Lack of Notice No Excuse for Failure to Settle

An insurer can no longer claim its lack of notice of a lawsuit against its insured excuses it for failing to settle the suit after the Georgia Supreme Court’s recent decision in GEICO Indemnity Co. v. Whiteside, Case No. S21Q0227 (Ga. April 19, 2021).

In Whiteside, the Georgia Supreme Court held that an insurer’s bad faith failure to settle a claim may result in liability for judgments in excess of the insured’s policy, even in cases where the insured also breaches its contractual duty to notify the insurer of a suit brought against it.

The facts of the case arose from a 2012 accident in which a permissive driver of a vehicle insured by GEICO struck and injured a bicyclist.

GEICO subsequently informed the driver that she was covered by the vehicle’s owner’s policy, but failed to ask her to notify GEICO of any accident-related legal documents or inform her of her obligation under the policy to notify GEICO if she was sued.

The injured bicyclist’s lawyer then demanded that GEICO settle by paying the $30,000 limit of that policy. GEICO refused, counteroffering $12,409. The bicyclist’s attorney never responded to this offer.

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