How Does Interpleader Work in a Car Crash Case?
In 2020, the Georgia Court of Appeals affirmed a $1.65 million judgment against a motorist for the pre-death pain and suffering of an accident victim who (along with her husband) was killed after the defendant’s vehicle crossed the median of Interstate 516 in Savannah and hit their oncoming car. The defendant subsequently sued his liability insurer based on its handling of the claims against him. The State Court of Chatham County granted the insurance company’s motion to dismiss.
An interpleader is a way for a stakeholder to initiate a suit between all claimants who are parties claiming a right to that property
In February 2013, the defendant was driving a Ford F-250 truck when he was cut off by a vehicle driven by an unknown “John Doe.” While attempting to avoid striking the other vehicle, the defendant lost control of the truck and crossed the median. He collided head-on with the victim’s vehicle, killing her and her husband and injuring their minor daughter.
The defendant was insured on a policy that had limits of liability for bodily injury coverage of $50,000 for one person’s bodily injury, including death, and $100,000 for each occurrence. The insurance company filed an interpleader action in superior court and tendered the policy limits of $100,000 to the court.
An interpleader is a way for a stakeholder to initiate a suit between all claimants who are parties claiming a right to that property. An interpleader lets the stakeholder to bring all claimants into the same action, instead of litigating against claimants in separate actions. By bringing an interpleader action, a stakeholder can accomplish the following:
- Have claimants litigate among themselves;
- Determine which claimants have a rightful claim to the property; and
- Avoid multiple liability.
Notably, the insurance company failed to secured a release of any potential claim against the defendant. The insurance company asked that the defendants be “required to interplead and settle between themselves their right to the sum paid by the insurance company into the registry of this Court, and that the insurance company be discharged from any and all other financial responsibilities under its contract of insurance… resulting from the vehicular accident.”
A month later, the victim’s mother and the administrator of her estate, filed suit against the defendant, the “John Doe” driver, and the Georgia Department of Transportation (“GDOT”), seeking damages for her daughter’s pre-death pain and suffering. The insurance company undertook the defendant’s defense of these claims.
In 2017, the victim’s mother settled with GDOT, leaving only the mother’s claim against the defendant and John Doe pending. At trial, the jury found in favor of the victim’s mother for $3 million. The jury apportioned 55% of the fault to the defendant and 45% to John Doe. Judgment was entered against the defendant in the amount of $1.65 million, an amount well in excess of the policy limits.
This lawsuit against the insurance company followed. The defendant alleged “negligence/bad faith failure to settle” in that the insurance company filed an interpleader action and tendered the bodily injury limits into the court registry without considering the defendant’s interests. The defendant also alleged breach of contract and the implied duty of good faith and fair dealing, based on the insurance company’s failure to provide an adequate defense to the mother’s claim.
The insurance company subsequently moved to dismiss the complaint for failure to state a claim upon which relief could be granted, which the trial court granted.
This appeal followed in which the defendant argued that the trial court improperly dismissed his tort claim for negligence/bad faith failure to settle.
Insurance company had no duty nor opportunity to resolve
Judge Jeffrey A. Watkins of the Court of Appeals wrote that under Georgia law, an insurance company may be liable for the excess judgment entered against its insured based on the insurer’s bad faith or negligent refusal to settle a personal claim within the policy limits. Importantly, in deciding whether to settle a claim within the policy limits, the insurance company must give equal consideration to the interests of the insured.
The trial court found that the insurance company had no duty nor opportunity to resolve the victim’s mother claim because she never made a demand for payment of the policy limits before the insurance company filed its interpleader complaint and tendered the policy limits into the court. In arriving at this conclusion, the trial court relied on a 2019 Georgia Supreme Court decision that stated, to the extent it had been unclear, “an insurer’s duty to settle arises only when the injured party presents a valid offer to settle within the insured’s policy limits.”
Judge Watkins explained that whether an insured would be entitled to relief in tort under any set of provable facts, including affirmative conduct by the insurer that has the effect of precluding an offer to settle within policy limits. Or more specifically: whether an insurer accords its insured the same faithful consideration it gives its own interest, which is typically a jury issue, when it unconditionally tenders the policy limits and thus cuts off the possibility for the insured to obtain a release of any of the claims against him.
Here, the trial court found that the defendant’s claim against the insurance company failed as a matter of law because the victim’s mother hadn’t made a time-limited offer to settle within policy limits.
However, under the circumstances, the Court of Appeals concluded that neither the general rule nor the public policy considerations behind the rule (including the potential for collusion between the insured and an injured party) precludes such liability as a matter of law. To hold otherwise would encourage an insurer, on notice that its insured faces liability well in excess of the policy limits, to cut off the possibility of settling any of those claims with a release for the insured. Rather than reducing the overall risk of excess exposure, filing the interpleader action under the circumstances alleged in this case was not only not in the defendant’s “best interest,” but it removed incentive for any claimant to settle a claim against the defendant within the policy limits.
The Georgia Court of Appeals reversed the trial court’s grant of the insurance company’s motion to dismiss and remanded the case for further proceedings on the defendant’s claims for bad faith failure to settle, breach of contract for inadequate defense, breach of contract for refusing to pay appeal bond premiums, and related claims for attorney fees and punitive damages. Cannon v. Safeco Ins. Co. of Ill., 2026 Ga. App. LEXIS 182, 2026 LX 141039, 2026 WL 733689 (Ga. App. March 16, 2026).
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