Is Negligence Enough for Bad Faith? The Eleventh Circuit Rejects an Invitation to Let the Georgia Supreme Court Decide

Saul Ewing Arnstein & Lehr LLP

[co-author: Tricia Kazinetz]

In a two-paragraph opinion following oral argument, the Eleventh Circuit Court of Appeals affirmed a District Court’s judgment that Nationwide was liable for either negligent or bad faith failure to settle a claim.  The trial court in the Northern District of Georgia previously ruled that Nationwide acted either negligently or in bad faith in failing to settle a claim of one of its insured.  Nationwide appealed to the Eleventh Circuit, arguing that Georgia law is unsettled as to whether an insurer can be liable for negligent, as opposed to bad faith, failure to settle a claim.  The appeal attracted attention from several Georgia organizations, including the Georgia Defense Lawyers Association (GDLA) and the Georgia Trial Lawyers Association (GTLA), resulting in divergent amicus curiae briefs.  The GDLA urged the Eleventh Circuit to certify the issue to the Supreme Court of Georgia, while the GTLA argued that the issue is settled. 
The underlying litigation:  In 2005, Seung Park, who was insured by Nationwide, ran a red light and struck Stacey Camacho’s car, resulting in Camacho’s death.  Following the accident, Nationwide had the opportunity to settle with Camacho’s surviving family members, but rejected the family’s demand.  Camacho’s family filed a wrongful death suit against Park.  In 2009, a jury awarded Camacho’s family $5.83 million.
On September 14, 2011, Plaintiffs sued Nationwide alleging that it acted negligently and in bad faith in failing to accept their demand for settlement.  Nationwide urged the district court to find that, under Georgia law, plaintiffs may sustain a claim for bad faith, but not negligent, failure to settle.  Despite Nationwide’s argument to the contrary, the District Court permitted plaintiffs to rely on both standards of liability and ultimately held that Nationwide had acted either negligently or in bad faith in its refusal to settle.  Nationwide appealed to the Eleventh Circuit. 
Amicus briefing: In its amicus brief to the Eleventh Circuit, the GTLA argued that it is settled law in Georgia that insurance companies may be liable to their insured for both negligence and bad faith.  In support of its argument, the GTLA focused on the Georgia Supreme Court’s reiteration of language that, GTLA argued, suggested that negligence is an acceptable standard of insurer liability.
In its amicus brief, the GDLA argued that the Eleventh Circuit should certify to the Supreme Court of Georgia the question of whether mere negligent, as opposed to bad faith, failure to settle a claim is sufficient.  In support of its argument, the GDLA pointed to Georgia cases that suggest that the negligence standard has crept its way into Georgia courts only by way of dicta.  Thus, the GDLA argued that any reliance on cases cited by the GTLA was misplaced.

Opinion on appeal: The Eleventh Circuit rejected Nationwide’s and the GDLA’s invitation to certify this question to the Supreme Court of Georgia and affirmed the District Court’s judgment. 

Camacho v. Nationwide Mut. Ins. Co., 188 F. Supp. 3d 1331 (N.D. Ga. 2016); aff’d
Camacho v. Nationwide Mut. Ins. Co., No. 16-14225, 2017 WL 2889470 (11th Cir. July 7, 2017)

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