Insurer Fell for “Bad Faith Set Up” by Partially Accepting Settlement Offer
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Posted on March 17, 2022 by Barry Zalma
When a plaintiff has serious injuries and the defendant has limited insurance limits the plaintiffs’ lawyer will issue a settlement offer with stringent conditions that must be accepted as demanded or the plaintiff will claim that the insurer acted in bad faith. In Ligon v. Hu, No. A21A1296, Court of Appeals of Georgia, Fifth Division (March 11, 2022) Hu’s insurer sent a check as demanded but failed to fulfill all of the conditions set by plaintiff’s counsel’s offer to settle. After the money was sent back and Ligon sued, Hu sucessfuly moved the trial court to enforce the settlement agreement. Ligon appealed claiming that there was no agreement.
FACTS
When an appellate court reviews an order on a motion to enforce a settlement agreement, it views the evidence in the light most favorable to the nonmoving party.
The evidence shows that Robert and Ami Ligon sent a written settlement offer to American Standard Insurance Company of Ohio, alleging that Robert Ligon was injured when he was struck by a car driven by Li Na Hu, American Standard’s insured. The offer was made pursuant to former OCGA § 9-11-67.1, which governs settlement offers for claims of injury arising from the use of a motor vehicle, and it contained the five material terms required by the version of the statute that was in effect at the time of the offer.
The offer also provided that certain acts were material to acceptance of the offer “and must be completed without variance of any sort to form a binding contract[.]” Those mandatory acts included payment of $100,000 and delivery of a release that fully complied with every term and condition of the offer. With regard to the release, the offer required that there be specific reference in the release to an affidavit of Hu swearing that there was no other insurance coverage available; mandated that the release only include signature lines for the Ligons and provided that the inclusion of a signature line for anyone else “for any purpose at all will be a counteroffer and rejection of this offer;” and required that there be no language in the release indicating that it was a contract under seal.
American Family delivered a $100,000 check, a release, and other purported acceptance documents to the Ligons. Thereafter, the Ligons returned the $100,000 check and documents to American Family, and also sent a letter to American Family stating that it had not complied with all the terms of the offer and had therefore rejected the offer.
Robert Ligon subsequently filed a complaint against Hu, seeking damages for injuries allegedly caused by her negligence in hitting him with her car while he was on a bicycle. Hu answered the complaint and also filed a motion to enforce a settlement agreement purportedly created by American Family’s acceptance of the Ligons’ offer to settle. The trial court entered an order granting Hu’s motion to enforce a settlement agreement and dismissing Robert Ligon’s action. He appeals from that order.
PURPORTED SETTLEMENT AGREEMENT.
Ligon contends that the trial court erred in granting Hu’s motion to enforce a settlement agreement and dismissing his action.
As part of that existing law, settlement agreements must meet the same requirements of formation and enforceability as other contracts. That existing law also includes the fundamental principle that an offeror is the master of his or her offer and free to set the terms thereof.
Thus, an offer may call for acceptance by the doing of some act, as opposed to a mere oral or written statement of acceptance of certain terms. An acceptance must comply with the requirements of the offer as to the performance to be rendered. An offeree’s failure to comply with the precise terms of an offer is generally fatal to the formation of a valid contract.
In this case, the offer to settle expressly provided that certain terms of the offer were material requirements of acceptance and that the failure to comply with those requirements would constitute a rejection of the offer. American Family failed to comply with the precise terms of the offer by failing to deliver a release that fully complied with the terms of the offer. Among other things, the release did not comply with the offer requirement that it include specific reference to an affidavit stating that there was no other insurance coverage available and the release included a signature line for someone other than the Ligons for the purpose of notarizing the document, despite the offer expressly stating that “inclusion of a place on the release for a signature of anyone other than [the Ligons] for any purpose at all will be a counteroffer and rejection.”
Since the release in this case was not identical with the terms of the offer American Family violated the express terms of the offer and the parties did not reach a binding settlement agreement. Consequently, the trial court erred in granting Hu’s motion to enforce a settlement agreement.
