Handling time-limited demands is one of the most important—and most anxiety inducing— daily tasks for claims professionals. Under some states’ rules, properly handling demands seems to require not just competence, but also perfection. Failure to adhere to this nearly impossible standard results in massive extracontractual payments.
To avoid this outcome, some claims operations have effectively outsourced this historical claims-handling function to law firms, a signal that effectively managing this risk has come to require legal acumen and not just claims experience. All this fuss seems pointless because, in the end, all the insurer wants to do is pay its money to protect its insured.
Legislatures in many states have taken notice of this unfair situation and have created statutory reforms, which have met with varying levels of success. Local plaintiffs’ bars look for loopholes to exploit in these statutes and fashion demands to evade statutory requirements. The legislature is then faced with amending the statute to close these loopholes.
This article explores statutory reforms in three key bad faith jurisdictions—Georgia, Florida, and Missouri—through the eyes of three attorneys and two claims professionals who routinely handle time-limited demands in these states. It addresses how the reforms came about, how the statutes evolved, how they have changed claims handling, and what challenges remain. Finally, the authors look ahead to possible future common-sense reforms that improve the climate for insurers who simply want to do the right thing.
Q: DESCRIBE YOUR STATE’S STATUTORY EFFORTS TO REFORM BAD FAITH LAW.
DOROTHY DIFIORE, QUINTAIROS, PRIETO, WOOD & BOYER: Despite massive lobbying efforts by the plaintiffs’ bar, the Florida Legislature finally succeeded in ramming through tort reform that, among many other measures, directly addressed third-party bad faith claims.
First, the statute made all bad faith claims—common law and statutory— subject to the pre-suit notice requirement of the bad faith statute.
Second, the statute gave insurers a safe harbor period. Section 624.155(4) protects a carrier from exposure over the policy limits so long as tender is made within the safe harbor period. It applies:
• Even where the plaintiff offer is expired or withdrawn.
• Even if the carrier fails to satisfy all requirements of a demand.
• Even if carrier does not comply with duties required by Boston Old Colony Ins. Co. v. Gutierrez (advise the insured of settlement opportunities and probable outcome of the litigation, warn of the possibility of an excess judgment, and advise the insured of any steps he might take to avoid same).
The trigger for safe harbor is receiving actual notice of a claim accompanied by sufficient evidence to support the amount of the claim. The insurer has 90 days from this notice to tender its policy limits. Obviously, there will be questions as to what constitutes “sufficient evidence” to show the claim was worth the policy limits.
Third, the statute gave insurers protection in claims involving multiple competing claims by permitting arbitration and interpleader.
Fourth, one-way attorney fees, which create a lopsided system that incentivizes plaintiffs and their attorneys to bring lawsuits, were repealed. Many of these bad faith lawsuits come from vendors using assignments of benefits to sue for small amounts without the risk of paying their attorneys because of the one-way fees provision.
In 2017, the Florida Supreme Court rejected the federal standard that attorney fee multipliers should be applied only in “rare and exceptional” circumstances, ruling instead that multipliers could be applied in almost any case. This section of the legislation expands provisions passed in 2022, in Senate Bill 2A, restoring the award of contingency risk multipliers to only rare and exceptional circumstances for all litigation.
Fifth, the statute reversed appellate court rulings holding that the standard for third-party bad faith is mere negligence.
For the policy with small limits, these changes should eliminate a large percentage of bad faith claims.
SHAWN BINGHAM, FREEMAN MATHIS & GARY: The Georgia Supreme Court had established in Southern General Insurance Company v. Holt that insurers have a duty to their insureds to settle claims within policy limits when the claimant’s special damages exceed those limits and the insurer is aware of facts making liability clear. Holt found this duty to settle is breached where an insurer is guilty of “negligence, fraud or bad faith in failing to compromise a claim.” The available damages under Holt are those that flow from the alleged wrongful failure to settle, most notably the full amount of the verdict unmitigated by the insurer’s policy limits. Following Holt, claimants increasingly presented insurers with policy limits demands conditioned on exceedingly difficult terms intended to induce insurers to trip over a technicality embedded in the demand.
In 2013, the Georgia General Assembly sought to curb unsavory demand tactics in motor vehicle accident cases by enacting O.C.G.A. § 9-11-67.1. The statute outlined five terms every qualifying offer must include, restricted the time the claimant can demand payment, and provided other rules for effecting settlements.
Although the statute was aimed to curtail Holt set-up demands, it had an unfortunate flaw that frustrated this purpose. In Grange v. Woodard, the Georgia Supreme Court held that although the statute had certain required terms in subsection (a), it otherwise permitted a claimant to include any terms, including terms conditioning acceptance on performance of specified acts, no matter how trivial or immaterial they might be.
