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Georgia May Give More Teeth to Uninsured Motorist Insurance Law

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The Georgia House of Representatives last week passed a bill which, if passed by the Senate and signed by Gov. Deal, would incrementally strengthen the leverage of automobile insurance policyholders who make claims under their “UM” (uninsured / underinsured motorist coverages.

The sponsors of this legislation, House Bill 303, are Rep. Dusty Hightower (from my old hometown of Douglasville), Rep. Alex Atwood (of St. Simons Island, but who I knew at Douglas County High School eons ago), and my other friends, Rep. Ronnie Mabra of Fayetteville, Rep. Tom Weldon of Ringgold, Rep. Trey Kelley of Cedartown (where I tried my first case as a young prosecutor before he was born) and Rep. Stacey Evans of Smyrna. Hats off to them for their efforts.

UM coverage protects a policyholder who is injured due to the negligence of a person who has no liability insurance, or less liability insurance than the injured person has in UM coverage. Unless rejected in writing, new auto insurance policies in Georgia include UM coverage equal to the amount of liability coverage.

Where there are separate policies issued on each vehicle in a household, e.g., State Farm, then typically the UM coverages of all those vehicle can be “stacked” or added together. Where multiple vehicle are on the same policy, e.g., Allstate, the UM coverages cannot be stacked in Georgia policies, but might be if the policies were issued in some other states.

One problem in handling UM claims is that insurance companies too often take the approach that they have nothing to lose by denial, delay and stonewalling. While an insurer in a liability claim has a duty of good faith to its defendant policyholder, and may be held liable for bad faith refusal to settle for liability policy limits, there is no such deterrent to stonewalling in UM claims.

Now the only sanction for denial of a UM claim is a bad faith penalty of up to 25% plus attorney fees, which can only be recovered in a separate lawsuit after winning a judgment against the driver who was at fault. Until then, the UM carrier for the injured person can just sit back and thumb its nose at its policyholder with total impunity.

The proposed amendment to O.C.G.A § 33-7-11, if it becomes law, will make the following incremental changes:
• Damages of the UM policy limit or principal balance of the judgment against the uninsured motorist, whichever is less.
• Bad faith penalty or $25,000 or 25% of the damages, whichever is more.
• Post-judgment interest at the statutory rate from the date of judgment against the uninsured motorist.

The most significant change in this legislation is to impose a $25,000 penalty for bad faith denial. That might be enough to get the attention of some claims departments some of the time. However, having been around the block a few times, I am hopelessly cynical about the good faith of a lot of insurance companies.

The proposed language of the code section after amendment, if it is enacted in its current form, will be:

O.C.G.A § 33-7-11
“(j)(1) If the insurer shall refuse to pay any insured any loss covered by this Code section and the applicable automobile liability or motor vehicle liability policy within 60 days after a written demand has been made by the insured, the insurer shall be liable to the insured for:
(A) Damages equal to the applicable policy limits or the principal balance of the judgment rendered against the uninsured motorist in the original tort action, whichever amount is less;
(B) If the fact finder determines that the insurer’s refusal to pay the insured was made in bad faith, a penalty of $25,000.00 or 25 percent of the damages set forth in subparagraph (A) of this paragraph, whichever amount is greater; and
(C) Postjudgment interest on the damages provided in subparagraph (A) of this paragraph pursuant to Code Section 7-4-12 calculated from the date of entry of the judgment against the uninsured motorist in the original tort action.
(2) When an insured has prevailed on a claim pursuant to subparagraph (B) of paragraph 28 (1) of this subsection, the court in its discretion may hold the insurer liable to the insured for reasonable attorney’s fees and expenses of litigation for the prosecution of the case under this Code section that were incurred after the sixtieth day of the demand made by the insured.

(3) The amounts set forth in paragraph (1) of this subsection and the question of bad faith, shall be determined in a separate action filed by the insured against the insurer after a judgment has been rendered against the uninsured motorist in the original tort action.

(4) Payment of the amounts provided in paragraph (1) of this subsection shall fully discharge the insurer’s obligations under the judgment entered against the uninsured motorist in the original tort action. Payment of the damages provided in subparagraph (A) of paragraph (1) of this subsection shall reduce the principal amount of such judgment. Payment of the postjudgment interest provided in subparagraph (C) of paragraph (1) of this subsection shall reduce the postjudgment interest owed on such judgment.”

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Ken Shigley is past president of the State Bar of Georgia, chair-elect of the American Association for Justice Motor Vehicle Collision, Highway & Premises Liability Section, lead author of Georgia Law of Torts: Trial Preparation & Practice, and a double board certified civil trial attorney.