Georgia’s Latest Effort on Plaintiff Demands Aims to Deter Bad-Faith Claims

Georgia lawmakers have approved two bills that could have a significant impact on windstorm and bad-faith claim losses for property insurers.

First, the bad-faith reform legislation.

Auto insurers have for years fought for changes to Georgia’s auto claims-handling statutes, after the famous Southern General Insurance Co. vs. Holt court decision in 1992. Under that and later rulings, plaintiffs attorneys in auto accident claims have been able to make overly complicated, time-limited demands, known as “Holt demands,” designed to trip up insurers and force judgments far above policy limits, carriers and insurance defense attorneys have said.

“It’s unbelievable,” said Mike Nelson, a New York attorney whose firm has help represent insurers in Georgia cases. “You can be as reasonable as possible and it still won’t work.”

The Georgia Senate last week, on the final day of the 2024 legislative session, overwhelmingly endorsed Senate Bill 83, which Nelson and others in the industry said could make a big difference in avoiding unfair and unnecessary bad-faith judgments and settlements. The bill, now awaiting Gov. Brian Kemp’s signature, could help clear up the current statute, particularly one section that gave plaintiffs some wiggle room on demands.

The existing law notes that it applies to claimants’ settlement offers made “prior to the filing of an answer.” Some plaintiffs’ attorneys have used that to create confusion, insurance lawyers said, sometimes by submitting demands after other defendants – but not the named insured and their insurers – had filed an answer. That led to subsequent demands and bad-faith allegations.

The new bill aims to clarify the wording:

“From the time a cause of action accrues until the filing of an answer by the named defendant, or if there are multiple named defendants, until the time that all named defendants have filed their initial answers or been found to be in default, whichever is applicable,” any offer to settle a claim shall be in writing and must specify several material terms, the bill reads. The wording leaves little room for further demands later on.

And plaintiffs would no longer be able claim an insurer failed to settle if the carrier agrees to the material terms and pays the policy limits or the amount of the demand, whichever is less, said Ron Jackson, Georgia vice president for the American Property Casualty Insurance Association. The APCIA worked for the bill to address “the abusive demands intended to subject an insurer to liability” for failing to settle a claim, Jackson said.

This is the third time Georgia lawmakers have attempted to clarify the law. Once in 2013 and again in 2021 the legislature addressed the issue. But attorneys still found some loopholes and courts did not disagree, Nelson said.

The trickiness of Holt demands and bad-faith claims has boiled over in Georgia and other states in recent years. Last year, one Atlanta plaintiffs’ firm made headlines after forcing a $600,000 settlement — well above Allstate’s policy limits — due to a well-timed Holt demand, according to news reports. In 2017, a federal appeals court upheld an $8 million judgment against Nationwide Insurance in an auto fatality case.

Nelson said that some claimants’ lawyers have gone so far as to demand that settlements be paid in cash on a certain date, in order to create a difficult obstacle for the insurer. In one case, now pending in federal court in Georgia, Root Property & Casualty Insurance Co. had a $25,000 check delivered via FedEx, per the terms of the Holt demand. The delivery driver photographed the envelope on the recipient’s front porch and logged the delivery time. The claimant’s attorney later said the check was never received, according to a complaint filed by Root’s attorney last month. The lawyer indicated that a bad-faith suit was imminent and demanded $150,000.

When confronted with the FedEx proof of delivery, the plaintiff’s lawyer suggested that the check had been subsequently stolen by “porch pirates.” Root has disputed that, but stopped payment on the check and issued a new one.

Florida insurers have also seen their share of bad-faith demands, and have blamed them for helping to jack up litigation expenses in the last decade. Florida lawmakers in 2022 and 2023 approved legislation that seeks to limit when plaintiffs can seek bad-faith claims.

Plaintiffs attorneys have argued that bad-faith claims and time-limited demands became necessary because of foot-dragging and underhanded tactics by insurers on claims settlements.

“…We have encountered insurance companies that attempt to trick claimants into accepting compromises that include terms or conditions not offered by the claimant or that exclude terms or conditions required by the claimant,” reads the Holt demand letter by the Georgia plaintiffs’ lawyer in the Root Insurance case. “Based on the past behavior of insurance companies, please be aware that we will not believe any claim that any failure to accept this offer of compromise unequivocally and without variance of any sort was ‘accidental.'”

The Georgia wind-mitigation bill.

The Georgia state Senate last week voted in favor of House Bill 279, which would require insurance carriers to provide premium discounts to homeowners and commercial properties that fortify against wind damage. The House of Representatives had endorsed the plan in February.

If signed into law as expected the bill will require insurers to submit rating plans to the state insurance commissioner. The discounts should begin March 1, 2025, the bill notes. Unlike Florida and a number of other states, the measure does not appear to provide funding for property owners who retrofit structures.

HB 279 now awaits the governor’s signature.

In March, the Georgia General Assembly passed another bill that will give insurers a break. SB 426, if signed by the governor, would bar direct lawsuits against insurance companies after a truck accident, except when the trucking company involved has gone bankrupt or the company or the driver can’t be found.