A divided Georgia Supreme Court on March 6 ruled that plaintiffs reaching a settlement agreement with an insurer over a motor vehicle accident can require the performance of a specific action — in this case, the time-limited payment of the demand.
The ruling, in which two justices dissented, expands the array of conditions plaintiffs' attorneys may impose upon insurers, who may face bad-faith claims if they don't agree to settle within the statutory requirements of the law.
The majority opinion, written by Justice Nels Peterson, said an insurance company that otherwise met all of the settlement demands but failed to deliver the insured's policy limits due to an alleged address mistake had in fact failed to accept the offer.
A dissent by Justice Harold Melton, with the concurrence of Justice Keith Blackwell, said the majority had ignored the "plain language" of a 2013 statute governing motor vehicle claim demands, which "prohibits a claimant from conditioning acceptance of a pre-suit offer upon the making of a timely payment" of the demand.
Ruling requested by 11th Circuit
The ruling was requested by the U.S. Court of Appeals for the 11th Circuit, which is hearing a case involving a fatal 2014 wreck in which a car driven by Thomas Dempsey hit a pickup driven by Boris Woodard, injuring Woodard and killing his daughter, a passenger. The lawyer for Woodard and his wife sent Dempsey's insurer, Grange Mutual, a demand for Dempsey's $100,000 policy limits with a list of conditions, among them that the insurer had 30 days to accept the offer and another 10 days to deliver the money.
"Timely payment is an essential element of acceptance," the letter noted.
One day before the offer expired, Grange Mutual's representative emailed the lawyer, accepting the offer, and a few days later she notified him that the checks were being issued that day.
Two weeks later, the lawyer told the claims representative that the checks had not arrived, and that therefore no binding settlement agreement had been reached.
The insurance representative apologized and said there had been an address issue, and offered to reissue the checks and overnight them, but the lawyer declined the offer.
Grange reissued the checks anyway and sent them to the lawyer, who returned them uncashed.
Grange sued Woodard and his wife in federal court for breach of contract. Both sides moved for summary judgment under a 2013 Georgia statute that lays out the requirements for pre-suit settlement demands in motor vehicle actions, including a proviso that the plaintiff must allow at least 30 days for the insurer to accept the offer.
The statute also says that nothing in it "is intended to prohibit parties from reaching a settlement agreement in a manner and under terms otherwise agreeable to the parties."
U.S. District Judge Richard Story granted the Woodards' summary judgment, ruling that nothing in the law barred their making payment a condition of acceptance. Story also rejected the insurer's argument that, if the payment demand was a valid element of acceptance, it had met that demand by issuing the checks.
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Ambiguous statute?
On appeal, the 11th Circuit observed that the statute seemed ambiguous, because it "appears to contemplate that an offeree will accept an offer in writing, such that payment would be a term of contract performance, not contract formation."
The 11th Circuit certified four questions to the Georgia Supreme Court:
- Did Grange's acceptance of the Woodards' offer create a binding settlement agreement?
- Does Georgia law permit unilateral contracts requiring the performance of a specific act as part of the contract?
- Did the Woodards' demand for timely payment as a condition of acceptance comport with Georgia law?
- And if there was a binding agreement, did Grange Mutual breach it?
In his 22-page majority opinion, Peterson recalled that the 2013 statute had been crafted in part to address insurers' complaints that plaintiffs' attorneys were abusing time-limited settlement demands, known as Holt demands, to "set up" insurers for bad faith claims by mandating unreasonably short deadlines.
Under the Georgia Supreme Court's 1992 decision in Southern General Insurance v. Holt, an insurer that fails to timely respond to a policy limit request when the likely damages exceeded those limits can be found to have acted in bad faith and held liable for damages exceeding those limits.
That decision, wrote Peterson, "spawned much litigation over, among other things, what constitutes an offer to which an insurer must respond, when an insurer's inquiry about medical liens amounts to a counteroffer, and how much time an offeror must provide for a response in order to trigger an insurer's duty to respond."
In response, the Georgia statute "sets forth certain terms that, at a minimum, must be included in a pre-suit offer, and … how those terms must be accepted." But the law does not bar a plaintiff from adding other conditions necessary to consider an offer accepted, Peterson wrote.
Thus, he said, the Georgia statute does permit "unilateral" contracts such as the one at issue, and "does not preclude a pre-suit offer from demanding timely payment as a condition of acceptance."
The Georgia court declined to rule upon the 11th Circuit's questions "to the extent that they call us to decide the ultimate issues in the case."
Dissent: 'Majority misread the law'
Melton's dissent said the majority opinion misread the law.
The Legislature clearly "intended to separate the payment component of an already formed settlement agreement from the acceptance of an offer that creates an enforceable settlement agreement in the first instance," wrote Melton. "Indeed, a party making an offer to settle may only 'requir[e] payment within a specified period [of not less than 10 days] after the written acceptance of the offer to settle' has already taken place."
Greg Land is a reporter for the Daily Report. He can be reached at gland@alm.com. On Twitter: @GregLand1
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