Georgia Injury Lawyers Blog

Bad Faith And Ambiguous Policy Provisions

July 16, 2015 | by Slappey & Sadd, LLC

Most bad-faith cases involve disagreements over the meaning of a particular provision of the insurance policy, the resolution of which resolves the issue of coverage. Where the insured prevails on the coverage issue in such cases, it will sometimes be because the court found the provision ambiguous and construed it in favor of coverage. Notwithstanding a ruling in favor of coverage in a particular case, the issue of whether the insurance company relied on the ambiguous provision in “bad faith” would still remain. The cases are mixed as to whether an insurer can face liability for bad faith when the insurer denies coverage in reliance on an ambiguous policy provision. As shown below, however, the modern trend appears to be that an insurance company’s reliance on an ambiguous provision does not shield the insurer from bad faith as a matter of law.

The Northwestern Mut. Life Ins. Co. v. Ross

One of the earliest bad-faith cases involved ambiguity in an insurance policy. In The Northwestern Mut. Life Ins. Co. v. Ross, the Supreme Court of Georgia found that the insurance company had relied on an ambiguous policy in denying coverage. Construing the ambiguity in favor of the insured, the Court found that coverage existed and affirmed the verdict in favor of the insured. In discussing its conclusion as to the meaning of the operative clause, the Court referred to the fact that other jurisdictions had reached an opposite conclusion as to the meaning of the operative clause. bad faith and ambigous policy

Insurance Coverage: Timely Demand

July 15, 2015 | by Slappey & Sadd, LLC

What Is Considered Timely Demand?

A proper “demand” for payment that complies with O.C.G.A. § 33-4-6 is essential to recovery. In evaluating the sufficiency of a demand, a court should consider its purpose. The purpose of the demand requirement “is to adequately notify an insurer that it is facing a bad faith claim so that it may make a decision about whether to pay, deny or further investigate the claim within the 60-day deadline.”

On its face, the demand requirement is straightforward. The statute’s plain language would appear to require only that the insurer refuse to pay within 60 days of a demand. This straightforward language notwithstanding, courts have added additional requirements to the demand through case law.

Statuatory Bad Faith: Failure To Pay A Loss

July 13, 2015 | by Slappey & Sadd, LLC

The statute opens with the requirement that there be a “loss” covered by a policy. Thus, the insured must prove that the loss for which payment sought is covered under the insurance policy at issue. Where the claim is not covered, the insurer has no obligation to pay and there can be no bad faith.

The vast majority of cases applying O.C.G.A. § 33-4-6 involve the insurance company’s failure to pay a loss under “first-party” coverage. First-party coverage includes claims involving only the insured and the insurer, such as payment for property damage to a home following a fire or the payment of benefits under a life or disability policy.

Leader Nat. Ins. Co. v. Kemp & Son

Best Tips On How To Read An Insurance Policy

July 5, 2015 | by Slappey & Sadd, LLC

Although the law can guide a practitioner in interpreting the various component parts of an insurance policy, the ability to analyze a policy and render a competent coverage analysis requires certain practical considerations. An opinion regarding coverage cannot be confidently given without consideration of all of the following:

Accurate Copy Of The Policy

Few insureds ever obtain, much less maintain, a complete and accurate copy of their policies. Although a commercial broker will often maintain or be able to reconstruct a complete and accurate copy, many retail agents will, in response to a request for a copy of the policy, provide a declarations page and state-specific endorsements without all policy forms.

Bad Faith Insurance: Construction Upholding Whole Contract

July 3, 2015 | by Slappey & Sadd, LLC

The rules of construction require the court to consider the policy as a whole, to give effect to each provision, and to interpret each provision to harmonize with each other. Additionally, a court should avoid an interpretation of a contract that renders portions of the language of the contract meaningless.

“[I]t is a cardinal rule of contract construction that a court should, if possible, construe a contract so as not to render any of its provisions meaningless and in a manner that gives effect to all of the contractual terms.” Pomerance, 288 Ga. App. at 494, 654 S.E.2d at 641.

A court may not construe an insurance policy in a way that renders a provision superfluous. York Ins. Co. v. Williams Seafood of Albany, Inc., 273 Ga. 710, 712, 544 S.E.2d 156, 157 (2001). This Court “must consider [the policy] as a whole, give effect to each provision, and interpret each provision to harmonize with each other.” S. Trust Ins. Co. v. Dr. T’s Nature Products Co., 261 Ga. App. 806, 807, 584 S.E.2d 34, 35-36 (2003).

