A recent opinion out of the Georgia Court of Appeals is forcing insurers to choose their words carefully when seeking clarification regarding time-limited settlement demands. In Yim v. Carr, the Court of Appeals reversed a ruling that a defendant driver’s insurer had accepted the plaintiff’s time-limited demand for the policy’s limits, holding instead that the insurer’s request for clarification regarding the scope of the offer’s release was not an “unequivocal acceptance” of the offer, but rather a counteroffer. The holding is likely to be appealed to the Supreme Court of Georgia, but in the meantime, it is causing some hand-wringing among insurance representatives and the defense bar.
Time-limited settlement demands in automobile injury cases are governed by O.C.G.A. § 9-11-67.1, which codifies the Supreme Court of Georgia’s holding in Southern General Co. v. Holt, 262 Ga. 267 (1992). In Holt, the Court held that an insurer with knowledge of its insured’s liability and damages exceeding policy limits can be subject to bad faith damages if its failure to settle within policy limits subjects the insured to a judgment in excess of those limits. This holding has led to the proliferation of time-limited settlement demands, or Holt demands, in which an injured party’s attorney sends a letter to the at-fault party’s insurer setting forth the insured’s clear liability and the existence of damage exposure in excess of the policy limits. To constitute a valid Holt demand, the offer must contain certain material terms:
(1) The time period within which such offer must be accepted, which shall be not less than 30 days from receipt of the offer;
(2) Amount of monetary payment;
(3) The party or parties the claimant or claimants will release if such offer is accepted;
(4) The type of release, if any, the claimant or claimants will provide to each releasee; and
(5) The claims to be released.
O.C.G.A. § 9-11-67.1(a). Once an insurer receives a valid Holt demand, it may accept the offer by stating in writing that it accepts the material terms outlined above “in their entirety.” Id. at (b). The insurer does “have the right to seek clarification regarding terms, liens, subrogation claims, standing to release claims, medical bills, medical records, and other relevant facts,” and the insurer’s “attempt to seek reasonable clarification shall not be deemed a counteroffer.” Id. at (d). If the insurer is deemed not to have accepted the offer in its entirety, however, it potentially exposes itself to a bad faith claim if the injured party ultimately obtains a judgment in excess of the policy limits.
At issue in Yim was whether the at-fault driver’s insurer, Liberty Mutual, rejected the plaintiff’s Holt demand by requesting clarification regarding the scope of the proposed release. The plaintiff’s demand specifically stated that the driver and only the driver would be covered by the release, and 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.” Liberty Mutual responded to the demand by accepting the offer but seeking clarification as to whether the at-fault driver’s parents—who were the named insureds on the policy—would also be covered by the release:
First, we agree that as consideration for the payment of $100,000.00, Patricia Carr will execute a limited release and settlement agreement resulting from the April 14, 2016 date of loss. We are in receipt of the limited liability release you enclosed with your demand. . . . We have previously forwarded our policy declarations to you, which indicate the named insureds under the policy as John Yim and Bok Yim, with Jenny Yim being a listed driver under the policy. Your proposed limited liability release does not list our named insureds John Yim or Bok Yim. Under O.C.G.A. § 33-24.41.1 (b) (2), Georgia law establishes that a limited liability release shall “[r]elease the insured tort feasor covered by the policy of the settling carrier from all personal liability from any and all claims arising from the occurrence on which the claim is based except to the extent other insurance coverage is available which covers such claim or claims.” In addition, I refer you to McKeel v. State Farm Mut. Auto. Ins. Co., 2015 U.S. App. LEXIS 12698 (11th Cir. 2015) as support for the proposition that a limited liability release must protect each insured in order to provide a liability insurer with an opportunity to resolve a claim against its insureds in consideration of the payment of policy limits. Please contact me to further discuss your limited liability release in regards to our named insureds John Yim and Bok Yim. Pursuant to O.C.G.A. § 9-11-67.1 we also request clarification from you that Ms. Carr does not intend to assert claims against the named insureds under the applicable policy. . . . To reiterate, both our discussions, as well as this letter, are in no way intended to be either a rejection of your demand or a counter-offer. Rather, it is Liberty Mutual’s intent to accept your settlement demand unequivocally and without variance. If anything in this letter is inconsistent with our discussions and/or Liberty Mutual’s acceptance of your demand, please make me aware immediately. . . .
(emphasis added). Liberty Mutual also tendered a check for the $100,000 policy limit. Nevertheless, in spite of Liberty Mutual’s expressed intention of accepting the offer “unequivocally and without variance,” the plaintiff’s attorney interpreted the letter as a counteroffer and, in turn, rejected that counteroffer and returned the settlement check.
After the plaintiff filed suit, Liberty Mutual moved to enforce the settlement agreement, contending that it had unequivocally accepted the plaintiff’s offer and that the clarification it requested was permitted by O.C.G.A. § 9-11-67.1(d). The trial court agreed that “the mere suggestion that the named insureds might be included in the release was at most a precatory request that did not impose any new conditions of settlement,” and granted Liberty Mutual’s motion to enforce the agreement.
The Court of Appeals reversed, finding that there was no meeting of the minds between the plaintiff and Liberty Mutual, and therefore no agreement. Pointing to the fact that the plaintiff’s demand specifically 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,” the Court concluded that “a reasonable person in the position of Liberty Mutual would have understood that [the plaintiff] considered the particular release form attached to the Settlement offer to be essential to her willingness to settle her bodily injury claims and that she would not agree to a settlement that released any parties other than [the at-fault driver].” In other words, even after Liberty Mutual stated that its request for clarification was in “no way intended to be either a rejection of [the plaintiff’s] demand or a counter-offer,” the Court of Appeals found it to be just that. As a result, Liberty Mutual finds itself potentially exposed in the event of a judgment in excess of the policy limits.
The Court of Appeals’ holding in Yim may still face scrutiny in the Supreme Court of Georgia, but until then, insurers responding to time-limited settlement demands should proceed with caution when seeking clarification on any of the offer’s terms.
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