If At First You Don’t Succeed: Georgia Legislature Amends Pre-Suit Demand Statute to Provide Additional Protections to Insurers

Written by: Abe Varner, Esq.

The Georgia legislature recently made significant revisions to O.C.G.A. 9-11-67.1, the Georgia statute governing pre-suit settlement demands for injuries arising out of the use a motor vehicle.  The amended statute was recently signed into law and applies to causes of action arising on or after July 1, 2021.

In response to an explosion of litigation over time limited pre-suit demands and bad faith failure to settle claims against insurers, in 2013 the Georgia legislature enacted O.C.G.A. 9-11-67.1.  The statute outlined procedures and requirements for pre-suit settlement demands for injuries arising out of the use a motor vehicle,[1] and how those demands could be accepted. The intent of statute was to  provide more certainty for insurers responding to pre-suit time limited demands. In practice, however, claimant attorneys have continued to successfully use complicated demands that put various conditions on insurers in order to make it more difficult for insurers to meet all terms of the demand, and making it more likely that insurers will fall into “traps” resulting in the demand not being accepted, which can subject the insurer to potential extra-contractual exposure for bad faith/negligent failure to settle claims.

The new amended statute puts important new limitations on time limited pre-suit demands, the most significant of which are discussed below:

A. Limiting the Terms that Can be Included in the Demand

Section (a) of the statute lists 5 materials terms that are required to be included in all pre-suit settlement offers:

• • The time period within which the offer must be accepted, which cannot be less than 30 days from the receipt of the offer.
  • The amount of monetary payment.
  • The party or parties that will be released.
  • The type of release, if any, that will be provided to each releasee.
  • The claims to be released.

In interpreting the statute, Georgia courts have held that, while claimants were required to include the 5 materials terms listed in subsection (a), claimants could still include additional materials terms in their demand, and if those additional terms were not accepted, there was no settlement.  For example, the Georgia Supreme Court has held that a claimant could properly make timely receipt of the settlement funds as a condition of settlement, despite it not being listed in subsection (a) of the statute.  Grange Mutual Cas. Co. v. Woodard, 300 Ga. 848 (2017).

In response to these cases, the new statute limits the terms that can be included in a pre-suit demand to those terms stated in subsection (a): it states that unless it was agreed by the claimant and recipient in writing, the required terms in subsection (a) of the statute “shall be the only terms” which can be included in an offer to settle under the code section.  Thus, if a demand includes additional material terms other than the 5 terms listed in subsection (a), the demand would not appear to be a valid demand under the statute.

B. Insurer’s Proposed Releases Shall Not Be Deemed a Counteroffer

In recent years more and more pre-suit demands have required that, in order to accept a demand, an insurer is required to draft and provide a release that meets all the terms of the demand, and if any release provisions are inconsistent with the demand terms, it will be deemed to be a counteroffer and rejection of the demand.  Recent Georgia cases have held that an insurer providing a draft release that is inconsistent with a demand’s terms do constitute a counteroffer and rejection of the demand.  Yim v. Carr, 349 Ga.App. 892 (2019); Pritchard v. Mendoza, 357 Ga.App. 283 (2020).  What’s worse is that these demands letters are often voluminous and include numerous (and often confusing and contradictory) terms, which can making it very difficult for a claims professional or counsel to draft a release that is in complete conformance with the demand.

In response to this line of cases, the new statute provides that if a release is not provided by the claimant with the demand, the insurers “providing of a proposed release shall not be deemed a counteroffer.”  In other words, if a demand includes a release, an insurer providing its own release with contradicting terms can still be deemed a counteroffer/rejection of the demand.  However, if no release is provided with the demand and the insurer provides its own proposed release, the amended statute should prevent the proposed release from being deemed a counteroffer.

C. Other Relevant Changes

The legislature made numerous small changes to the statute, and the amended statute should be reviewed in its entirety when evaluating its application to a specific case.  However, some other relevant changes to O.C.G.A. 9-11-67.1 include:

• • The statute applies to offers made prior to the filing of a defendant’s answer. Previously, the statute simply applied to demands made prior to the filing of a lawsuit, which resulted in some claimant attorneys filing suit and then immediately serving a demand on the insurer, which allowed them to avoid the requirements of the statute.
  • Demands have to include medical or other records in the claimant’s possession incurred as a result of the subject claim that are sufficient to allow the claim to be evaluated.
  • Demands can include a term requiring the insurer to provide a statement under oath regarding whether all insurance coverage it provides for the claim has been disclosed.
  • Demands can require payment within a specified period of time, but the date shall not be less than 40 days from receipt of the offer (previously, it was not less than 10 days from acceptance of the offer).

D. Conclusion

There is no doubt that there will continue to be substantial litigation regarding time limited pre-suit demands and whether an insurer’s response constitutes an acceptance, or a counteroffer that will potentially subject the insurer to a future bad faith failure to settle claim.  However, with the changes to O.C.G.A. 9-11-67.1, the Georgia legislature has taken a significant step to provide insurance carriers more certainly in responding to pre-suit demands for motor vehicle injury claims.  Notably, the amended version of  O.C.G.A. 9-11-67.1 only applies to causes of action arising on or after July 1, 2021.  For causes of action arising prior to that time, the prior version of the statute, and the cases interpreting it, will continue to apply.

Finally, it is important to note that, by its terms, O.C.G.A. 9-11-67.1 applies only to pre-suit demands arising out of the use of a motor vehicle; the statute does not apply to non-motor vehicle claims. To date, courts have not applied the requirements of the statute to non-motor vehicle claims, nor have courts cited the statute as being instructive in the non-motor vehicle claim context. This trend is expected to continue under the amended version of O.C.G.A. 9-11-67.1.  Instead, for tort claims not involving the use of a motor vehicle, the old Georgia caselaw addressing the procedure for time limited demands will continue to apply.[2]

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[1] Also, the statute only applies when the claimant is represented by an attorney.  It does not apply when the claimant is acting pro se.

[2] For example, Georgia courts have held that a demand may carry a time limit that is unreasonably short, or contain insufficient information to allow the insurer to properly evaluate the claim. See Baker v. Huff, 323 Ga. App. 357 (2013) (Court of Appeals did not tolerate a transparent “set-up” attempt made in a 10-day settlement demand that did not provide material information about the claim necessary for the insurer to evaluate it.).

Certain rules from the caselaw continue to apply to demands for all types of bodily injury claims, regardless of whether the claim is subject to O.C.G.A. 9-11-67.1.  For example, an insurer has no affirmative duty to engage in negotiations concerning a settlement demand that is in excess of the policy limits.  Cotton States Mut. Ins. Co. v. Brightman, 276 Ga. 683 (2003).  Georgia courts have also recognized a limited “safe harbor” for time-limited demands in claims involving hospital liens: if a claimant unreasonably refuses to provide assurances that a hospital lien will be satisfied, an insurer is free to pay the lien directly and tender the remainder of the policy limit to the claimant – in this scenario, the insurer is not liable for bad faith failure to settle as a matter of law.  Southern General Ins. Co. v. Wellstar Health Systems, Inc., 315 Ga. App. 26 (2012).