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Legal Issues |
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Georgia's Bad Faith Statute
O.C.G.A. §33-4-6 reads, in relevant part:
Before a party can recover attorney’s fees or other
penalty for bad faith against an insurer, the party seeking such penalties must
make a demand for payment under the policy more than 60 days prior
to the filing of the suit. Hanover
Insurance Co. v. Hallford, 127 Ga. App. 322 (1972).
Furthermore, an insurer’s denial of a claim
does not waive that statutory period of 60 days, and the filing of a lawsuit by
the insured against the insurer within the 60-day period precludes any recovery
of penalties outlined in O.C.G.A. §33-4-6 for attorney’s fees
stemming from an insurer’s bad faith refusal to pay a claim.
Kilpatrick Marine Piling v. Fireman’s Fund Insurance Co.,
795 F.2d 940 (11th Cir. 1986).
A long-standing tenet of Georgia law holds that where
the evidence put forth by the insured seeking bad faith penalties under O.C.G.A.
§33-4-6 fails to authorize a finding of bad faith on the part of an
insurer, a jury is not authorized to find against the insurer for
attorney’s fees.New York Life
Ins. Co. v. Ittner, 64 Ga. App. 806 (1941). Attorney’s fees and penalties provided by
statute for bad faith should never be permitted unless the insured can show
that the insurer acted in such a way that its defense was "frivolous and
unfounded."Georgia
Farm Bureau Mut. Ins. Co. v. Boney, 113 Ga. App. 459 (1966); Continental
Casualty Co. v. Owen, 90 Ga. App. 200 (1954).
Where there is evidence that the insurer’s refusal to pay the Plaintiff’s claim was
justified there can be no bad
faith. See: Lincoln Life Ins. Co. v. Anderson,
109 Ga. App. 238 (1964); National-Ben Franklin Ins. Co. v. Prather,
109 Ga. App. 459 (1964); Old Colony Ins. Co. v. Dressel,
109 Ga. App. 465 (1964).
Georgia is very liberal in its application of the Bad
Faith Statute. In most states, the standard for determining whether an insurer
acted in bad faith is whether it had reasonable grounds upon which to deny a
claim at the time the decision was made for denial of the matter. In Georgia,
the standard is much less stringent. The standard is whether reasonable grounds
exist to support denial of the claim at trial, not at the time the
claim was actually denied.
If the evidence at trial of
the matter provides the insurer "reasonable grounds" for
contesting the claim, there can be no finding against an insurer for bad faith
and attorney’s fees in the matter regardless of the case’s outcome.
Grange Mut. Cas. Co. v. Law,
223 Ga. App. 748 (1996); Interstate Life & Accident Ins. Co. v.
Williamson, 110 Ga. App. 557 (1964).
In the event of a loss which is covered by a policy of
insurance and the refusal of the insurer to pay the same within 60 days after a
demand has been made by the holder of the policy and a finding has been made
that such refusal was in bad faith, the insurer shall be liable to pay such
holder, in addition to the loss, not more than 25 percent of the liability of
the insurer for the loss and all reasonable attorney’s fees for the prosecution
of the action against the insurer.
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