What Constitutes a “Good Faith Effort” to Settle?
A store owner appealed from the trial court’s order granting partial summary judgment in favor of an insurance company with regard to its liability for a penalty and attorney fees under O.C.G.A. § 33-4-7(a). The store contended that the trial court erred by rejecting its assertion that the insurer failed to make a good faith effort to settle its third-party property damage claim after its building was damaged by the driver of a tractor trailer covered by the insurer.
Background
The store owner learned about damage to the store on March 29, 2010, and reported it to the insurer by phone the next day. The store also named the driver and his employer as defendants in its complaint, alleging that the driver negligently backed a tractor-trailer truck into the store causing physical damage.
On March 31, 2010, he sent to the insurer a copy of the police report, a quote for repairs in the amount of $8,400, and photographs of the damage. On the same day, he advised the insurer that repairs would start on April 5th. On April 13th, the repairs were completed, and the manager notified the insurer by phone and requested reimbursement. On April 24th, the manager sent an e-mail to the insurer requesting full reimbursement of the repairs by April 31st, so the insurer could avoid legal costs. On April 28th, a claims representative for the insurer faxed a letter in reply stating that it was in the process of completing its investigation and requested color photos of the completed repairs and an invoice showing parts and labor costs for the completed repair.
On May 21st, the store’s attorney sent a letter by regular mail and fax demanding payment of $8,400 by May 31st. The insurer responded on June 16th, stated that it was “not questioning liability or responsibility for the damages caused by our insured,” and requested the same photos and detailed invoice previously requested. The store’s attorney provided the requested information by e-mail on June 29th, and requested funds by July 7th.
On July 8th, the insurer offered $6,000 to settle the property damage claim, justifying the reduced amount on preexisting damage to the areas repaired. After several calls with the store’s attorney, the insurer agreed on July 22nd to pay the full amount of $8,400 and sent a release the next day. This release included a provision requiring the store and its attorney to indemnify the released parties. On July 23rd, the store’s attorney wrote the insurer that he had “relayed your offer to pay $8,400 … on a full release. Once I hear back on whether the store will accept, I will let you know.”
On August 9th, the store’s attorney sent a certified letter to the insurer “pursuant to O.C.G.A. § 33-4-7” offering to settle for $8,400. The letter specified that the check should be made payable to the law firm “as attorneys for the store” and that the funds would be held in escrow until the store executed and forwarded a release enclosed with the letter. This release differed from the one provided by the insurer and didn’t include a hold harmless and indemnity agreement. The insurer received the letter on August 12, 2010.
After further discussions between the store’s attorney and the insurer about terms of the release, the insurer issued a check to the store on October 12th, and sent a letter enclosing the same release it first sent to counsel, stating that it was “unable to issue settlement without properly signed and notarized forms.” On November 19th, counsel advised the insurer that the store was rejecting the insurer’s “counteroffer to settle this claim,” returned the check to the insurer, and enclosed a copy of the complaint it had filed the same day.
On December 4, 2023, the parties entered into a “Stipulation of Judgment as to Property Damages Award” in which they agreed “that the property damages … awarded to the store due to [the tractor-trailer driver’s] negligence are $8,400, payable now and need not be proven at trial. …” In March 2024, the insurer moved for summary judgment on the store’s claims under O.C.G.A. § 33-4-7 and O.C.G.A. § 13-6-11. The trial court granted the motion only as to O.C.G.A. § 33-4-7, and the store filed a notice of appeal.
Court of Appeals
Vice Chief Judge E. Trenton Brown noted that O.C.G.A. § 33-4-7(a) outlines an insurer’s duty “[i]n the event of a loss because of injury to or destruction of property covered by motor vehicle liability insurance” as follows:
[T]he insurer … has an affirmative duty to adjust that loss fairly and promptly, to make a reasonable effort to investigate and evaluate the claim, and, where liability is reasonably clear, to make a good faith effort to settle with the claimant potentially entitled to recover against the insured under such policy. Any insurer who breaches this duty may be liable to pay the claimant, in addition to the loss, not more than 50 percent of the liability of the insured for the loss or $5,000.00, whichever is greater, and all reasonable attorney’s fees for the prosecution of the action.
O.C.G.A. § 33-4-7(b) provides:
An insurer breaches the duty of subsection (a) of this Code section when, after investigation of the claim, liability has become reasonably clear and the insurer in bad faith offers less than the amount reasonably owed under all the circumstances of which the insurer is aware.
O.C.G.A. § 33-4-7(c) outlines the following procedural requirements for recovery:
A claimant shall be entitled to recover under subsection (a) of this Code section if the claimant or the claimant’s attorney has delivered to the insurer a demand letter, by statutory overnight delivery or certified mail, return receipt requested, offering to settle for an amount certain; the insurer has refused or declined to do so within 60 days of receipt of such demand, thereby compelling the claimant to institute or continue suit to recover; and the claimant ultimately recovers an amount equal to or in excess of the claimant’s demand.
The statute also state that a claimant may serve the insurer at the expiration of the 60-day period specified in O.C.G.A. § 33-4-7(c), and the action for bad faith won’t be abated by payment after the 60 day period. Once a claimant obtains “a verdict resulting in a recovery equal to or in excess of the claimant’s demand … the trial shall be recommenced in order for the trier of fact to receive evidence to make a determination as to whether bad faith existed in the handling or adjustment of the attempted settlement of the claim or action in question.”
The parties disagreed about how these statute provisions should be interpreted. The insurer asserted that it couldn’t be held liable under the statute because it offered the amount demanded within 60 days of receipt of the certified letter. the store contended that the insurer had an affirmative duty to make a good faith effort to settle and had no lawful right to condition payment on execution of a general release with a hold harmless and indemnity provision.
In order to resolve this dispute, the court was required to examine the relevant rules of statutory interpretation.
Judge Brown explained that in our search for statutory meaning, the Court must give the text its plain and ordinary meaning, view it in the context in which it appears, and read it in its most natural and reasonable way. “In considering the meaning of a statutory provision, the judge explained, “we should not read it in isolation from the other statutory provisions of which it is a part,” quoting a 2021 decision. If the statutory text is clear and unambiguous, the Court will attribute to the statute its plain meaning, and the search for statutory meaning is at an end. In these situations, judicial construction is not only unnecessary but it’s forbidden.
O.C.G.A. § 33-4-7(b) states that an insurer breaches “the duty of subsection (a) … when, after investigation of the claim, liability has become reasonably clear and the insurer in bad faith offers less than the amount reasonably owed under all the circumstances of which the insurer is aware.” Under this plain language, an insurer breaches the statute when it offers less than the amount reasonably owed in bad faith. Subsection (c) similarly predicates recovery on an insurer’s refusal or failure to settle for an amount certain within 60 days of receipt of an “offer to settle for an amount certain.”
Having considered the plain language of the O.C.G.A. § 33-4-7, the context in which it appears, and reading it in its most natural and ordinary way, Judge Brown and the panel concluded that the store couldn’t recover from the insurer because the insurer offered to settle for the amount demanded by the store within 60 days of receiving the store’s demand.
As a result, the Court of Appeals affirmed the trial court’s grant of summary judgment in favor of the insurer. In so holding, it rejected the store’s invitation to judicially craft a requirement that an offer of payment “must be unqualified, and if there is a qualification for payment, an insurer risks imposition of bad faith penalties upon the offer’s rejection should the rejection be found unreasonable.” FDOV, LLC v. Eaddy, 2025 Ga. App. LEXIS 225 (Ga. App. June 2, 2025).
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