The Eleventh Circuit has ruled that an insurer’s misrepresentation unrelated to its denial of an insurance claim is insufficient to sustain a cause of action for bad faith failure to pay under O.C.G.A. § 33-4-6.
In Passmore v. Travelers Cas. & Sur. Co., No. 21-12423, 2022 WL 244081 (11th Cir. Jan. 27, 2022), the insured submitted a claim under her property policy seeking coverage for damage to her home after Hurricane Irma. The parties disputed whether the claim was covered, and in pre-suit communications, the insurer sent a letter informing the insured that, under the terms of her policy, any lawsuit against the insurer must be brought within one year after the occurrence. However, the policy did not contain such a provision.
The insured then sued for breach of contract and bad faith failure to pay pursuant to O.C.G.A. § 33-4-6 within a year, and the District Court granted the insurer summary judgment on the bad faith claim. On appeal, the insured argued that the insurer’s misrepresentation concerning the contractual statute of limitations was evidence of bad faith because the insurer implied that the insured’s lawsuit may be untimely, and she rushed to file when she could have waited to strengthen her claim.
The Eleventh Circuit disagreed. It began by noting that under O.C.G.A. § 33-4-6, the scope of bad faith is limited to “any frivolous and unfounded refusal in law or in fact to pay according to the terms of the policy.” Passmore, 2022 WL 244081, at *2. The Court concluded the alleged misrepresentation was not evidence of bad faith because the misrepresentation itself “did not constitute an absolute denial of liability or a refusal to make a bona fide effort to effect a settlement of the claim.” Id. (punctuation omitted).
In Passmore, the Eleventh Circuit has confirmed that the bar for demonstrating bad faith under O.C.G.A. § 33-4-6 remains high and must concern the insurer’s basis for denying the insurance claim. Thus, other allegations of bad faith, unrelated to the denial of the claim, will not sustain a cause of action under O.C.G.A. § 33-4-6.
If you have questions concerning this legal update, please contact Seslee Smith or Ryan Burke, who handle MMM’s insurance coverage and bad faith practice and regularly litigate these issues.