ZALMA OPINION
An insurer faced with a policy limits demand that it believes would be a fair and reasonable settlement on behalf of its insured must either accept the offer as made or work with the plaintiffs’ counsel to reach an agreement as to the terms and conditions of the release. To just send a check without a declaration from Hu that he had no other insurance, among other things, was not a full acceptance and there was no enforceable agreement. The Georgia Court of Appeals had no choice but to reverse the trial court since there was obviously no agreement. American Family fell into the bad faith set up trap and can only hope, at trial, the judgment is equal to or less than the $100,000 policy limit.
(c) 2022 Barry Zalma & ClaimSchool, Inc.
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and [email protected].
Over the last 54 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created a library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.
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Southern Insurance Company Of Virginia v. Justin D. Mitchell, et al., No. 3:24-cv-00198, United States District Court, M.D. Tennessee, Nashville Division (October 10, 2024) Southern Insurance Company of Virginia sought a declaratory judgment regarding its duty to defend William Mitchell in a wrongful death case pending in California state court.
KEY POINTS
1. Motion for Judgment on the Pleadings: The Plaintiff moved for judgment on the pleadings, which was granted in part and denied in part.
2. Duty to Defend: The court found that the Plaintiff has no duty to defend William Mitchell in the California case due to a specific exclusion in the insurance policy.
3. Duty to Indemnify: The court could not determine at this stage whether the Plaintiff had a duty to ...
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Post 5119
Default of Settlement Agreement Reduced to Judgment
In Government Employees Insurance Company, Geico Indemnity Company, Geico General Insurance Company, and Geico Casualty Company v. Dominic Emeka Onyema, M.D., DEO Medical Services, P.C., and Healthwise Medical Associates, P.C., No. 24-CV-5287 (PKC) (JAM), United States District Court, E.D. New York (July 9, 2025)
Plaintiffs Government Employees Insurance Company and other GEICO companies (“GEICO”) sued Defendants Dominic Emeka Onyema, M.D. (“Onyema”), et al (collectively, “Defendants”) alleging breach of a settlement agreement entered into by the parties to resolve a previous, fraud-related lawsuit (the “Settlement Agreement”). GEICO moved the court for default judgment against ...
ZIFL – Volume 29, Issue 14
Post 5118
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You can read the full 20 page issue of the July 15, 2025 issue at https://lnkd.in/giaSdH29
THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL
This issue contains the following articles about insurance fraud:
The Historical Basis of Punitive Damages
It is axiomatic that when a claim is denied for fraud that the fraudster will sue for breach of contract and the tort of bad faith and seek punitive damages.
The award of punitive-type damages was common in early legal systems and was mentioned in religious law as early as the Book of Exodus. Punitive-type damages were provided for in Babylonian law nearly 4000 years ago in the Code of Hammurabi.
You can read this article and the full 20 page issue of the July 15, 2025 issue at https://zalma.com/blog/wp-content/uploads/2025/07/ZIFL-07-15-2025.pdf
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...
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In Richard Bernier v. State Farm Mutual Automobile Insurance Company, No. 4:24-cv-00002-GMS, USDC, D. Alaska (May 28, 2025) Richard Bernier made claim under the underinsured motorist (UIM) coverage provided in his State Farm policy, was not satisfied with State Farm's offer and sued. Both parties tried to win by filing motions for summary judgment.
FACTS
Bernier was involved in an auto accident on November 18, 2020, and sought the maximum available UIM coverage under his policy, which was $50,000. State Farm initially offered him $31,342.36, which did not include prejudgment interest or attorney fees.
Prior to trial Bernier had three remaining claims against State Farm:
1. negligent and reckless claims handling;
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3. award of punitive damages.
Both Bernier and State Farm dispositive motions before ...
ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
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Health Care Fraud Trial Results in Murder for Hire of Witness
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This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.
In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:
Insurance Coverage Dispute:
Travelers issued a Commercial General Liability ...