Georgia Supreme Court to Rule on Insurer's Bad Faith

The Supreme Court of Georgia has taken three certified questions from the U.S. Court of Appeals for the Eleventh Circuit on issues of insurance bad faith:

1. When an insurer has no notice of a lawsuit against its insured, does O.C.G.A. § 33-7-15 and a virtually identical insuring provision relieve the insurer of liability from a follow-on suit for bad faith?

2. If the notice provisions do not bar liability for a bad-faith claim, can an insured sue the insurer for bad faith when, after the insurer refused to settle but before judgment was entered against the insured, the insured lost coverage for failure to comply with a notice provision?

3. Does a party have the right to contest actual damages in a follow-on suit for bad faith if that party had no prior notice of or participation in the original suit?

GEICO failed to settle a time-limited claim against its insured, who was later served with a Summons and Complaint and failed to notify GEICO of the suit. The insured defaulted and was found liable for $2.9 million in damages. The insured went into bankruptcy, and the bankruptcy trustee sought bad-faith damages from GEICO. GEICO lost in the trial in the Middle District of Georgia and was found 70% liable for the insured's liability in the underlying suit.

The Eleventh Circuit, in an opinion by former Georgia Justice Britt Grant, certified the above three questions of Georgia law to the Supreme Court of Georgia to decide. GEICO is represented by a team headed by former Georgia Chief Justice Leah Ward Sears.

Oral argument is scheduled for February 3, 2021, and a decision should be published later in the spring or early summer.