When an insurance carrier refuses a reasonable settlement offer within policy limits and the case later produces a verdict exceeding those limits, the insured defendant has a claim against the carrier for the excess. The framework for this claim in Georgia traces back to Holt v. State Farm Mutual Automobile Insurance Co. and the cases that followed. Properly structured time-limited demands set up these claims, which can dramatically increase available recovery in catastrophic injury cases.
The Holt framework has procedural requirements. Demands not meeting those requirements may not preserve the bad-faith claim. Understanding how to properly structure time-limited demands matters for cases where exposure may exceed policy limits.
The legal framework #
Georgia recognizes bad-faith failure-to-settle claims through case law and statute:
Common law framework. Holt v. State Farm Mutual Automobile Insurance Co., 78 Ga. App. 105 (1948), and subsequent decisions establish the common-law framework. An insurer that unreasonably refuses to settle within policy limits when a reasonable offer is made may be liable to the insured for the excess.
Modern Georgia Supreme Court framework. Subsequent Supreme Court decisions have refined the standards. The basic elements include: a reasonable offer to settle within policy limits, opportunity to settle, and the insurer’s failure to settle being unreasonable.
Statutory framework. O.C.G.A. § 33-4-7 provides specific bad-faith remedies for motor vehicle insurance. The procedural requirements differ from common-law claims.
Plaintiff’s role. Plaintiff cannot directly sue the defendant’s insurer for bad faith. The insured defendant has the claim against their own insurer. Plaintiff typically obtains this claim through assignment as part of settlement of the excess verdict.
Damages available. Bad-faith claims can recover the entire judgment amount above policy limits, plus potentially additional damages for the insurer’s conduct.
The Holt demand framework #
To preserve bad-faith claims, demands must meet specific requirements:
Within policy limits. The demand must be at or below the policy limits. Demands exceeding limits don’t trigger the same bad-faith framework.
Time limit. The demand must specify a deadline for response. The deadline must be reasonable given the case complexity.
Adequate evaluation time. The deadline should allow the insurer sufficient time to investigate, evaluate, and obtain authority. Unreasonably short deadlines may not preserve bad-faith rights.
Clear notice. The demand should clearly notify the insurer that failure to settle within limits may expose the insured to excess judgment.
Full release offered. The demand typically offers complete release of all claims against the insured in exchange for the policy limits. Conditional or partial releases may not satisfy the framework.
Supporting documentation. The demand should be supported by documentation establishing case value above policy limits.
What counts as “reasonable time” #
The reasonableness of the time period depends on case circumstances:
Case complexity. More complex cases require longer evaluation periods. Catastrophic injury cases with extensive medical documentation may need 30-60 days or more.
Documentation provided. Complete documentation at the time of demand reduces the time the insurer needs to evaluate. Demands with skeletal documentation may not establish reasonable time.
Stage of case. Pre-suit demands typically allow more evaluation time; demands shortly before trial may have shorter reasonable periods.
Insurer cooperation. Insurer requests for additional time should generally be granted when reasonable. Refusing reasonable extensions may undermine bad-faith claim.
Industry practice. Georgia case law has evolved on what time periods are reasonable. Counsel should be aware of current decisions.
Sufficient information requirement. The insurer should have sufficient information to make an informed decision within the time period. If essential information is missing, the insurer may legitimately need more time.
Demands typically allow 30-60 days. Shorter periods may face challenges; longer periods are safer but may delay case resolution.
Stranger demand cases #
When the demand is made before any litigation, courts have considered whether the insurer had adequate information to evaluate:
Pre-suit demand evaluation. Pre-suit demands require the insurer to evaluate without the benefit of discovery. The plaintiff’s documentation becomes particularly important.
Recorded statement issue. Some recorded statements taken without counsel involvement may complicate later bad-faith claims if statements undermine credibility.
Information access. Plaintiff providing adequate information to support the demand supports the bad-faith framework. Withholding key information may undermine it.
Cooperation requirements. Cooperation with reasonable insurer investigation requests supports the framework. Refusing reasonable requests may undermine it.
The McReynolds and Holt progeny #
Several Georgia decisions have refined the framework:
McReynolds v. Krebs. Georgia Supreme Court (290 Ga. 866, 2012) addressed details of acceptance and counter-offers. Acceptance must be clean and unconditional; conditional acceptance may constitute counter-offer.
Recent decisions on counter-offers. Subsequent cases addressed whether responses to demands constitute counter-offers (terminating the original demand) or merely requests for additional information (preserving the demand).
Decisions on adequate time. Cases addressing what constitutes reasonable time have produced fact-specific guidance.
Decisions on materiality of changes. When demands or acceptances are modified, materiality of the changes affects whether the original demand framework is preserved.
Counsel preparing time-limited demands should be aware of current case law, as the framework continues to evolve.
