In late September 2008, First Acceptance retained counsel to help resolve the five known injury claims and, it hoped, to “reach a global settlement.”

On January 15, 2009, First Acceptance's counsel sent a letter to the attorneys for the multiple claimants to inform them of First Acceptance's “interest[] in arranging a joint settlement conference/mediation in an effort to resolve these claims.”

On June 2, 2009, Ms. An and Ms. Hong's counsel sent two letters (the “June 2 Letters”) by facsimile to counsel for First Acceptance. Counsel stated his clients' interest in attending a settlement conference and, in the alternative, offered to settle their claims for the available policy limits.

First Acceptance's attorney received and reviewed the June 2 Letters, which, he later said, he did not then construe as “any kind of time limit demand.”

On July 10, 2009, Ms. An and Ms. Hong filed a complaint in a Georgia state court seeking damages arising out of the August 29, 2008 automobile collision.

On July 13, 2009, Ms. An and Ms. Hong's attorney sent a letter by facsimile to First Acceptance's attorney in which, after noting that “[i]t has now been 41 days since [he sent his] letter, and [he] had received nothing,” he advised that the offer to settle his clients' claims had been revoked.

First Acceptance's attorney responded on July 20, 2009 and invited the attorney and his clients to attend a settlement conference with the other claimants. He then scheduled the settlement conference for September 1, 2009 and, on July 30, 2009, notified Ms. An and Ms. Hong's attorney of the scheduled date. Ms. An and Ms. Hong's attorney declined to attend the conference.

On February 19, 2010, First Acceptance offered to settle Ms. Hong's claim for $25,000. On September 24, 2010, First Acceptance offered to settle Ms. An and Ms. Hong's claims for $25,000 each, which equaled the $50,000 policy limit. The offers were rejected.

Following a trial in July 2012, the jury returned a verdict in favor of Ms. An and Ms. Hong. The trial court entered judgment in favor of them and against the then-administrator of Mr. Jackson's estate, including an award of over $5.3 million for Ms. Hong's injuries.

Robert W. Hughes, Jr., as administrator of Mr. Jackson's estate, sued First Acceptance in June 2014, alleging negligence and bad faith in First Acceptance's failure to settle Ms. Hong's claim within the policy limits. Mr. Hughes sought to recover $5,309,220.25, the amount of the judgment attributable to Ms. Hong's injuries that remained unpaid, as well as punitive damages and attorneys' fees.

The trial court granted First Acceptance's motion for summary judgment on all claims. An appellate court reversed the grant of summary judgment to First Acceptance on Mr. Hughes' failure-to-settle claim, and the dispute reached the Supreme Court of Georgia, which asked the parties to address whether an insurer's duty to settle arose when it knew or reasonably should have known that settlement with an injured party within the insured's policy limits was possible or only when the injured party presented a valid offer to settle within the insured's policy limits.

The Georgia Supreme Court's Decision

The court reversed the appellate court's decision, holding that an insurer's duty to settle arises only when the injured party presents a valid offer to settle within the insured's policy limits.

Accordingly, the court said, the question was whether Ms. An and Ms. Hong had made a valid offer that First Acceptance failed to accept negligently or in bad faith. The court ruled that they had not.

The court examined the June 2 Letters and found that, for the most part, their meaning was “clear.” The court said that Ms. An and Ms. Hong, through their attorney, express a willingness to participate in the proposed settlement conference with other claimants. Alternatively, they expressed their willingness to settle their claims upon receipt of three items: (1) a release of the insured from all personal liability except to the extent other insurance coverage was available, (2) specified insurance information, and (3) the insured's available bodily injury liability insurance proceeds. The court found that the offer to settle was not, at least expressly, subject to a time limit for acceptance, and that Ms. An and Ms. Hong did not state an express time limit on their willingness to attend the settlement conference.

The court then ruled that, through the June 2 Letters, Ms. An and Ms. Hong offered to settle their claims within the insured's available policy limits and to release the insured from further liability, except to the extent other insurance coverage was available, but that the offer “did not include a 30-day deadline for acceptance.”

Accordingly, the court concluded that First Acceptance was entitled to summary judgment on Mr. Hughes' failure-to-settle claim. It reasoned that (i) because Ms. An and Ms. Hong's offer was not a time-limited settlement demand, First Acceptance was not put on notice that its failure to accept the offer within any specific period would constitute a refusal of the offer, and (ii) given, especially, that the June 2 Letters communicated an unequivocal desire on the part of Ms. An and Ms. Hong to attend the proposed settlement conference, First Acceptance could not have reasonably known that it needed to respond within 41 days or risk that its insured would be subject to a judgment in excess of the policy limits on account of their claims.

“First Acceptance's failure to promptly accept [Ms.] An and [Ms.] Hong's offer was reasonable as an ordinarily prudent insurer could not be expected to anticipate that, having specified no deadline for the acceptance of their offer, [Ms.] An and [Ms.] Hong would abruptly withdraw their offer and refuse to participate in the settlement conference,” the court concluded.

The case is First Acceptance Ins. Co. of Georgia v. Hughes, No. S18G0517 (Ga. March 11, 2019).