How much is the bad-faith penalty against a Georgia insurer worth?

· 3 min read

When a Georgia insurer is found to have refused a first-party claim in bad faith, the statutory penalty is calculated as a percentage of the loss, with a fixed floor. O.C.G.A. § 33-4-6 sets the formula, and it is designed to make an unjustified denial more expensive than simply paying the claim.

The penalty formula

Under § 33-4-6, an insurer that is liable for a bad-faith refusal must pay, in addition to the covered loss itself, a penalty of not more than 50 percent of the insurer’s liability for the loss, or $5,000, whichever is greater. In other words, the bad-faith penalty is calculated against the amount the insurer owed, capped at half that amount, but never less than the $5,000 statutory minimum.

The penalty sits on top of the underlying benefit. The policyholder still recovers the covered loss, and the penalty is an extra sum layered onto it. That structure is what gives the statute teeth: an insurer cannot treat the worst-case outcome of a wrongful denial as merely paying what it owed all along.

What drives the number

The size of the penalty in any given case depends on a few moving parts:

  • The amount of the covered loss, since the percentage portion is measured against the insurer’s liability for that loss.
  • Whether 50 percent of the loss exceeds $5,000, because the statute pays the greater of the two figures.
  • A finding of bad faith, since the penalty only applies once the refusal is determined to be unjustified.

The penalty also depends on a procedural step built into the statute. The policyholder must make a written demand for payment, and the insurer must fail to pay the covered loss within 60 days of that demand before bad-faith liability can attach. Paying after the 60-day window does not erase the exposure; § 33-4-6 specifies that the action is not abated by late payment, so an insurer cannot avoid the penalty simply by relenting once suit is filed.

Reasonable attorney fees are also recoverable under the statute, which adds to the total exposure even though they are separate from the penalty itself. Because those fees track the actual cost of prosecuting the claim, they can rival or exceed the percentage penalty on a modest loss.

The bottom line

The bad-faith penalty under O.C.G.A. § 33-4-6 is the greater of 50 percent of the insurer’s liability for the loss or $5,000, awarded in addition to the covered loss and alongside recoverable attorney fees. The figure scales with the size of the claim, ensuring even small covered losses carry a meaningful penalty when an insurer denies them without justification.

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.

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