I’ve previously discussed Georgia’s bad faith demand requirements in Georgia Unfair Claims Handling. A recent Georgia appellate court opinion1 highlights how strictly OCGA § 33-4-6 is construed by the courts.

OCGA § 33-4-6 provides, in relevant part:

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 50 percent of the liability of the insurer for the loss or $5,000.00, whichever is greater, and all reasonable attorney’s fees for the prosecution of the action against the insurer.

Georgia courts have held that to bring a claim under this statute the policyholder must prove:

  1. That the claim is covered by the relevant insurance policy;
  2. That a demand for payment was made by the policyholder at least 60 days prior to filing suit; and
  3. That the carrier’s failure to pay was motivated by bad faith.2

In Thompson v. Homesite Insurance Company of Georgia, the policyholder’s home was damaged when a tree fell on it during a storm. The policyholder sustained damages to her home and expenses to remove the tree and other debris from her property. Homesite’s initial payment for these damages was $1,812.33.

The policyholder disagreed with Homesite’s valuation of her claim, and made a number of complaints to and about Homesite regarding the handling of her claims. Specifically, the policyholder filed a formal complaint with the Georgia insurance commissioner and sent several messages to Homesite representatives in May 2011, inquiring about, and criticizing, the handling of her claims. After receiving documentation of the expenses incurred by the policyholder for removal of the tree and other debris in June 2011, Homesite issued an additional payment for $1,800 on October 6, 2011.

In a letter dated October 12, 2011, the policyholder’s counsel demanded payment for the reimbursement for the policyholder’s tree and debris removal expenses. In this letter, the policyholder’s counsel threatened to file a bad faith claim against Homesite under OCGA § 33-4-6 if Homesite did not properly reimbursement the policyholder for the tree and debris removal expenses. This letter also notified Homesite that the policyholder disagreed with Homesite’s estimate of damages to repair her home.

The parties ultimately went to appraisal and an umpire awarded the policyholder $50,713.69 less the $1,000 deductible and prior payments. Homesite issued payment for the umpire’s award.

The policyholder then sued Homesite claiming that Homesite unreasonably delayed reimbursing her for the tree and debris removal expense and that it had underpaid on the umpire’s award, subjecting Homesite to liability under OCGA § 33-4-6. Homesite moved for summary judgment on these claims.

The court analyzed whether the policyholder’s communications with Homesite were sufficient to support recovery under the bad faith statute. The court concluded that statements by the policyholder to Homesite and the Georgia insurance commissioner that she was unhappy with the progress of her claim were not sufficient to alert Homesite she was considering filing a bad faith claim.

The court held that a demand under OCGA § 33-4-6 must not only express displeasure with the insurer’s handling of the claims process but actually alert the insurer that the insured plans to take legal action for bad faith if the claim is not paid.

The only communication the policyholder had with Homesite in which potential litigation was threatened was the October 12, 2011, letter sent by her counsel. However, this threat of litigation pertained only to the Homesite’s failure at the time to reimburse the policyholder for tree and debris removal expenses. Since Homesite paid the policyholder for those expenses on October 6, 2011, Homesite had already satisfied the specific demand made by the policyholder. As the policyholder never threatened to invoke OCGA § 33-4-6 regarding any remaining portions of her claim with Homesite, the appellate court affirmed the trial court’s grant of summary judgment on the policyholder’s bad faith claim.

While Georgia courts have held that no special language is necessary for the demand under OCGA § 33-4-6, this opinion emphasizes how strictly courts will review and interpret the demands in order to hold carriers liable under the bad faith statute.
1 Thompson v. Homesite Ins. Co. of Georgia, No. A17A1938 (Ga. App. Mar. 14, 2018).
2 BayRock Mortg. Corp. v. Chicago Title Ins. Co., 286 Ga.App. 18, 19 (648 S.E.2d 433) (2007).