Bad Faith Insurance Claim Cannot Be Perfected After Suit Is Filed

This was an action to recover under a policy of fire insurance. On the eve of the expiration of the one-year suit limitation period, the insureds filed suit seeking recovery under the policy and seeking bad faith penalty and attorneys fees under Georgia’s Bad Faith statute, O.C.G.A. § 33-4-6. On the same day, the insureds demanded payment threatening bad faith if the claim was not paid within sixty days. The insurance company answered the lawsuit and investigated the claim. Ultimately, the company paid the claim more than sixty days after the demand was made. The company then moved for summary judgment on the bad faith claim, alleging that the demand had to be made more than sixty days before suit was filed. The Court of Appeals upheld the trial court’s judgment in favor of the company. The insureds violated the bad faith statute when they made their demand for bad faith on the same day that they filed suit for bad faith. Under the statute, the insureds were required to make the demand at least sixty days before filing the lawsuit. In addition, the demand was likely untimely since it was made less than 60 days after submitting the proof of loss. The policy and law required that the insureds make the demand no earlier than sixty days after submitting the proof of loss. The Court rejected the insureds’ claim that the suit limitation period placed an inequitable burden on them to prove their claim and comply with the bad faith statute within one-year following the date of loss. Since the bad faith statute is in the nature of a penalty, its terms would be strictly construed and would not be broadened to accommodate the insureds.

Counsel for Defendant: Tom Martin