Georgia Supreme Court Reverses Appellate Court Holding On Adequacy Of Jury Charge For Plaintiff’s Bad Faith Claims

Fortner v. Grange Mutual Ins. Co. (Georgia Supreme Court, October 19, 2009)   The Georgia Supreme Court granted certiorari to consider whether the Court of Appeals properly interpreted the aEURoesafe harboraEUR? provision recognized in Cotton States Mut. Ins. Co. v. Brightman, 276 Ga. 683 (2003).  In 2003 Fortner was injured in a car accident caused by Grange Mutual policyholder, Arnsdorff, who had bodily injury limit of $50,000 and a $1 million liability with Auto Owners Ins. Co. through his plumbing business.  Fortner offered to settle all claims for $50,000 from Grange aEURoecontingent uponaEUR? Auto OwneraEUR(TM)s payment of $750,000.  Auto OwneraEUR(TM)s did not respond within the specified time, but Grange responded that it would pay the $50,000 contingent upon Fortner signing a full release with indemnification and dismissing the claim against its insured, Arnsdorff.  Fortner considered this a rejection of the offer and went to trial obtaining a $7 million verdict against Arnsdorff.  Arnsdorrf then assigned to Fortner any cause of action he might have against Grange based on its alleged bad faith in failing to settle.  Fortner brought a bad faith claim against Grange, and a jury retuned a verdict in favor of Grange.  Fortner appealed, contending the following charge was in error:   In responding to a settlement demand, which demand is conditional upon the response of another insurance company, and insurance company can off it s policy limits in response to the demand and then let the plaintiff negotiate with the remaining insurers.  In that situation, the insurance company would have given equal consideration to its insuredaEUR(TM)s financial interest and fulfilled its duty to him.  And you would return your verdict in favor of the defendant.   The court of appeals found no error in the charge concluding it was consistent with the Brightman decision and was aEURoeproperly adjusted to the facts of the instant caseaEUR? since Fortner made a settlement demand that was conditioned upon the responses of both Grange and Auto Owners.  The Georgia Supreme Court, however, concluded the charge was erroneous thereby reversing the trial court.  The Supreme Court explained in Brightman, supra, how an insurer may satisfy the standard of reasonableness and thereby create a aEURoesafe harboraEUR? for itself when the plaintiff makes a settlement offer containing a condition that is beyond the control of the insurer.  Under similar facts, the Brightman court, noted that when a settlement offer contains a condition beyond an insureraEUR(TM)s control, the insurer can create a safe harbor from liability by meeting the portion of the demand over which it has control.  Thus, the Court held that the appellate court erred in holding that the jury charge was consistent with Brightman, noting that the charge would only have been appropriate if Grange had responded to the settlement condition beyond its control by simply offering its policy limits.  Instead Grange conditioned its acceptance on the signing of a full release with indemnification language and dismissing the claim against Arnsdorff with prejudice which was ultimately valued at $7 million.  The court noted that these conditions were within the insureraEUR(TM)s control and the jury should have been allowed to consider them in determining whether Grange acted reasonably in responding to the settlement offer.  Thus, the court deemed that the charge was not consistent with the safe harbor provision in Brightman and therefore was in error.    For a copy of the decision, click here   Paul Steck and Tom Segalla

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