First Acceptance Ins. Co. of Ga., Inc. v. Hughes, 305 Ga. 489

Background

In Aug. 2008 Ronald Jackson caused a multi-vehicle crash and later died; his insurer First Acceptance had $25,000 per person / $50,000 per accident liability limits.
Multiple claimants were injured, including Hong (severe brain injury) and An (neck/arm injuries); insurer’s adjusters early on concluded exposure exceeded policy limits.
June 2, 2009: counsel for An and Hong sent two letters offering either participation in a joint settlement conference or, alternatively, to settle for available liability proceeds upon receipt of a release, requested insurance information, and the insurer’s available bodily injury proceeds. The letters did not expressly set a deadline to accept the settlement offer.
July 13, 2009: An and Hong’s counsel revoked the offer after not receiving a response; First Acceptance later scheduled (and attempted) a multi-claimant settlement conference which An and Hong declined to attend.
Trial produced a multi-million dollar verdict for Hong; administrator of Jackson’s estate sued First Acceptance (June 2014) for negligence/bad faith in failing to settle within policy limits. Trial court granted insurer summary judgment; Court of Appeals reversed; Supreme Court granted certiorari.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether an insurer’s duty to settle arises only when an injured party presents a valid policy‑limits offer or whenever insurer knows settlement within limits is possible	Hughes: insurer had duty because First Acceptance knew (or should have known) Hong’s claim made settlement within limits necessary; industry custom required resolving worst exposures	First Acceptance: duty to settle is triggered only by a valid policy‑limits demand; without a valid time‑limited offer insurer not on notice to accept immediately	The Court: duty to settle arises only when injured party presents a valid offer to settle within policy limits; absent such offer no tort duty to accept.
Whether the June 2 letters constituted a valid, time‑limited policy‑limits offer	Hughes: June 2 letters created an offer that included a 30‑day deadline for response	First Acceptance: letters were an alternative to mediation and did not impose a 30‑day acceptance deadline; conditions on settlement included provision of requested insurance info and a release	The Court: June 2 letters were an offer to settle for available policy limits but did not include a 30‑day deadline; construed against drafter; thus no time‑limited demand.
Whether insurer acted unreasonably in failing to accept before revocation	Hughes: insurer acted unreasonably given knowledge of Hong’s severe exposure and customs to address worst claim	First Acceptance: absent a time‑limited demand, it was reasonable to pursue joint settlement conference and not treat silence as refusal	The Court: as a matter of law insurer did not act unreasonably; summary judgment for insurer affirmed.
Effect of ambiguity in settlement correspondence on summary judgment	Hughes: ambiguity supports jury question on whether offer existed and deadline	First Acceptance: contractual interpretation is issue of law; letters unambiguous as to absence of deadline	The Court: interpretation is legal; after applying contract rules no ambiguity remained on deadline—no 30‑day limit—so summary judgment appropriate.

Key Cases Cited

Cotton States Mut. Ins. Co. v. Brightman, 276 Ga. 683 (insurer may be liable for excess judgment for bad faith/negligent refusal to settle)
Fortner v. Grange Mut. Ins. Co., 286 Ga. 189 (insurer must give insured’s interests same consideration as its own in deciding whether to settle)
Southern Gen. Ins. Co. v. Holt, 262 Ga. 267 (reasonableness of insurer’s response to settlement offer generally a jury question)
Simpson & Harper v. Sanders & Jenkins, 130 Ga. 265 (if offer silent on time to accept, construed to remain open a reasonable time)
Prior v. Hilton & Dodge Lumber Co., 141 Ga. 117 (offer silent as to time must be accepted within reasonable time; unilateral offer may be withdrawn before acceptance)
First Data POS, Inc. v. Willis, 273 Ga. 792 (plain contractual language must be given literal meaning)
Cahill v. United States, 303 Ga. 148 (definition and treatment of ambiguity in written instruments)