the action. Failure of an insurer to defend the action shall be deemed prima-facie evidence that its failure to make payment was vexatious and without reasonable cause. 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 attorney for the services of the attorney in the action against the unauthorized insurer.
(Code 1933, § 56-611, enacted by Ga. L. 1960, p. 289, § 1.)
Cross references.- Liability of authorized insurer refusing in bad faith to pay claim, § 33-4-6.
Law reviews.- For article discussing Georgia provisions concerning damages for insurer's failure to pay first-party claims, see 14 Ga. L. Rev. 497 (1980).
JUDICIAL DECISIONS
If the question of liability is a close one, the insurer cannot be guilty of bad faith. Allen v. National Liberty Life Ins. Co., 153 Ga. App. 579, 266 S.E.2d 269 (1980).
Evidence admissible on question of reasonable cause though unknown when claim denied.
- Although it does not appear that a doctor's opinion was known by the insurer at the time it decided to deny the decedent's claim for benefits, such testimony is nonetheless admissible for the purpose of disproving appellant's allegation that the denial of benefits was "vexatious and without reasonable cause." Allen v. National Liberty Life Ins. Co., 153 Ga. App. 579, 266 S.E.2d 269 (1980).
Ordinarily, the question of good or bad faith of the insurer is for the jury. Allen v. National Liberty Life Ins. Co., 153 Ga. App. 579, 266 S.E.2d 269 (1980).
Summary judgment for insurer is proper if evidence shows substantial defense.
- Where under the evidence submitted on the insurer's motion, it is clear that genuine issues of material fact exist on the question of what caused the decedent's loss, but it is also clear that the insurer has evidence on which a substantial defense to liability under the policy can be based, since the denial of benefits was based upon "reasonable cause" and was not "vexatious," the trial court did not err in granting the insurer motion for partial summary judgment on the insured's claim under this section. Allen v. National Liberty Life Ins. Co., 153 Ga. App. 579, 266 S.E.2d 269 (1980).
Cited in Cotton States Mut. Ins. Co. v. McFather, 251 Ga. 739, 309 S.E.2d 799 (1983).
RESEARCH REFERENCES
Am. Jur. 2d.
- 44 Am. Jur. 2d, Insurance, § 46 et seq.
C.J.S.- 44 C.J.S., Insurance, § 153 et seq.
ALR.
- Validity of statutory provision for attorneys' fees, 90 A.L.R. 530.
What persons or corporations, contracts or policies, are within statutory provisions allowing recovery of attorney's fee penalty against insurance companies or against companies dealing in specified kinds of insurance, 126 A.L.R. 1439.
Consequences of liability insurer's refusal to assume defense of action against insured upon ground that claim upon which action is based is not within coverage of policy, 49 A.L.R.2d 694.
What constitutes "trial," "final trial," or "final hearing" under statute authorizing allowance of attorneys' fees as costs on such proceeding, 100 A.L.R.2d 397.
Validity of statute allowing attorney's fee to successful claimant but not to defendant, or vice-versa, 73 A.L.R.3d 515.
Recoverability of punitive damages in action by insured against liability insurer for failure to settle claim against insurer, 85 A.L.R.3d 1211.
Liability insurer's postloss conduct as waiver of, or estoppel to assert, "no-action" clause, 68 A.L.R.4th 389.