In 2021, in response to this court’s Woodard decision and the demand tactics that ensured, the General Assembly amended O.C.G.A. § 9-11- 67.1 to correct problems exposed by Woodard. The most important change was to add subsection (b)(1), which made the terms in subsection (a) the only permitted settlement terms “[u]nless otherwise agreed by both the offeror and the recipients in writing.”
Following the 2021 amendments, a new demand template emerged from the plaintiffs’ bar that was aimed at intimidating insurers into agreeing to nonstatutory terms under subsection (b)(1) through carefully crafted waiver language.
This was accomplished by inventing a dubious legal theory—that O.C.G.A. § 9-11-67.1 does not apply to demands served before suit—and communicating this position to insurers as if it was a straightforward and uncontroversial interpretation of the statute.
This tactic led to the outcome in Redfearn v. Moore, where the Court of Appeals held that, by consenting to the demand’s waiver language, the insurer had agreed under subsection (b)(1) to the inclusion of non-statutory terms in the claimant’s offer and had failed to meet every term. In that case, the inclusion of boilerplate language “must be endorsed by all payees” on the back of the check was a rejection of the offer.
As a rebuke of these new demand tactics, the Georgia General Assembly amended the statute again in 2024, this time with sweeping changes. Most of the 2021 provisions, including the five required terms (with two more added), carried over to the new statute, but there are many innovations. The new subsection (a) of the statute, for example, requires that all offers to settle auto accident claims be an offer to enter a bilateral contract. This means that auto accident demands served on insurers, whether before or during litigation, cannot require the performance of an act, such as receipt of payment, as a condition of acceptance of the demand.
The most important change, however, is the creation of a safe harbor from extracontractual liability under subsection (i). This subsection immunizes insurers from tort liability where, after receiving a time-limited demand arising from an auto accident, the insurer timely (A) “purports to” accept the material terms, (B) provides a sworn statement of insurance if required by the offer, and (C) pays the lesser of the amount demanded or the insurer’s policy limits.
This new safe harbor is the most useful tool in the insurer’s arsenal to counter confusing set-up demands. No matter what the terms of the demand are, doing the three acts required in subsection (i) will shield the insurer from liability, though not necessarily settle every case.
PHILIP SUMNER, BAKER STERCHI COWDEN & RICE: Handling time-limited settlement demands with coverage issues or questionable liability has become increasingly complex in recent years in Missouri. Part of that complexity arises from R.S.Mo. § 537.065, which allows a claimant and tortfeasor to enter a “contract to limit recovery,” whereby the claimant agrees not to personally pursue the tortfeasor for any excess judgment, and the tortfeasor agrees to assign their bad faith claim against their insurer to the claimant. The statute has been effectively used (i.e., abused) by the plaintiffs’ bar as a powerful tool to obtain massive judgments against tortfeasors and, ultimately, large settlements from insurers.
After the plaintiffs’ bar found and exposed several loopholes in the 2017 version of § 537.065, the statute was amended again in 2021. Under the 2021 version, a tortfeasor’s insurer must have first refused to withdraw a reservation of rights or declined coverage before a claimant and tortfeasor can enter a contract to limit recovery. The 2021 version also requires a tortfeasor to send a copy of any contract to limit recovery to their insurer within 30 days of execution, gives insurers the ability to intervene as a matter of right in injury lawsuits on behalf of their insureds within 30 days of receipt of notice, and provides that any contract to limit recovery entered into pursuant to the statute shall be admissible in any subsequent bad faith action.
When the legislature enacted the 2017 version of § 537.065, it enacted a new time-limited demand statute, R.S.Mo. § 537.058, which sets forth requirements for “time-limited demands,” which are defined as “any offer to settle any claim for personal injury, bodily injury, or wrongful death…within the insurer’s limit of liability insurance, which by its terms must be accepted within a specified period of time.”
Any time-limited settlement demand must meet all requirements of § 537.058; if they do not, they will not be considered a “reasonable opportunity to settle for the insurer or be admissible in any lawsuit alleging extra-contractual damages against the tortfeasor’s liability insurer.”
R.S.Mo. § 537.058 sets out several requirements for time-limited demands, including but not limited to the following:
• Must be in writing, reference the statute, and be sent by certified mail return receipt requested to the tortfeasor’s liability insurer.
• Must state the time limit for responding to the demand, which “shall not be less than 90 days from the date such demand is received by the liability insurer.”
• Must be accompanied by a list of the claimant’s health care providers from the time of injury to the date of the demand, a description of all known injuries, and a HIPAA authorization sufficient to allow the insurer to obtain medical records from the providers.
