Court Holds Insurer Did Not Act In Bad Faith By Not Obtaining Release Of Its Insured As Part Of Settlement Payment

ACCC Ins. Co. v. Tammy Renee Carter et al,

(United States District Court, Northern District of Georgia, May 26, 2009)

This action involved a unique question under Georgia law regarding an alleged bad faith refusal to pay claim and whether an insurer acts in bad faith in paying the policy limits of its insured’s policy without conditioning payment on the release of its insured where claimants’ counsel demanded payment of the face amount of its insured’s policy, but expressly refused to release the insured in return for the insurance company’s payment.  ACCC issued an automobile insurance policy that was in force at the time of the accident with coverage of $25K per person for bodily injuries.  Counsel for claimants issued a settlement demand letter to ACCC under which claimants agreed to release ACCC, but not its insured, in exchange for payment of the insured’s $25K policy limit.  The court noted that because the initial settlement demand expressly stated that the claimants would not release the insurer from liability, ACCC did not at that time have a realistic possibility to settle the claim against its insured.  Thus, because ACCC never received a settlement offer within its policy limits in which claimants agreed to release the insured, Georgia law did not expose ACCC to liability of the judgment against its insured as ACCC could not have settled the claims within the policy limits.     


By Thomas F. Segalla and Paul C. Steck


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