The Georgia Court of Appeals recently issued three decisions answering the question of where the line lies between an acceptance and a counteroffer. All three decisions are important for insurers, because they show that courts should look to the “real world” context of settlement negotiations, rather than impractically holding parties to every minute detail in a settlement offer.
In the most recent case of Hansen v. Doan, the Court of Appeals affirmed a trial court’s decision to enforce a settlement agreement against the plaintiff in a motorcycle injury case. The plaintiff, Lawrence Hansen was riding his motorcycle on June 22, 2011 when he was struck by a vehicle driven by defendant Laura Doan. Around two weeks later, plaintiff’s attorney sent a letter of representation to defendant’s insurer, Liberty Mutual, and stated to the insurer that Mr. Hansen’s injuries were serious.
Less than a week later, Liberty Mutual’s claims specialist informed plaintiff’s counsel by telephone that there was only $25,000 in liability coverage, and that given Mr. Hansen’s extensive injuries, she would need “very few” medical documents before she could tender the limits of Ms. Doan’s policy.
On July 11, 2011, plaintiff’s counsel sent Liberty Mutual a time-limited settlement demand letter, asking for the policy limits in exchange for the plaintiff signing a limited release pursuant to O.C.G.A. § 33-24-41.1. The demand letter also contained the following language: “To be accepted, the O.C.G.A. § 33-24-41.1 Limited Release in favor of [defendant] and Liberty Mutual . . . only (with no indemnity language) and the $25,000 check . . . must be received within twelve days of you receiving this demand. The offer is automatically withdrawn if these conditions are not complied with within the time limit.”
Ten days later, Liberty Mutual’s claims specialist sent plaintiff’s counsel a letter requesting an interview of the plaintiff and a wage authorization form. The following day, she had a recorded telephone conversation with plaintiff’s counsel. During the call, the claims specialist told plaintiff’s counsel that “we have a $25,000 limit and I believe was you sent me is obviously sufficient enough for me to go ahead and pay that limit . . . . I’m looking at your letter here and you wanted a limited release which is . . . obviously not a problem. Do you have one that you want to use a specific release?” Plaintiff’s counsel informed her that he did not have a particular release he wanted to use. As the claims specialist looked for a limited release to use, Plaintiff’s counsel informed her that someone sat down in his office and abruptly ended the conversation.
Later that day, the claims specialist faxed a letter to plaintiff’s counsel confirming their conversation and stating “we are agreeing to pay our policy limits of $25,000 to your client. We will also agree to a limited release. You indicated that you did not have a specific release you wanted to use. I am attaching the only limited release that I have which we can tailor to fit your needs. If you would please look it over and make your suggestions or any changes you wish to make then we can iron out the details . . . I would like to iron out the details of the settlement today so we can meet your deadlines unless you will agree to let us mail the check to your office.”
After several unsuccessful attempts to reach plaintiff’s counsel, the claims specialist then received a letter saying that the settlement offer had been automatically withdrawn because the insurer did not accept the offer within the specified time and because the limited liability release contained indemnification language. Plaintiff then filed a lawsuit against the defendant, and the insurer moved to enforce the settlement agreement.
The question before the court was whether the insurer’s delivery of a release that contained indemnification language, contrary to the plaintiff’s settlement demand, constituted an acceptance of the settlement offer. The court looked closely at the context of the settlement negotiations which occurred between the insurer and the plaintiff’s attorney. First, the court considered the claims specialist’s request for an interview and additional information about the plaintiff’s medical bills and lost wages to be merely a request for confirmation rather than a counteroffer. The court also determined that the evidence showed the claims specialist intended to provide a release to plaintiff’s counsel that allowed him to make changes as he felt necessary. Overall, it was the court’s opinion that the insurer performed the acts necessary to accept the plaintiff’s offer by tendering the policy limits and by providing the plaintiff’s attorney with a release with the clear understanding that the attorney could tailor the release to his demand.
This opinion and the decisions in Arnold v. Neal and Turner v. Williamson are helpful to insurers, as it shows that courts have some flexibility on the question of “the meeting of the minds.” As long as the insurer makes it clear that they are accepting the essential elements of the plaintiff’s offer, the court is unlikely to treat any minor variance from the settlement offer as a counteroffer. Hopefully, these opinions will result in fewer bad faith claims against insurers who genuinely want to settle with plaintiffs.
Please let us know if we can answer any questions or if you would like a copy of these opinions.
David Sawyer and Michael Rust