Structuring the demand #
Effective Holt-type demands include specific elements:
Statement of demand amount. Clear statement of the amount demanded, with confirmation that it is within policy limits.
Statement of deadline. Specific date and time by which the carrier must respond.
Notice of consequences. Statement that failure to accept exposes the insured to excess judgment and creates potential bad-faith liability.
Release terms. Specific release language the plaintiff offers in exchange for the policy limits.
Documentation reference. Reference to supporting documentation provided with or available with the demand.
Acceptance procedure. Specific procedure for valid acceptance (form of acceptance, where to send, what’s required).
Limitations on the demand. Any specific limitations or conditions, clearly stated.
The demand should be carefully drafted to avoid ambiguity that could undermine the bad-faith framework.
What counts as acceptance #
Acceptance must be unambiguous:
Unconditional acceptance. The carrier accepts the demand without conditions. The case settles on the demanded terms.
Conditional acceptance. Acceptance with conditions may constitute counter-offer rather than acceptance. The plaintiff is then free to reject and pursue litigation.
Late acceptance. Acceptance after the deadline generally doesn’t bind the plaintiff. The plaintiff may proceed with litigation while preserving bad-faith rights.
Form requirements. Acceptance should follow the form specified in the demand. Deviations may complicate enforcement.
Tender of payment. Some demands require tender of payment with acceptance. The specifics depend on the demand terms.
When demands fail #
When properly structured demands fail to produce settlement:
File suit promptly. Filing suit demonstrates commitment to enforcing the claim. Delay may suggest the demand wasn’t serious.
Continue litigation. Litigation proceeds with the case theory developed in the demand.
Document insurer conduct. Continued documentation of insurer conduct throughout litigation supports possible bad-faith claims.
Achieve excess verdict. Bad-faith claims require an actual verdict exceeding policy limits. Pursuing trial may be necessary.
Assignment from insured. Plaintiff typically obtains the bad-faith claim through assignment from the insured defendant as part of settling the excess judgment.
Pursue bad-faith claim. With the assignment, plaintiff can pursue the insurer directly for the excess plus damages.
Coordination with insured defendant #
The insured defendant has separate interests:
Insured’s right to settle. The insured has the right to be settled within policy limits when the insurer can do so. Insurer refusal harms the insured.
Cooperation with insurer. The insured generally must cooperate with the insurer per policy terms. Cooperation requirements affect strategy.
Independent counsel. When coverage issues exist, the insured may be entitled to independent counsel rather than relying solely on insurer-appointed counsel.
Assignment of bad-faith claim. After excess verdict, the insured can assign their bad-faith claim to the plaintiff in exchange for release of personal liability.
Plaintiff’s communication with insured. Communications with represented defendants must comply with professional conduct rules.
Insurance company defenses #
Insurers raise various defenses to bad-faith claims:
Reasonableness of refusal. Insurer argues that refusal was reasonable based on then-available information and case evaluation.
Inadequate information. Insurer argues the demand didn’t provide adequate information to make an informed decision.
Unreasonable demand. Insurer argues the demand amount or terms were unreasonable.
Inadequate time. Insurer argues the time provided was insufficient given the case complexity.
Plaintiff conduct. Insurer argues plaintiff conduct (failure to cooperate, recorded statement inconsistencies, etc.) undermined the demand.
Coverage issues. Insurer argues coverage limitations affected the appropriate response to the demand.
Each defense requires factual evaluation. Strong demands anticipate likely defenses and address them through careful structuring.
Statutory bad-faith framework #
Georgia’s statutory framework has specific requirements:
O.C.G.A. § 33-4-6 (general). Applies to insurer refusal to pay claims in bad faith. Procedural requirements include 60-day demand letter before suit.
O.C.G.A. § 33-4-7 (motor vehicle). Specific provisions for motor vehicle insurance bad-faith. Different procedural requirements than the general statute.
Statutory damages. Statutory frameworks provide for specific damage components including penalty amounts and attorney fees.
Concurrent claims. Statutory and common-law bad-faith claims can sometimes proceed together, with different damage frameworks.
The procedural requirements for statutory claims must be strictly followed. Failure to comply with procedural prerequisites can bar statutory bad-faith remedies.
The leverage of properly structured demands #
A properly structured time-limited demand creates two beneficial outcomes. If accepted, the case settles efficiently with policy limits recovery. If rejected, the framework preserves potentially substantial bad-faith recovery that may dramatically exceed policy limits. Catastrophic injury cases with limited insurance often produce their largest recoveries through bad-faith claims rather than primary liability claims. The discipline of proper demand structuring, even at the price of negotiating less aggressively in some respects, often returns more than equivalent investment in case preparation through other channels.
This article is for informational purposes only and does not constitute legal advice. Personal injury cases turn on specific facts and applicable law that vary by case. If you have been injured in Georgia and want to understand your legal options, consult a licensed Georgia personal injury attorney.