What is a liability insurer’s duty to settle within policy limits in Georgia?
A liability insurer in Georgia owes its own policyholder a duty to handle settlement opportunities with appropriate care. When a claim can reasonably be resolved within the policy limits, the insurer cannot put its own financial interest ahead of the insured’s exposure to a larger judgment. This duty is at the heart of Georgia’s failure-to-settle law.
Equal consideration of the insured’s interests ¶
The Georgia Supreme Court addressed this duty in Southern General Insurance Co. v. Holt, 262 Ga. 267 (1992). The court explained that in deciding whether to settle a claim within the policy limits, an insurer must give equal consideration to the interests of its insured, affording the insured the same faithful consideration the insurer gives its own interests. The insurer cannot treat the policy limit as a ceiling on its own risk while ignoring that an excess verdict would fall on the policyholder personally.
That framing matters because the insurer and the insured can have divergent interests. The insurer’s maximum exposure is usually the policy limit, but the insured’s exposure includes everything above it. The duty to settle exists precisely to keep the insurer from gambling with money that is not its own.
When the duty is triggered ¶
The duty becomes significant when the facts point toward serious exposure. Circumstances that typically bring it into play include:
- Clear or strong liability against the insured.
- Damages that realistically exceed the available policy limits.
- A reasonable opportunity to settle within those limits, often presented through a time-limited demand.
In that setting, an insurer that unreasonably refuses a within-limits settlement offer risks being held responsible for a resulting excess judgment. Whether the refusal was unreasonable is generally a fact question, weighing what the insurer knew about liability and damages when it declined.
The bottom line ¶
In Georgia, a liability insurer must give its policyholder’s interests equal weight when a claim can be settled within policy limits, as the Holt decision requires. The duty guards the insured against the insurer’s temptation to risk an excess verdict, and an unreasonable refusal to accept a fair within-limits settlement can leave the insurer answering for the amount above the limits.
This article is for general educational and informational purposes only and is not legal advice. It does not create an attorney-client relationship, and Georgia law may change. For advice about a specific situation, consult a licensed Georgia personal injury attorney.