Recently, the Eleventh Circuit, applying Georgia law, reaffirmed that an insurer cannot be liable for negligently failing to settle a case unless the settlement demand provides protection to the insured against all potential claims, even those which have not been asserted.
Linthicum v. Mendakota Insurance Company, No. 16-16593 (11th Cir. May 3, 2017) arises from truly tragic circumstances. While driving intoxicated, Bobby James Hopkins, II, struck and killed the Linthicums’ 11 year old son. Hopkins fled the scene, and attempted to have his car repaired. The child lived a short time before dying.
The trial court granted summary judgment to Insurer, and the Eleventh Circuit upheld that decision. The court reasoned that the settlement demand was ineffective to trigger bad faith liability because the demand would settle only some of the claims (the wrongful death) claims against Hopkins, leaving Hopkins potentially exposed to other liability in the form of a claim by the non-existent estate of the Linthicums’ deceased son. The Linthicums argued that the absence of any claim asserted by an estate, as well as the non-existence of such an estate, meant that the timed settlement demand would cover all existing, asserted liability against Hopkins. Therefore, reasoned the Linthicums, Insurer could be liable for negligently failing to accept that demand. The courts rejected this argument, noting that Georgia law provided a method of recovery for the estate, should an estate be opened.
The Linthicum holding reaffirms that under Georgia law a carrier acts negligently in refusing to settle a claim only when the settlement demand effects a complete release of liability against the insured party. Because the Linthicums’ demand left Hopkins potentially exposed to future liability, Insurer could not be liable for failing to accept the demand.