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First Acceptance Insurance Company of Georgia, Inc. v. Hughes

Supreme Court of Georgia

March 11, 2019

FIRST ACCEPTANCE INSURANCE COMPANY OF GEORGIA, INC.
v.
HUGHES

          ELLINGTON, JUSTICE.

         We granted certiorari in this case, Hughes v. First Acceptance Ins. Co. of Ga., Inc., 343 Ga.App. 693 (808 S.E.2d 103) (2017), to review whether the Court of Appeals erred in reversing the grant of summary judgment to the insurer on the insured's failure-to-settle claim. We also asked the parties to address whether an insurer's duty to settle arises only when the injured party presents a valid offer to settle within the insured's policy limits or whether, even absent such an offer, a duty arises when the insurer knows or reasonably should know that settlement within the insured's policy limits is possible. As to this threshold issue, we conclude 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. Applying the applicable rules of contract construction to correspondence from two injured parties in the instant case, we conclude that the injured parties presented to the insurer a valid offer to settle within the insured's policy limits but that the offer did not include any deadline for accepting the offer. Based on the undisputed evidence, we conclude as a matter of law that the insurer did not act unreasonably in failing to accept the offer before it was withdrawn by the injured parties. As the insurer was entitled to summary judgment, we reverse the decision of the Court of Appeals.

To prevail at summary judgment under OCGA § 9-11-56, the moving party must demonstrate that there is no genuine issue of material fact and that the undisputed facts, viewed in the light most favorable to the nonmoving party, warrant judgment as a matter of law. OCGA § 9-11-56 (c). A defendant may do this by either presenting evidence negating an essential element of the plaintiff's claims or establishing from the record an absence of evidence to support such claims.

Peterson v. Peterson, 303 Ga. 211, 213 (1) (811 S.E.2d 309) (2018) (citation and punctuation omitted).

         So viewed, the evidence shows that, on August 29, 2008, Ronald Jackson caused a multi-vehicle collision; he later died from his injuries. At the time of the collision, Jackson was insured by an automobile policy issued by First Acceptance Insurance Company of Georgia, Inc., with bodily injury liability limits of $25, 000 per person and $50, 000 per accident.

         First Acceptance was advised after the collision that Julie An and her minor daughter, Jina Hong, had been injured. Hong sustained a fractured skull, bleeding on the brain, and was in a coma for four to five days, and An suffered a neck injury and her arm was permanently scarred. First Acceptance was also advised that Catherine Bishop had suffered head, neck, and back injuries, that Chris Bishop had suffered soft tissue injuries, and that Jose Rodriguez had suffered neck and back injuries.[1] First Acceptance adjusters determined that its policy provided coverage to Jackson for the collision, and they assessed early in their investigation that Jackson was liable for the loss and that his exposure for claims exceeded the policy limits.

         In late September 2008, First Acceptance retained counsel to help resolve the five known injury claims and, hopefully, "reach a global settlement." On November 14, 2008, First Acceptance received Rodriguez's attorney's demand to settle his client's claims in exchange for payment of all available policy limits within 20 business days of receipt of the demand. Rodriguez later agreed to extend the time to respond to his settlement demand "in lieu of completing a global settlement conference." 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." First Acceptance's counsel sent another letter to claimants' counsel, on February 2, 2009, reporting that Rodriguez was agreeable to a joint settlement conference.

         On June 2, 2009, An and Hong's counsel sent two letters (the "June 2 Letters") by facsimile to counsel for First Acceptance. As more fully set forth in Division 2, infra, An and Hong's 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 testified, he did not then construe as "any kind of time limit demand," after which the letters were inadvertently filed with some medical records. On July 10, 2009, An and Hong filed a complaint in the State Court of DeKalb County seeking damages arising out of the August 29, 2008 automobile collision. Shortly after filing the complaint, An and Hong's attorney sent a letter by facsimile to First Acceptance's attorney on July 13, 2009, 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 to An and Hong's attorney on July 20, 2009, and invited him 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 An and Hong's attorney of the scheduled date. An and Hong's attorney declined to attend the conference.

         On February 19, 2010, First Acceptance offered to settle Hong's claim for $25, 000. On September 24, 2010, First Acceptance offered to settle An's and Hong's claims for $25, 000 each, which equaled the $50, 000 policy limit. The offers were rejected. In a July 2012 trial, the jury returned a verdict in favor of An and Hong. The trial court entered judgment in favor of An and Hong and against the then-administrator of Jackson's estate, including an award of over $5.3 million for Hong's injuries.

         Robert W. Hughes, Jr., as administrator of Jackson's estate, filed this suit against First Acceptance in June 2014, alleging negligence and bad faith in First Acceptance's failure to settle Hong's claim within the policy limits. Hughes sought to recover $5, 309, 220.25, the amount of the judgment attributable to Hong's injuries which remained unpaid, as well as punitive damages and attorney fees. First Acceptance moved for summary judgment, and Hughes moved for partial summary judgment on the issues of liability and compensatory damages.

         The trial court denied Hughes's motion for summary judgment and granted First Acceptance's motion for summary judgment on all claims. Hughes appealed, and the Court of Appeals reversed the grant of summary judgment to First Acceptance on Hughes's failure-to-settle claim. Hughes v. First Acceptance Ins. Co. of Ga., Inc., 343 Ga.App. at 696-698 (2) (a). We granted First Acceptance's petition for certiorari.

         1. We asked the parties to address whether an insurer's duty to settle arises when it knows or reasonably should know settlement with an injured party within the insured's policy limits is possible or only when the injured party presents a valid offer to settle within the insured's policy limits.

         "An insurance company may be liable for the excess judgment entered against its insured based on the insurer's bad faith or negligent refusal to settle a personal claim within the policy limits." Cotton States Mut. Ins. Co. v. Brightman, 276 Ga. 683, 684 (1) (580 S.E.2d 519) (2003) (footnote omitted). An "insurer is negligent in failing to settle if the ordinarily prudent insurer would consider choosing to try the case created an unreasonable risk. The rationale is that the interests of the insurer and insured diverge when a plaintiff offers to settle a claim for the limits of the insurance policy." Id. at 685 (1) (emphasis supplied; footnote omitted). An insurance company's "bad faith in refusing to settle depends on whether the insurance company acted reasonably in responding to a settlement offer, bearing in mind that, in deciding whether to settle, the insurer must give the insured's interests the same consideration that it gives its own." Fortner v. Grange Mut. Ins. Co., 286 Ga. 189, 190 (686 S.E.2d 93) (2009) (emphasis supplied; citation and punctuation omitted). Generally, it is for the jury to "decide ...


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