Insurance policy limit demands for personal injury claims (commonly known as Holt demands) remain a thorny issue in Georgia. “Set-up” Holt demands — complete with vague and confusing conditions and shady releases — remain commonplace in hopes that unwary insurers “botch” their responses and become ensnared in multimillion-dollar bad faith litigation.
To better navigate this needlessly complex area of law, insurers should have a good grasp on the current legal landscape surrounding the Holt rule, how intended “fixes” may not prevent bad-faith litigation, and best practices and considerations that are available when a Holt demand comes in the door.
What is Holt?
Decades ago, the Georgia Supreme Court announced a rule in Southern General Insurance Company v. Holt that if an insurer refuses in bad faith to settle a claim against its insured for an amount within the policy limits, it may be liable for the full amount of any excess judgment against the insured.
The policy underlying the Holt rule is simple: To encourage insurers to use settlement to eliminate their insured’s liability rather than rolling the dice in litigation. Although an insurer’s good (or bad) faith in responding to a settlement demand remains a jury question, an insurer’s liability under Holt may be implicated when:
(1) The settlement demand falls within the insured’s policy limits.
(2) The claimant’s special damages are greater than the policy limits.
(3) The insured is “clearly liable.”
In the three decades following Holt, the bad-faith standard has been watered down and weaponized. Georgia courts have effectively reduced bad faith to a mere negligence standard: “whether the insurance company acted reasonably in responding to a settlement offer.” Cotton States Mut. Ins. Co. v. Brightman.
In other words, even if an insurer has no sinister motives and intends to pay the policy limits, it can be threatened with an expensive Holt suit if the insurer’s response to a settlement demand was not “reasonable.” See, e.g., GEICO Indem. Co. v. Whiteside.
Plaintiffs’ attorneys have weaponized this watered-down standard because insurers often represent the only possible collectible source of recovery, and many insured drivers are only insured up to the state’s minimum requirements: $25,000 per claim and $50,000 per occurrence for bodily injury, and $25,000 for property damage.
Thus, instead of furthering the “sound public policy of encouraging settlements,” the Holt rule has had the opposite effect as lawyers try to multiply litigation by baiting a rejection with conflicting, confusing or noncompliant Holt demands to tee up exposure many times greater than an insurer’s applicable coverage limits.
Why Holt is still a problem
The upside-down world created under Holt has not gone without notice, prompting judicial and legislative “fixes.” Judge Christopher J. McFadden used a concurring opinion to voice his “grave concerns” about the widespread use of Holt demands containing “onerous” requirements. White v. Cheek.
Separately, the General Assembly enacted revisions to the statute governing time-limited settlement demands for motor vehicle injuries, that attempted to level the playing field and provide clarity on what would constitute a valid Holt demand.
And in a rare win in Holt jurisprudence, Alston & Bird’s insurance defense team secured a defense opinion in First Acceptance Insurance Co. of Georgia v. Hughes, where the Georgia Supreme Court held that insurers have no duty to settle a claim until they first receive a valid offer to settle.
Despite these attempted fixes, serious practical and pragmatic considerations with Holt remain, and little has been done to remove the incentive to tee up “refusals” and roll the dice on bad-faith litigation against the insurer. Recent decisions — like Simmons v. Bates, 366 Ga. App. 410 (2023), Pierce v. Banks, 2023 WL 4227923 (June 28, 2023), and Yim v. Carr, 349 Ga. App. 892 (2019) — demonstrate how even problematic Holt demands can be leveraged to create exposure.
All three opinions dealt with appeals from motions to enforce settlements, where the insurers attempted to accept purported Holt demands. Yet, because the insurers did not explicitly follow each of the demands’ enumerated conditions, there was no meeting of the minds and no settlement.
The panels remained resolute even in the face of the demands’ draconian requirements, such as a demand that was 39 pages long and with 30 footnotes (Simmons) or where the settlement was rejected because the check left off a comma in “Brooks Injury Law, LLC” (Pierce). The Yim and Pierce courts also rejected pragmatic considerations in favor of an enforceable agreement, such as when an insurer accepted the material conditions of the demand (Pierce) or raised concerns about a potentially noncompliant release (Yim).
Of course, “it is not bad faith to reject an offer made in bad faith.” White, 360 Ga. App. at 567 (McFadden, J., concurring). But these decisions are clear that notions of good faith (or the alleged lack thereof) did not matter in deciding whether the parties struck a binding settlement.
With that reasoning, plaintiffs’ firms will argue that they may continue dressing up onerous demands under Holt and putting insurance companies in the untenable position of trying to comply with a demand (no matter how onerous) or face years of litigation with the threat of a judgment many times greater than policy limits.
Considerations for insurers
It is clear that vague, confusing and noncompliant Holt demands will continue to be used to ensnare insurers in bad faith litigation, but what can insurers do to navigate this complex, often hostile, legal environment? For starters, insurers should consider:
- Formalizing procedures and conducting trainings so that teams can spot and escalate possible Holt demands timely and effectively to in-house counsel as necessary. For example, O.C.G.A. § 9-11-67.1 applies only to settlement demands “prepared by or with the assistance of an attorney,” and claimants will often send letters that appear to be prepared by individuals to disguise Holt demands. Buzzwords (“time-limited demand”), citations to Georgia law (Holt, Brightman and O.C.G.A. § 9-11-67.1) and language about the insurer’s and insured’s interests often signal a Holt demand.
- Escalating a potential Holt demand to in-house counsel to assess the demand and the insurer’s response, while minimizing communications with claimant’s counsel. Even a polite acknowledgement of receipt of a Holt demand by an insurer can be misconstrued to tee up a purported rejection of a Holt demand.
- Ensuring that Holt demands are interpreted literally and, if accepted, strictly followed. Unconditionally accepting and then failing to meet every single condition and stipulation will be deemed a rejection. Plaintiffs’ firms are looking for any basis to claim their offer has been denied so that they may pursue bad-faith litigation. Deadlines for settlements are often masterfully crafted to include weekends and holidays, producing confusion about the exact expiration date.
- Proposing and backing legislation amending O.C.G.A. § 9-11-67.1 to provide for a workable procedure that better accomplishes the policy goals stated in Holt. One option is a safe harbor that an insurer satisfies any Holt duty when it places the policy limits in escrow (or files a disinterested interpleader) where the parties with a stake in the policy funds are the insured and the plaintiff.
Insurers have a number of options in responding to a Holt demand, but it is important that they are proactive so they can effectively assess their options. Being informed about the current legal landscape can help make that task a bit easier.
Jenny Hergenrother is a partner with Alston & Bird specializing in products liability and complex litigation.
Alan Pryor is a senior associate with the firm and a member of its food and beverage and insurance class-action teams.
John Lex Kenerly is an associate with Alston & Bird’s litigation and trial practice group.
Andy Tuck is a partner with the firm and a patent-barred commercial litigator focusing on international arbitration and federal litigation.
Opinions expressed here are the authors’ own.
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