BY RICH DOLDER & JAY SADD
Actions speak louder than words. Getting an insurance company to actually pay a claim is better than getting a promise to pay the claim later. When the claim is one of probable liability, provable damages and relatively small policy limits, claimants deserve action and payment; mere words and promises to those aggrieved by another’s negligence do no good. A recent ruling by the Supreme Court of Georgia, Grange Mut. Ins. Co. v. Woodard, has important implications for any attorney representing persons injured in automobile wrecks when there is liability insurance coverage.Grange clarifies that those attorneys are allowed to demand action rather than mere words.
Anyone representing people injured and killed in automobile wrecks is now familiar with O.C.G.A. § 9-11-67.1,sometimes referred to as the “offer statute” and passed by the General Assembly in 2013.2 The offer statute unquestionably applies to pre-suit settlement demands made by or with the assistance of counsel for payment of bodily injury and death claims arising out of automobile wrecks occurring after July 1, 2013.3 It unquestionably requires such demands to set forth at least five material terms with respect to deadlines, the amount of payment, the parties to be released, the type of release offered and the claims to be released.4 Since inception of the offer statute,however, insurance companies and claimant attorneys have disagreed as to whether claimants may reasonably demand actual payment within a certain time before a settlement agreement is created. In Grange, the Supreme Court of Georgia resolved all doubt, ruling that § 9-11-67.1 “does not prohibit a claimant from conditioning acceptance of a Pre-Suit Offer upon the performance of some act, including a timely payment.”
Nothing in Grange should be considered new or surprising, as it merely restates the common law of contract formation imported from England to our system of jurisprudence at the time of the American Revolution. To appreciate the implications of Grange, it is therefore useful to review the long-lived distinction between “conditions of acceptance” and “conditions of performance” well-known by attorneys and insurance company claims professionals whose business it is to settle claims. A condition of acceptance refers to an act that must be done in order for an enforceable contract to be created. A condition of performance refers to an act that is required by the contract after the contract is created. In the settlement context, if timely payment is a condition of acceptance, the failure to timely pay means there is no settlement agreement. If timely payment is a condition of performance, the failure to timely pay means the settlement contract has been breached, but a settlement contract still exists. In practice, the difference is whether an insurance company that desires to create an enforceable settlement contract to protect its insured must actually pay a claim or merely promise to pay the claim at some later time.
The tragic story of the Woodard family and Grange’s failure to effect settlement on behalf of its insured illustrates why the distinction matters. On March 20, 2014, Grange’s insured was driving his car, flew off a raised road and landed on top of a pickup truck driven by Boris Woodard. Mr. Woodard’s daughter, Anna, was a passenger. Anna died of her injuries a few days after the accident and Mr. Woodard was seriously injured. Grange had sold the at-fault driver a policy with liability limits of $50,000 per person and $100,000 per accident. Grange received prompt notice of the claim and assigned an adjuster to handle it. Despite its insured’s clear liability and exposure to massive damages, Grange did not tender its liability limits even after learning that the Woodards had retained counsel.
On June 19, 2014, the Woodards’ counsel, Michael Neff and Shane Peagler, sent a demand to Grange offering to settle the Woodards’ claims for policy limits. The letter included the material terms required by § 9-11-67.1(a)(1)-(5), including that Grange had 30 days from its receipt of the letter to indicate its acceptance.Further, the letter stated that payment must be made within the 10-day time period set forth in § 9-11-67.1(g).Significantly, the letter included the following sentence: “Timely payment is an essential element of acceptance.”
Grange promptly received the letter but did not immediately send its acceptance. Rather, Grange waited until the eve of the 30-day deadline to send written acceptance. Grange then waited an additional eight days before,according to affidavits it filed with the court, setting in motion an automated, human-free check-writing and check-mailing process. When Messrs. Neff and Peagler did not receive any payment by the deadline, they informed Grange it had failed to settle and that they would proceed with a lawsuit against Grange’s insured.
Grange filed a breach of contract action in the Northern District of Georgia, claiming it had settled.9 According to affidavits from Grange claims professionals and IT personnel, a “glitch” in Grange’s automated payment system caused the checks to be put into the mail without an address. (The lack of address explains, of course, why Messrs.Neff and Peagler did not receive payment.)
Grange argued it had settled because the offer statute did not allow claimants to require timely payment as a condition of acceptance.10 According to Grange, the offer statute outlawed all conditions of acceptance other than sending written acceptance within 30 days. Under Grange’s theory, payment could only be a condition of performance. Thus, according to Grange, the Woodards’ sole remedy for Grange’s failure to pay was to sue for breach of the settlement contract and litigate whether they were entitled to interest on the $100,000 Grange failed to timely pay.
