When a person dies because of someone else’s negligence in Georgia, the family’s recovery often depends on an insurance policy. The at-fault party may carry auto liability coverage, a homeowner’s policy, a commercial liability policy, or some other form of insurance. In many cases the insurer, rather than the individual defendant, is the party that actually evaluates the claim and pays a settlement. Insurance bad faith refers to conduct by an insurer that falls below the legal standard of fair dealing it owes in connection with a claim. Understanding what bad faith means under Georgia law helps explain why it can become an issue in wrongful death matters.
The Concept of Bad Faith in Georgia
Georgia recognizes a specific statutory penalty for an insurer’s bad faith refusal to pay a first-party claim. That penalty appears in O.C.G.A. § 33-4-6. Under this statute, when a loss covered by a policy of insurance is involved, the policyholder may make a demand for payment. If the insurer refuses to pay within 60 days after the demand, and a court or jury later finds that the refusal was in bad faith, the insurer can be held liable for more than the loss itself.
Georgia courts have defined bad faith under this statute narrowly. It generally means a frivolous and unfounded refusal to pay a claim. If the insurer has any reasonable ground to contest the claim, courts have held that the penalty does not apply. An insurer is entitled to investigate, to dispute liability, and to disagree about the value of a claim without exposing itself to a bad faith penalty, as long as its position has a reasonable basis. The penalty is reserved for refusals that lack a reasonable foundation.
Statutory Penalties Under O.C.G.A. § 33-4-6
When bad faith is established under the statute, the insurer can be liable for the amount of the loss plus an additional penalty. The statute sets that penalty at not more than 50 percent of the insurer’s liability for the loss, or $5,000, whichever is greater. The statute also allows recovery of reasonable attorney’s fees for prosecuting the action against the insurer. Georgia courts have treated this statute as the exclusive remedy for an insurer’s bad faith failure to pay a first-party claim, meaning a separate common law tort claim for that conduct generally is not available.
First-Party Versus Third-Party Contexts
The distinction between first-party and third-party claims matters in wrongful death cases. A first-party claim is one a policyholder brings against that person’s own insurer, such as a claim under uninsured motorist coverage after a fatal crash. O.C.G.A. § 33-4-6 addresses this first-party setting.
A third-party context arises when a family pursues the at-fault party’s liability insurer. Georgia law also recognizes a separate principle that governs how a liability insurer handles a settlement opportunity for its own insured. When a claimant offers to settle a wrongful death claim within the policy limits, the liability insurer owes a duty to give fair consideration to that offer and to act reasonably in protecting its insured from a judgment that exceeds the coverage. If an insurer unreasonably rejects a reasonable within-limits demand, and a verdict later exceeds the policy limits, the insured may have a claim against the insurer for the excess. That principle is distinct from the statutory first-party penalty, though both fall under the general label of bad faith.
How Bad Faith Can Affect a Wrongful Death Settlement
In a wrongful death matter, bad faith issues can shape the course of negotiations and the size of a recovery in several ways. When a liability insurer faces potential exposure beyond the policy limits, the prospect of an excess judgment and a possible bad faith claim by its own insured creates an incentive to evaluate a within-limits demand seriously. The existence of these legal rules influences how insurers respond to settlement offers.
In the first-party setting, such as a claim against the decedent’s own uninsured motorist carrier, the statutory penalty under O.C.G.A. § 33-4-6 provides a remedy when an insurer refuses a valid claim without a reasonable basis. The availability of the penalty, the additional percentage, and attorney’s fees can affect the economics of the dispute.
The legal standard for proving bad faith is demanding. A delay in payment, a dispute over value, or a denial that turns out to be wrong does not by itself establish bad faith. Georgia law requires conduct that was frivolous and unfounded, or, in the liability context, an unreasonable failure to settle. Whether a particular insurer’s conduct meets that standard depends on the specific facts and is a question that a court or jury resolves.
The Broader Picture
Insurance bad faith is a legal concept rather than a description of every disagreement with an insurer. Georgia has set a specific statutory framework for the first-party penalty and a body of case law for the liability insurer’s duty to settle. In wrongful death matters, these rules operate in the background of nearly every claim that depends on insurance coverage. They define the limits of what an insurer may do when evaluating a claim and provide consequences when an insurer crosses the line that Georgia law has drawn. The result is that bad faith principles can influence both whether a wrongful death claim settles and what the family ultimately recovers, even though a finding of bad faith itself is reached only in a narrow set of cases.
Disclaimer
This article is provided strictly for general educational and informational purposes. It is intended to explain how Georgia law works as a matter of public legal education, and it does not constitute legal advice, a legal opinion, or a recommendation about any particular course of action. Reading this article, or contacting the website on which it appears, does not create an attorney-client relationship between the reader and any law firm, attorney, or author.
The law changes over time. Statutes, regulations, court rules, and judicial decisions discussed here may have been amended, repealed, superseded, or reinterpreted after the date of publication, and citations to specific code sections or cases reflect the law only as it was understood when this article was written. The application of any legal principle also depends heavily on the specific facts and circumstances of an individual matter, and outcomes vary from case to case.
For these reasons, no one should rely on this article as a substitute for advice from a licensed Georgia attorney who can review the particular facts involved. The author and publisher make no warranty, express or implied, regarding the accuracy, completeness, timeliness, or applicability of the information provided, and disclaim any liability for any action taken or not taken based on this content.