Update on Pitfalls to Responding to Policy-limit Demands

Written by: Duane Cochenour, Esq. and Bill Daniel, Esq.

The Georgia Court of Appeals recently held that an insurer’s request for clarification as to which insureds are released in a pre-suit, policy-limit demand amounted to a counteroffer and rejection of the demand. In Yim v. Carr, 349 Ga. App. 892 (2019)[1], plaintiff Patricia Carr was involved in an automobile collision with defendant Jenny Yim. As a result of the accident, Carr’s counsel issued a policy-limit demand with an attached limited liability release to at-fault driver Jenny Yim. The demand in pertinent part provided the following information:

  • The demand provided that if accepted “Jenny Yim, and only Jenny Yim, will be released under the enclosed Limited Liability Release.”
  • The release further stated that “any request for a release of other persons or entities that are or may be liable will constitute a rejection of this offer and a counter-offer to resolve claims against other potentially liable parties.”
  • Lastly, the Carr provided that the attached limited liability release was the only release Carr would execute.

Yim’s insurer, Liberty Mutual, responded accepting the demand “unequivocally and without condition or exception.” However, its letter went on to “seek clarification” regarding whether Yim’s parents (the named insureds on the policy) were also to be released if the policy limits were paid.  Carr’s attorney responded that Liberty Mutual’s response was a rejection of the demand because it sought to include Yim’s parents, contrary to the terms of the offer. Carr subsequently filed suit against Yim and Yim’s parents. Yim moved to enforce the settlement agreement. The trial court granted Yim’s motion, finding that the response did not constitute a counteroffer because it only sought clarification regarding the scope of the limited liability release.

However, the Court of Appeals reversed the trial court’s decision.  They held that the carrier was not attempting to seek clarification; rather, it was trying to negotiate to have the parents included in the release when the demand specifically stated that only Yim would be released.  This was an essential term of the demand and there was no meeting of the minds.

Georgia law provides that the recipient of a pre-suit offer may seek reasonable clarification on relevant terms without transforming what would otherwise be an acceptance into a counteroffer. OCGA § 9-11-67.1; Partain v. Partain, 338 Ga. App. 298, 301 (2016) (holding a mere request for confirmation does not constitute an offer). However, “where the settlement offer specifies the release that is necessary for effectuating settlement, there is no acceptance if the responding party does not accept that release.” Yim v. Carr, 349 Ga. App. at 908.


This is a heavily fact-specific ruling. Here, the claimant issued a very specific policy-limit demand.  It said only the driver would be released and even warned that any request to release other parties would be deemed a counteroffer. Liberty had good intentions by trying to seek protection for all its insureds in exchange for payment of the policy limit. However, the demand was clear that a release of all insureds was not being offered. That puts the carrier in a difficult situation in which it can obtain protection for the primary tortfeasor, who is an insured under the policy, but to do so requires payment of the policy limit without any protection for a claim against the other insureds.  In this case, that claim against the other insureds was not being made at the time of the demand, and ultimately ended up being subject to summary judgment. However, Liberty did not know that would be the case at the time it had to make these decisions.

The biggest take-away from this case is that the Court of Appeals is cautioning carriers that they cannot use the statutory right to seek clarification under OCGA § 9-11-67.1 to attempt to negotiate terms that are clearly set forth in the plaintiff’s policy limit demand. If an issue is not addressed in the demand (or in a release that is attached), then the statute allows the carrier to seek reasonable clarification.  However, it is not a door to negotiate existing terms under the guise of seeking clarification.  The difficulty is that not every demand is this specific and there are frequently gray areas in what you can seek clarification on.  Caution should be exercised whenever a carrier wants to take advantage of their statutory right to seek clarification that their request not be construed as attempting to negotiate different terms of settlement.

Our coverage practice group has decades of experience responding to policy limit demands and stands ready to assist our insurance carrier clients to make sure they limit exposure in this challenging and developing area of law in which one mistake can literally cost many millions of dollars.

[1] This was a pre-suit demand that only asserted claims against the driver. Carr later added a claim for vicarious liability against Yim’s parents. The parents eventually obtained summary judgment as to that claim, but that was long after the time for a response to the policy limit demand.

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