Last month’s decision, from the Georgia Court of Appeals in White v. Cheek, No. A21A0212 (Ga. Ct. App. May 21, 2021), let stand a plaintiff’s bad faith set-up of an insurer.  The terms of the plaintiff’s settlement offer were set out in a 22-page, single-spaced letter, with 16 footnotes thrown in for good measure.  The court concluded that, despite the insurer’s stated acceptance of the offer, a settlement was not in fact reached.  Thus, the table is now set for the pursuit of bad faith damages, and the insurer’s potential exposure being well-beyond the $25,000 policy limit that had been demanded.
 
A concurring judge reached the same conclusion, albeit for a different reason.  But, in doing so, the jurist called out the plaintiff’s tactic for what it was -- and made clear that something needs to be done about the situation.   

At issue in White v. Cheek was the defendant’s effort to enforce a settlement that it believed had been reached with the plaintiff.  As is often the case in these situations – but not always – the matter arose from an auto claim under a low-limits policy. 

Walter Cheek was a passenger in a vehicle driven by Stephen White.  White lost control of the vehicle, a collision ensued and Cheek sustained injuries.  White was insured by GEICO.   

Cheek’s counsel sent GEICO an offer of compromise letter governed by a Georgia statute --  O.C.G.A. § 9-11-67.1 -- that set out the required terms of a settlement offer, such as the time period for acceptance, monetary amount, party(ies) released, type of release and claims released.  The statute also sets out requirements governing acceptance and addresses a few other issues concerning settlements.

The concurring opinion noted that the letter was 22 single-spaced pages and had 16 footnotes. The opinion does not say much about all this verbiage, but notes, importantly, that it included the following: “All communications to this firm initiated by or on behalf of your insurance company or your insured relating to this offer of compromise must be made in writing. If a communication to this firm relating to this offer of compromise is initiated by or on behalf of your insurance company or your insured in any form other than writing, that will be a rejection of this offer of compromise. . . .”  The letter also stated: “[I]n the unlikely event that GEICO needs any additional information regarding liability or damages to complete its evaluation of this claim, please contact me in writing to let me know. I will do my best to answer any questions you could possibly have.”

Despite this requirement for a writing, GEICO responded to Cheek’s counsel with a voicemail:

“Hey this is … with GEICO insurance, I was calling regarding your client … Cheek. Just wanted to let you know that I was the new bodily injury adjuster, it looks like there is a question of liability on our insured driver … White. I am just calling to see if you guys will be able, if you would allow, recorded statements for Mr. Cheek. My phone number is … , claim number is … Thank you.”

With no response, five days later GEICO’s adjuster left a similar voice mail.

Cheek’s counsel sent a letter to GEICO acknowledging receipt of the voicemail and added: “Obviously, your call makes it clear that GEICO has chosen to reject Mr. Cheek’s offer of compromise.”

Less than a month later GEICO sent a letter accepting the offer and included a check for $25,000 payable to Cheek.  Cheek’s counsel responded that there was no settlement, as the offer had been rejected, and the check was returned

White filed a motion to enforce the settlement.  The trial court denied the motion, concluding that there was no settlement, as GEICO failed to comply with the condition that communications be in writing.

The Georgia appeals court, without much effort, affirmed.  The court concluded that, under the statute, GEICO was entitled to seek clarification of the offer.  However, Cheek’s counsel had been entitled to require that such request for clarification be in writing.  By leaving voicemails to request additional clarification, GEICO violated this requirement of the offer.  Therefore, no settlement had been reached.  Cheek can now proceed with a bad faith claim.

Chief Judge McFadden concurred in the result, but for a different reason, concluding that the voicemails were not a counter-offer.  GEICO was entitled to seek reasonable clarification of the offer and Cheek’s counsel could not treat certain types of attempts as counteroffers.    

However, the Chief Judge still concluded that GEICO did not accept the offer as “GEICO delivered a proposed release that differed from the offer’s requirements in certain respects. For example, Cheek’s offer provided that the release could not contain ‘denials of liability’ or ‘non-admissions of liability,’ but the proposed release delivered by GEICO stated that it ‘in no way prejudices the rights of [White] to deny liability’ and that it ‘is not an admission of liability by [White].’ Under this court’s decision in Pritchard v. Mendoza, 357 Ga. App. 283, 288-289 (850 SE2d 472) (2020), GEICO’s failure to deliver a fully compliant release meant that GEICO did not accept the offer.”

The matter before the court was resolved, but the Chief Judge wasn’t finished, taking the opportunity to address the abuse of bad faith set-ups by plaintiff’s counsel.  As he saw it, the onerous requirements, of the nearly two-dozen page offer letter, was “compelling, if not dispositive, evidence of a lack of intent to settle the claim.”  Thus, the offer was not made in good faith and “per force it is not bad faith to reject an offer made in bad faith.”

The law gives plaintiffs a lot of leeway when it comes to crafting their offers and the requirements for acceptance.  So the opportunity for a bad faith set-up exists.  So perhaps the way to address the problem is the one suggested by Chief Judge McFadden.  If the terms of the offer are so onerous, it is evidence that the plaintiff really had no intent to settle in the first place.  And “it is not bad faith to reject an offer made in bad faith.”