In an important emerging trend for insurers, the Northern District of Georgia recently dismissed a claim for bad faith failure to settle as a matter of law, relying upon a no-action provision in the governing policy. The opinion follows new authority from the Eleventh Circuit Court of Appeals.
In Am. Fam. Ins. Co. v. Almassud, No. 1:16-CV-4023 (N.D. Ga. May 17, 2021), the insured sought to assert a claim for bad faith failure to settle, arguing that the underlying case should have settled pre-suit, whereas it was ultimately settled by the insurer after years of litigation at the onset of a second trial.
However, the Northern District disallowed the insured’s bad faith claim, finding it futile as a matter of law. Citing Game Truck Georgia, LLC v. Atl. Specialty Ins. Co., 2021 WL 868506 (11th Cir. Mar. 9, 2021), the court noted that insurance policies “may cabin the insurer’s liability in tort.” Almassud, ECF Dkt. No. 379, p. 5. And, where a no-action provision has not been satisfied, “the failure-to-settle claim [cannot] proceed.” Id., p. 6.
In Almassud, the policy contained a no-action provision, prohibiting the insured from bringing suit against the insurer until the entry of either a final judgment or a “written agreement of [the insured], the claimant, and [the insurer].” The court determined that the insured could never satisfy the no-action clause because although the underlying case settled by written agreement, the insured did not sign it. Indeed, he expressly did not consent to it. Therefore, his failure to settle the claim could not proceed.
Following Game Truck and Almassud, insurers facing claims for bad faith failure to settle should carefully review the governing policy’s no-action clause to determine whether the insured has satisfied all conditions precedent to bringing suit.
Seslee Smith and Ryan Burke represent the insurer in Almassud. If you have questions about the court’s opinion in that case or if you would like assistance in evaluating an insured’s allegations of bad faith and potential defenses thereto, please reach out to them or a member of the MMM Litigation group.