Georgia Supreme Court Provides Guidance in Navigating Post-Loss Duties in Bad Faith Claims

There are several complex issues of required actions, records preservation and notice in the context of post-loss tort, tort, and contract duties between an insured and insurer which have vexed practitioners for ages. The Supreme Court of Georgia weighed in on some of these major issues by in response to a certified question from the Eleventh Circuit Court of Appeals. Suit was initially brought when Whiteside, the trustee to the bankruptcy estate of Bonnie Winslett, sued Geico to recover the value of Winslett’s tort claim against Geico on a claim of failure-to-settle.

The Court gave clarification on three important issues. First, the Court found that when an insurer has no notice of a lawsuit against its insured, O.C.G.A. §33-7-15 and a virtually identical insuring provision do not per se relieve the insurer of liability from a follow-on suit in bad faith. Second, the Court held that since these notice provisions do not bar liability for a bad-faith claim, an insured may sue the insurer for bad faith when, after the insurer refused to settle but before judgment was entered against the insured, the insured lost coverage for failure to comply with a notice provision. Third, the Court found that a party does not have the right to contest actual damages in a follow-on suit for bad faith even if that party had no prior notice of or participation in the original suit. These rulings are a harsh but clear statement of the limited issues to be tried in a follow-on failure to settle claim.

The opinion can be found at https://law.justia.com/cases/georgia/supreme-court/2021/s21q0227.html