Hunton Insurance Recovery Blog

In a recent insurer’s failure-to-settle case, Hughes v. First Acceptance Ins. Co. of Ga., the Georgia Court of Appeals reaffirmed that there is no hard-set rule conducive to summary judgment; rather, the court ruled that a jury should determine whether the insurer’s actions had been “reasonably prudent.”  Plaintiff Robert Jackson allegedly caused a five-vehicle collision that resulted in his death and the serious injuries of others, including Julie An and her minor child, Jina Hong.  An and Hong, through their counsel, communicated with Jackson’s insurance company, First Acceptance, stating that they were “interested” in settling their claims within Jackson’s policy limit of $25,000.  Counsel also requested that the insurer send him policy information within 30 days.  An later claimed that this communication represented an offer of settlement, when, 41 days later, they sent First Acceptance a letter withdrawing their “offer” and stating their intent to file suit due to the insurer’s failure to respond.  An and Hong then filed suit and were ultimately awarded $5,334,220 in damages.  First Acceptance paid $25,000 towards the award, leaving Jackson’s estate exposed to over five million dollars in damages.

Robert Hughes, as administrator of Jackson's estate, then commenced an action against First Acceptance, alleging negligent and bad faith failure to settle.  Granting summary judgment to First Acceptance, the trial court accepted First Acceptance’s argument that because there were numerous other injured parties seeking compensation, First Acceptance could not in good faith settle a claim that would exhaust its insured’s policy.  The Court of Appeals, however, rejected this reasoning, noting that an insurer may be liable for an excess judgment against its insured if the insurer, negligently or in bad faith, failed to settle within the policy limits.  The court therefore held that whether First Acceptance acted negligently under these circumstances turned on whether it had acted reasonably in responding to the settlement offer from An’s counsel, which is a matter for the jury.