What To Expect When You're Expecting ' An Uncooperative Insured

• Published date: 20 August 2021
• Subject Matter: Insurance, Litigation, Mediation & Arbitration, Insurance Laws and Products, Trials & Appeals & Compensation
• Law Firm: Drew Eckl & Farnham, LLP
• Author: Mr Marshall Sims

For an insurer, fully evaluating a time limited demand in an automobile negligence action can be difficult and uncertain. A comprehensive investigation requires skillful work; often involving review of complex medical records and interviews of fact witnesses. The pressure of a time limited demand is coupled with the duties imposed by Georgia law requiring insurers to act in "good faith" when faced with a valid and reasonable offer, within policy limits, to settle claims against its insured. However, the duties imposed are not a one-way street. Insurance policies impose duties on both parties to the contact. The duties of the insured that are most commonly examined are the insured's requirement to provide notice to the insurer and the insured's duty to fully cooperate with the insurer in the investigation and defense of a plaintiff's claim.

What happens when both parties allegedly breach a duty imposed by their insurance contract and a subsequent judgment is entered against the insured? Does a breach of the insured which would give the insurer cause to deny coverage relieve the insurer of potential bad faith exposure? In the recent Supreme Court decision, GEICO Indem. Co. v. Whiteside, No. S21Q0227, 2021 WL 1521527 (Ga. Apr. 19, 2021), the answer may be no.

In Whiteside, a permissive user of the insured's vehicle caused an accident with a bicyclist, necessitating extensive emergency treatment and hospitalization of the bicyclist. It was undisputedly the fault of the insured driver, and the insurer notified the driver that, "based on the evidence we have gathered, we are responsible for the accident." Importantly to the Court, the insurer also failed to inform the driver, who was not the named insured, of her duty to cooperate, to forward any accident-related legal documents, or even to notify the insurer if she was subsequently sued.

The insurer was sent a time limited demand for the $30,000 policy limits, supported by the bicyclist's $15,000 in medical bills. The insurer responded with a counteroffer and the bicyclist's attorney never responded to the counteroffer. The insurer continued in its efforts to contact the bicyclist's attorney to continue negotiations. Unbeknownst to the insurer, the bicyclist's attorney filed suit and server the permissive use driver. Neither the driver nor the bicyclist's attorney ever noticed the insurer of the suit.

The driver never filed an answer and the bicyclist's attorney moved for a default judgment. Default was...