Q: HAVE THE REFORMS CHANGED HOW CLAIMANTS PRESENT TIMELIMITED DEMANDS? KIM MOBLEY, THE GENERAL: In Florida, tort reform has dramatically reduced the number of time-limited demands, as 624.155(4) gives the insurer 90 days to tender the policy limits or the amount demanded by the claimant, whichever is less, after receiving actual notice of a claim. As for multiple competing claims, the provisions allow for an interpleader or arbitration in Florida, which has never been an option in Florida before the 2023 tort reform. This means that competing claimants in such situations are less likely to engage in gamesmanship.
Georgia’s new law has a “safe harbor” that insulates the insurer from the extracontractual liability if it performs three acts. So far, the demands we have seen have included the language of the new statute, but we are noticing that adjusters may or may not be aware of the statute and continue to seek affidavits from the insureds or focus on the other conditions that aren’t considered material as stated in the statute.
Missouri’s time-limited demand statute, 537.058, is flawed as it only refers to “timelimited” demands. We have recently seen an uptick in the pro se handwritten or typed demands where the claimant will ask to release a specific party for the policy limits without specifying a time limit. The reason for this is to evade application of the statute. These demands will often say “we don’t want to have to try to collect the full amount from Mr. Insured,” which is a red flag in that we can tell by that language that an attorney is guiding them in this process.
DAN BEDNARZ, AMICA: In Florida, the days of short-fused/single-digit day demand deadlines and extensive conditional items has essentially ended. This is likely due to the belief that a judge in the “new tort world” will exercise more grace to a carrier in terms of what a reasonable timeframe and tailing conditions are. We have seen plaintiff powerhouse firms remove specific timeframes and request a “tender at this time” which is likely a ploy to see what the Florida courts deem as a reasonable timeframe in the event we are beyond the safe harbor period. We are also seeing plaintiff’s firms give carriers 90 days to respond in line with the newly created safe harbor period. However, they may condition issuance of a check at an earlier timeframe.
In Georgia, we are seeing a higher rate of compliant demands being received by certified mail. We still receive a fair amount of demands by email or facsimile which are not compliant with the statute. While we do note whether a demand is non-compliant, we handle all with a high standard of good faith keeping the insured’s interest at the forefront of all decisions.
Q: HOW HAVE THE REFORMS CHANGED THE WAY INSURERS HANDLE DEMANDS?
BEDNARZ: In Georgia, the emergence of the seven material terms and safe harbor available under the latest version 2024 of O.C.G.A. § 9-11-67.1 has not only altered the way we respond to demands, but also how we educate our staff. We have worked closely with local counsel to develop a uniform acceptance letter under the terms and protections of the statute with an emphasis to accept material terms only. We hold regular educational sessions to update new and existing employees of the protections available to us inclusive of training staff to identify what is a complaint or non-compliant demand. We are very cautious when requesting clarification and have limited that request to mainly the release of a subject party if it is absolutely necessary.
For example, the bare minimum party to be released under the terms of a limited liability release in Georgia is the vehicle operator. In order to comply with a demand, we may not request a release of the vehicle owner, or any additional parties/carrier, as it could be deemed as a material term deviation and therefore, rejection. For the most part, we do not ever request an extension to a demand after it has been received for similar reasons outlined regarding seeking clarification. Any extension of the demand deadline would likely be viewed as a rejection. In summary, strict adherence is more important now than ever.
FL HB 837 saw its own version of safe harbor protections added via §624.155(4). Under the safe harbor, a carrier is protected from exposure over the policy limits so long as tender is made within the safe harbor period. This is even where the demand has expired or plaintiff has withdrawn their offer, even if the carrier fails to satisfy all requirements of a demand and even if the carrier does not comply with the duties under Boston Old Colony. Given the language and notice requirement of “sufficient evidence to support the amount of the claim” triggering tolling of the safe harbor, we expect this to be litigated for some time as to what truly surpasses that somewhat subjective threshold. However, gone are the days of carrier paranoia in believing some demands need to be acted upon and complied with the instant they arrive.
This conversation continues in the May/June issue of CLM Magazine.
About the Authors:
Shawn Bingham is a partner at Freeman Mathis & Gary, LLP. sbingham@fmglaw.com
Dorothy DiFiore is a partner at Quintairos, Prieto, Wood & Boyer. dorothy.difiore@qpwblaw.com
Kim Mobley is senior manager, litigation at The General Insurance. kmobley@thegeneral.com
Dan Bednarz is casualty claims manager at Amica. dbednarz2@amica.com
Philip Sumner is a member at Baker Sterchi Cowden & Rice. psumner@bakersterchi.com