Judge Story rejected Grange’s arguments and granted summary judgment in favor of the Woodards.11 Grange appealed, and the Eleventh Circuit certified questions to the Supreme Court of Georgia.12 Georgia’s highest court ruled that an offeror is still “master of his offer” and that the offer statute did not outlaw claimants requiring an insurance company to perform one or more acts, including timely payment, in order to effect a settlement on behalf of its insured.
The decisions in Grange will not change the practice of all claimant attorneys, as many have always required action and not mere promises to effect settlement, including the delivery of affidavits affirming the extent of available insurance coverage, actual receipt of payment and other appropriate acts. Nor will Grange change the practice of insurers who proactively work to settle claims that threaten their insured’s financial well-being rather than holding onto funds for as long as possible. Grange is significant in that it clarifies that the offer statute did not take away the right of claimants to demand timely acts before agreeing to settle.
Although the Supreme Court of Georgia was careful to note that it was not deciding whether Grange had acted negligently or in bad faith in failing to settle, it did note that Grange’s potential liability under Holt “looms in the background.” Thus, although the Woodards’ demand that timely payment be a condition of acceptance would seem to be practical, reasonable and even necessary in a probable-liability, high-damages death claim, that issue was not judicially determined. Thus, nothing in Grange should alter the practice of making reasonable demands with reasonable terms. Grange clarifies, however, that attorneys may continue to zealously represent their clients within the bounds of the law in demanding reasonable terms of settlement. In the context of representing persons injured in automobile wrecks, such zealous representation includes, in the proper case, requiring insurance companies to take reasonable action – and not merely make promises – to settle a claim and protect its insured from legal liability as promised under the policy.
ABOUT THE AUTHORS
Richard E. Dolder is a partner who joined Slappey & Sadd to expand the firm’s work on insurance coverage and insurance bad faith. Rich represents individuals and businesses who are improperly denied coverage or treated unfairly by their insurance companies. He currently serves on the GTLA Verdict Editorial Board.James (Jay) Sadd is a founding partner of the firm Slappey & Sadd, LLC, Atlanta where he represents families,workers, and consumers who have been critically injured or lost a loved one because of the negligence or willful conduct of others. Jay is a former Education Chair and President of the Georgia Trial Lawyers Association and remains active today
1300 Ga. 848, 797 S.E.2d 814, (2017),recon. denied(Mar.30, 2017).2Anyone in this practice area who is not familiar with the statute should immediately become acquainted with it. Though it is not complicated, it has some technical features. The authors have educational material available upon request.3O.C.G.A. § 9-11-67.1(a) and (h).4O.C.G.A. § 9-11-67.1(a)(1)-(5). Although it is certainly not required, one way to ensure compliance with the four material terms required by subsections (2)-(4) is to draft the release the claimant agrees to provide and attach it to the demand letter.Grange, 300 Ga. at 848.6Grange, 300 Ga. at 853-54 (citing to black-letter rules of the common-law).7Of course, it is possible that payment could be so late as to constitute a repudiation of the settlement contract.8The Eleventh Circuit later applied the Supreme Court’s interpretation of the offer statute to the facts of the case and ruled that there was no settlement agreement created. Grange Mut. Cas. Co. v. Woodard, 861 F.3d 1224 (11th Cir. 2017). Additional facts are available in the Eleventh Circuit’s order certifying questions to the Georgia high court. 826 F.3d 1289 (11th Cir. 2016).Grange Mut. Cas. Co. v. Woodard, 2015 WL 3904598 (N.D. Ga.),aff’d,861 F.3d 1224 (11th Cir. 2017).10In the alternative, Grange argued, it had settled because it had written the checks within the 10-day deadline. As the Eleventh Circuit noted in rejecting the argument, “If ‘payment’ was effectuated simply upon the writing of a check, then [insurance companies] could simply write checks and sit on them indefinitely.” 861 F.3d at 1233.112015 WL 3904598.12826 F.3d 1289.13300 Ga. at 853, 797 S.E.2d at 819.
14300 Ga. at 856-57 (referring to an insurer’s liability for amounts in excess of its policy limits under S. Gen. Ins. Co. v. Holt, 262 Ga. 267, 416 S.E.2d274 (Ga. 1992)).©TUULIJUMALA /SHUTTERSTOCK.COMWhen the claim is one of probable liability, provable damages and relatively small policy limits, claimants deserve action and payment; mere words and promises to those aggrieved by another’s negligence do no good.