In two recent opinions, Chief Judge McFadden of the Georgia Court of Appeals lamented the wave of “onerous” Holt demands sweeping the state, suggesting that the General Assembly should protect insurers from them or that Georgia courts should dismiss bad faith claims predicated upon them.
In tort cases where damages grossly exceed policy limits, the insured’s liability is clear and an insurer is likely to accept a policy limits demand. Claimants’ counsel has a perverse incentive to make a demand so complicated that the insurer, despite its intentions, may fail to accept it, setting up a bad faith claim for extra-contractual damages. Such demands often include a laundry list of technical requisites to acceptance, such as the drafting of a release with numerous terms and conditions. Insurers, even represented by seasoned counsel, have at times failed to properly accept such demands.
On March 11, 2021, the Court of Appeals addressed such a scenario in Wright v. Nelson. After the insurer purported to unequivocally accept such a demand, it later sent a draft release unsatisfactory to the claimants’ counsel. The parties disputed whether the insurer created an enforceable agreement by accepting the demand, or if a conforming release was a requisite to acceptance. The Court of Appeals sided with the insurer, holding the insurer’s acceptance created an “enforceable settlement agreement” and a non-conforming release was, if anything, a breach of the settlement agreement, not a rejection of the offer.
Judge McFadden’s concurring opinion called attention to the “unintended consequences” of Holt, including the perverse incentive claimants’ attorneys have to draft onerous demands. Judge McFadden called on the General Assembly to enact legislation protecting insurers, such as creation of a safe harbor.
On May 21, 2021, the Georgia Court of Appeals addressed a similar scenario in White v. Cheek. This time, the Court of Appeals sided with the claimant in finding under the facts of the case that no enforceable settlement agreement existed.
However, Judge McFadden again wrote separately to highlight his frustration with onerous Holt demands and to suggest that such demands cannot be the basis for a viable bad faith claim. He wrote that the onerous nature of the Holt demand at issue “is compelling, if not dispositive, evidence of a lack of intent to settle the claim and so of bad faith. Per force it is not bad faith to reject an offer made in bad faith.” Such a finding, if adopted by Georgia courts generally, may put an end to the tide of onerous Holt demands in this state. Any insurer facing a bad faith claim predicated upon such an onerous demand should consider Judge McFadden’s reasoning.
If you would like to speak to an attorney about a Holt demand, a bad faith claim, or other matter, or if you have questions about the content of this update, please contact Seslee Smith, Ryan Burke, or a member of our Litigation group.