During the 2015 session of the Georgia General Assembly, the Georgia House of Representatives passed House Bill 303 which provided for the amendment of Georgia’s Uninsured Motorist Act, O.C.G.A. § 33-7-11 to provide for a minimum bad faith penalty of $25,000, regardless of the UM limits, plus attorney’s fees. Of note, the initial version of the bill called for unlimited penalties. The bill did not reach the Senate floor, but will likely be revisited next year. As explained below, the bad faith provisions contained in the current statute provide considerable protection to insureds over and beyond typical breach of contract claims.

Uninsured/underinsured motorist claims are a mixed bag of tort and contract claims. A claimant insured must prove an entitlement to a tort recovery against an uninsured/underinsured motorist in order to be able to recover from the UM carrier. However, the claimant insured must also show that the policy is applicable. For instance, sometimes there is an issue as to whether the insured actually qualifies as an insured under the policy. Sometimes there are issues with multiple insurance policies issued by multiple companies as to which companies and policies provide primary coverage. When there is an issue as to whether or not coverage is owed, an insurance company has a contractual right to undertake an investigation, take statements under oath, request certain documents, etc. Often, sixty (60) days does not provide sufficient time period in which to undertake all of these efforts. Nonetheless, if a claimant insured makes a demand the day after an accident and the UM carrier does not accept within sixty (60) days, the current law places claimant insureds in a position where they can attempt to utilize the bad faith statute.

Under normal contract law, if a business breaches a contract, the penalty is paying the other side’s attorney’s fees. Under current law, when a UM carrier breaches a contract in bad faith, it is on the hook for attorney’s fees plus twenty-five percent (25%) of the contracted amount. In other words, there is already a twenty-five percent (25%) windfall available to an insured victim of a bad faith breach as opposed to a victim of any other bad faith breach.

To the extent that an individual decides to purchase UM insurance, the minimum limits available are $25,000 per person/$50,000 per accident. Presumably, most policies issued in Georgia carry those minimum limits. Accordingly, the proposed bill’s amendment to include a minimum penalty of $25,000 effectively creates a one hundred percent (100%) penalty for most circumstances. Due to this penalty, along with the attorney’s fees which are also afforded by the current UM Act and the bad faith bill, claimant insureds are far better off when there is a bad faith breach than where there is not a bad faith breach. This means that there is an incentive for a claimant insureds’ attorneys to set up insurance companies and create an argument that bad faith has occurred even when such is absent. Insurance companies will be put in a position to settle those claims rather than pay attorney’s fees to defend both the underlying claim, the bad faith claim, and face the risk of paying an unwarranted penalty.

Any suggestion that UM carriers typically choose not to pay owed claims insofar as they know they can earn interest on the retained money and only pay a twenty-five percent (25%) penalty, which would equate to $6,500 under the current statute for a $25,000 policy, is without merit. Such suggestion entirely disregards the fact that insurance companies have to pay attorneys to defend UM claims which are not settled. If litigation were to drag on two (2) to three (3) years, as the attorney’s fees incurred by the UM carrier would greatly exceed the current penalty and even the penalty proposed by the bill.

The current statute works. I have been doing this for nineteen (19) years and have tried many personal injury cases. The vast majority of the time (I would estimate 80%), the ultimate judgement against the at-fault party or the uninsured motorist is less than the amount offered. This means that the claimants are leaving money on the table eighty percent (80%) of the time by not accepting the insurance company’s best offer. This also means that insurance companies typically get it more than right.