Bad Faith v. Good Faith and Just Results

by Scott Busby – Busby & Negin

The demand letter alleging bad faith arrives. Your blood pressure goes up – either you are sick of seeing lawyers toss the claim into every claim or you worry you may have made a mistake on a legal or factual point. How do you lower your blood pressure? Each moment of each day, on each file and the many micro-decisions you make – simply to pursue a Just Result. And what do you get – just results – and good results for you and your insureds.

Furthermore, you educate yourself on your policy, the facts, and the law. Last November 2019 (remember the good old days when merely mentioning the year didn’t cause an ulcer), I spoke at our Southern Loss Association Luncheon on the topic of bad faith. There are now 607 reported decisions that reference O.C.G.A. Section 33-4-6, Georgia’s insurance bad faith statute; that’s about 30 new cases just in the last 12 months. Keep in mind that is just the appellate and federal reported decisions. The vast majority of bad faith cases aren’t appealed. As you well know, most of the cases where lawyers assert bad faith never make it to the courts, as seasoned adjusters do their work in such a manner that the insureds are paid in accordance with their insurance contract. Yet, the specter of bad faith can, and perhaps should cause us to pause and make sure we pursue the right result for each claim.

As a reminder, to prevail under O.C.G.A. Section 33-4-6, the insured must prove (1) that the claim is covered under their policy; (2) that a demand for payment was made against the insurer within 60 days prior to filing suit; and (3) that the insurer’s failure to pay was motivated by bad faith. If bad faith is proven, the insurer shall be liable to pay, in addition to the loss, not more than 50 percent of the liability of the insurer for the loss or $5,000.00, whichever is greater, and all reasonable attorney’s fees for the prosecution of the action against the insurer. One other aspect of the statute to note is that it is the exclusive remedy for any extracontractual damages relative to the insurance contract. Thus, if the insured alleges other theories of recovery distinct from a bad faith claim, or somehow failed to follow the strictures of the statute, and absent a special relationship beyond that of insured and insurer, such claims when predicated on the insurer’s failure to pay a claim, are not valid.

So, let’s examine two contrasting interesting bad faith cases from the last twelve months. As you read about these cases, ask yourself if the carrier and/or the insured was pursuing a just result. In Crazy Cuban, LLC v. AmGuard Ins. Co., 437 F. Supp. 3d 1261 (N.D. Ga 2020), a fire in a restaurant involved a lengthy exchange of documentation, and hiring and firing of a public adjuster, with whom the carrier nevertheless chose to continue to work. The key problem for the carrier is expressed in this quote from the opinion:

Plaintiff has shown a genuine issue of material fact as to whether its failure to provide the proofs of loss is excusable. The facts demonstrate that Plaintiff actively engaged and cooperated with Defendant to reach an agreement regarding the total amount of various categories of losses. Defendant rejected Plaintiff’s informally edited proofs of loss and ceased communications with Plaintiff before the parties reached an agreement. This set of facts stands in stark contrast to the cases Defendant cites, where summary judgment was granted in favor of insurers when insureds failed to provide proof of loss.

The trial court denied the carrier’s motion for summary judgment on the count for bad faith, finding the issue of bad faith was for the jury under these facts. No carrier wants to read that in an order. Though the opinion does not reveal all the rationale the carrier may have had, it does not appear that the carrier tendered the funds it believed it owed in a timely manner. It was insisting on the execution of the proof of loss, the issue about which a factual dispute ensued because the insured returned the proofs the carrier sent with their own edits, but not properly executed or agreed to. While a proof of loss is a policy requirement, the delay turned costly. Key takeaways from this case should be that when the negotiations with the insured break down, the communications can not stop and the attempts should be made to at least attempt a clear tender of the funds the carrier believes are owed. If there is insufficient documentation or communication, the answer cannot be as in this case that the carrier “ceased communications with Plaintiff [Insured] before the parties reach an agreement”.

Our second case was decided in December 2019, Fight for Fitness, Inc. v. Sentinel Ins. Co., 2019 U.S. Dist. WL 7485331. Aren’t we all in a “Fight for Fitness”? Here, a tenant had leased space that included some fixtures, from which it benefitted, that were destroyed by fire. They asserted they were entitled to compensation for those fixtures, though they did not actually own them. The court noted: “Plaintiff [tenant] admits, for example, that under the lease agreement with AFC’s former landlord, it took the property strictly ‘as is’ and paid nothing to the landlord for any betterments. Plaintiff also concedes that nothing in the Martial Arts Student Agreements Servicing Agreement – entered into by Duvera and Plaintiff amid the bankruptcy dismissal as a result of the state court Consent Order – transferred ownership of the interior contents of the property to it.” The court found there was no coverage for the betterments and held the following on the insured’s claim for bad faith:

And this matter is a clear-cut case where bad-faith damages are plainly unavailable. . . . The Court has already determined that the Defendant is entitled to judgment as a matter of law. It thus had a reasonable basis to contest the claim. See Ga. Farm Bur. Mut. Ins. Co. v. Williams, 266 Ga. App. 540, 597 S.E.2d 430, 432 (Ga. Ct. App. 2004) (“The insured bears the burden of proving bad faith, which is defined as any frivolous and unfounded refusal in law or in fact to comply with the demand of the policyholder to pay according to the terms of the policy.”). The record contains no genuine dispute of material fact regarding Plaintiff’s bad-faith damages claim.

Unfortunately, sometimes the facts are unusually complex, the coverage issues unique, and applying the law to those requires some novel arguments. The good news: when you truly have complex facts, unique coverage issues and novel theories of law, you are at a greatly reduced risk of bad faith if you can show a “reasonable basis” for your position. While a strained construction should not have the unjust result of an erroneous denial of a claim, neither should reasonable positions, even if unique, result in an unjust imposition of bad faith penalties and attorney fees.

What is one way I pursue Just Results in my practice? Over a decade ago I started adding the Latin phrase “Soli Deo Gloria” to my signature block on all emails. It is the same phrase that Bach and Handel would add to their musical scores. Translated it means “Solely for the Glory of God”, not that any of my work attains that lofty goal. No, for me, Soli Deo Gloria is aspirational. I intend that it could be said that each email I send, in its own small way, might be worthy of that moniker. That includes excellence in pursuing every avenue to justice for my clients. So, as you go through your day, sending that email, making that phone call -ask yourself, is what I am doing in furtherance of a Just Result?

This article should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information purposes only. If you would like more information regarding this subject, please contact him at 470-275-3044 or email him directly at

This is a publication of Southern Loss Association, Inc., P.O. Box 421564, Atlanta, GA 30342. The articles published on this website are in a general format and are not intended to be legal advice applicable to any specific circumstances. Legal opinions may vary when based on subtle factual differences. All rights reserved.