Combating Claims Asserted Under the Unfair Claims Settlement Practices Act
By: Kristen Vigilant
In first-party insurance coverage lawsuits across Georgia, insureds are increasingly asserting one particular extracontractual claim in addition to their breach of contract claims: violation of the Unfair Claims Settlement Practices Act, O.C.G.A. § 33-6-30 et seq. Likewise, insureds’ pre-suit demands pursuant to O.C.G.A. § 33-4-6, or bad faith demands, are increasingly including references to this Act. Despite the Act’s uptick in popularity, Georgia law is clear: Insureds’ claims against their insurers pursuant to the Act fail as a matter of law because it does not create a private cause of action.
The Act contains two articles: Article I regulates insurance trade practices and Article II sets forth standards for investigating claims arising under insurance policies. See O.C.G.A. § 33 6-1, § 33 6 31. The Act makes clear the Georgia General Assembly assigned exclusive authority to enforce and regulate the Act to the Insurance Commissioner.
Article I gives the right to enforce the Act to the Insurance Commissioner. Specifically, O.C.G.A. § 33-6-6 states, “(a) The Commissioner shall have the power to examine and investigate into the affairs of every person engaged in the business of insurance.” O.C.G.A. § 33-6-13(d) instructs the Commissioner to act “[w]henever the Commissioner has knowledge of any violation of this code section.” Moreover, O.C.G.A. § 33 6 14 provides, “(a) The powers vested in the Commissioner by this article shall be in addition to any other powers.”
Article II specifically refers to Article I to discuss the Commissioner’s powers. Under O.C.G.A. § 33-6-35(b), “[t]he provisions of Code Sections 33-6-7 through 33-6-11 . . . and other matters in connection with violations of Article I of this chapter shall be applicable to violations of this article.” Further, O.C.G.A. § 33 6 36 provides, “The Commissioner may, in accordance with the procedures set forth in Code Section 33 2 9, promulgate rules and regulations.”
Critically, Article II expressly states, “Nothing contained in this article shall be construed to create or imply a private cause of action for a violation of this article.” O.C.G.A. § 33-6-37. In dereliction of this plain language, insureds are frequently asserting claims against their insurers under the Act in hopes of expanding the potential scope of recovery in lawsuits.
Courts have repeatedly demonstrated willingness to dismiss claims asserted under the Act as a matter of law. In two recent cases, the U.S. District Court for the Northern District of Georgia dismissed insureds’ claims for violation of the Act because it does not create a private cause of action. Anderson v. State Farm Fire & Cas. Co., 20-cv-00246-LMM, Doc. 69, Order Partially Granting Motion for Judgment on the Pleadings (N.D. Ga. Jan. 20, 2021); Valles v. State Farm Fire & Cas. Co., 19-cv-5593-MLB, Doc. 57, Order Granting Motion for Judgment on the Pleadings (N.D. Ga. Feb. 1, 2021). The Anderson court also rejected the insured’s argument that the Act impliedly created a private cause of action, stating that “[t]he Unfair Claims Settlement Practices Act is not a law that creates a duty between parties” and that the Act “fails to provide a cause of action in express terms.” Anderson, 20-cv-00246-LMM, Doc. 69 at 8 (citing Elder v. State Farm Fire & Cas. Co., No. 1:19-cv-5077-SDG, 2020 WL 4530315, at *3 (N.D. Ga. May 15, 2020) (“This chapter of the Georgia insurance code does not provide a private cause of action for money damages.”)).
In a more recent trend, some plaintiff attorneys have attempted to avoid litigating in federal court by asserting claims pursuant to the Act against insurance adjusters in addition to breach of contract claims against their insurers. This tactic likewise has been unsuccessful.
In Elder, the insured (a Georgia citizen) filed a lawsuit in state court against his insurer (a citizen of another state) and a claims adjuster employed by the insurer (a Georgia citizen), which the defendants removed to federal court. Elder, 2020 WL 4530315, at *1 (N.D. Ga. May 15, 2020). The insured asserted claims for breach of contract and attorneys’ fees against his insurer. Id. In an effort to defeat diversity of citizenship among the parties and remand the case from federal to state court, the insured also asserted a claim for violation of the Act against the adjuster in his individual capacity. See id. The district court held the insured “lack[ed] a private right of action” against the adjuster and denied the insured’s motion to remand the case back to state court, finding that the insurer “demonstrate[ed] that there [was] no possibility a state court could find the Complaint state[d] an action against [the adjuster].” Id. at *4. The court dismissed the claim against the adjuster, thus dismissing him from the case. Id.
Despite the recent increase of insureds asserting claims for violation of the Act against insurers and their adjusters, courts are routinely rejecting such claims as a matter of law. Accordingly, insurers should be mindful of their statutory obligations to follow the Act, but the Act does not create a private right of action for insureds to use in first-party insurance coverage disputes.
Attorney Contact Info
Kristen Vigilant
kristen.vigilant@swiftcurrie.com
470.639.4854