Bad Faith Insurance: Exclusions, Exceptions And Limitations

June 29, 2015 | by Slappey & Sadd, LLC

Exclusions, Exceptions And Limitations

In contrast to the grant of coverage in an insurance policy, exceptions and exclusions to coverage must be narrowly and strictly construed against the insurer and liberally construed in favor of the insured to afford coverage. A contract of insurance is construed most strongly against the insurer and liberally in favor of the insured, particularly where the insurer seeks to deny coverage based upon a policy exclusion. Exceptions, limitations and exclusions to insuring agreements require a narrow construction on the theory that the insurer, having affirmatively expressed coverage through broad promises, assumes a duty to define any limitations on that coverage in clear and explicit terms. Where an insurer grants coverage to an insured, any exclusions from coverage must be defined clearly and distinctly. Exclusions are strictly construed.

Ambiguities

Bad Faith Insurance: The Reasonable Expectations Doctrine

June 26, 2015 | by Slappey & Sadd, LLC

The Reasonable Expectations Doctrine In Insurance Bad Faith

The plain meaning of an insurance policy is informed by the reasonable expectations of the insured. “A contract of insurance should be strictly construed against the insurer and read in favor of coverage in accordance with the reasonable expectations of the insured.” Insurance policies are contracts of adhesion, drawn by insurers, and should be construed as reasonably understood by an insured. The test is not what the insurer intended its words to mean, but rather what a reasonable person in the insured’s position would understand them to mean. “The policy should be read as a layman would read it and not as it might be analyzed by an insurance expert or an attorney.”

Richards v. Hanover Ins. Co.

Common-Law Bad Faith: An Introduction

June 25, 2015 | by Slappey & Sadd, LLC

Insurance Bad Faith And Common Law

In addition to the cause of action for bad-faith failure to pay that is grounded in statute, Georgia recognizes a cause of action for insurance bad faith that is grounded in the common law. As explained below, common-law bad faith is associated with a liability insurer’s fiduciary duty to protect its insured from the risks associated with litigation against the insured. In most cases, these risks include legal liability to the insured for damages the insured has allegedly caused to a third-party claimant. Succinctly stated, “[a]n insurance company may be liable for damages to its insured for failing to settle the claim of an injured person where the insurer is guilty of negligence, fraud, or bad faith in failing to compromise the claim.” The most common example of an insurance company’s liability for bad faith arises when the insurance company fails to take advantage of a reasonable opportunity to settle claims against its insured within policy limits.

Origins and the Smoot Trilogy

Bad Faith Insurance: An Introduction

June 23, 2015 | by Slappey & Sadd, LLC

Because an insurance policy is a contract, any dispute implicating an insurer’s bad faith will involve the meaning of the words in the insurance policy. This is true no matter the type of bad faith at issue. Construction and interpretation of an insurance policy come into play in statutory bad-faith cases brought under O.C.G.A. § 33-4-6 as well as in bad-faith cases under the common law. Below we will look at the types of bad faith insurance.

Types Of Bad Faith Insurance

1. Withholding Payment

Statutory Bad Faith

May 15, 2014 | by Slappey & Sadd, LLC

Explanation of Bad Faith Failure to Pay an Insurance Claim

The relationship between you and your insurance company is based on the insurance policy, which is a type of contract. If your insurance company fails to pay a valid claim, it is a breach of the insurance contract. Usually, breach of contract allows an insured to recover only the amounts that would have been due under the insurance contract if the insurance company had paid the claim. In this situation, an insured who has to hire an attorney to get its claim paid is not “made whole.” This is because the insured has to wait a long time for the money it should have been paid earlier and has to pay attorneys’ fees. Insurance companies know this. Insurance companies know that the expense, risk and duration of litigation cause insureds to abandon or compromise their claims.

To partly alleviate these situations, Georgia has an insurance “bad faith” statute, O.C.G.A. § 33-4-6. Georgia’s insurance bad faith statute allows an insured to recover additional damages as a penalty and attorneys’ fees when an insurance company, following a demand from the insured, persists in its refusal to pay amounts due under a policy in “bad faith.” The purpose of the bad faith statute is to remove the incentive for unnecessary delay and to create a situation allowing an insured to be made whole in the event the insured is forced to go to court to enforce the insurance contract.