Recently, the Georgia Court of Appeals issued an opinion in the case of Southern General Ins. Co. v. Wellstar, ____ Ga. App. ____ (2012 No. A11A2065). The opinion seriously chips away at the rights of injured claimants in dealing with an at-fault party’s insurance company.
Georgia law has provided since the 1970’s that when an at-fault party’s insurance company knows that the injured party has medical bills and/or lost wages that exceed the limits of the coverage available to the at fault party, the insurance company has a duty to tender its limits if given the opportunity by the injured claimant’s attorney to settle the claim within those limits. If the insurance company does tender its limits, it can be held in bad faith by its insured (the at-fault party) because it is needlessly exposing its insured (and his/her assets) to a judgment potentially in excess of those limits via a lawsuit.Georgia law also provides that a hospital that provides medical care to an injured claimant has a claim for payment on the settlement with the at-fault insurance company when certain procedural conditions are met under the hospital lien statute.
The Wellstar Court was faced with a situation where a plaintiff had $22,000.00 in bills and the at-fault party had only $25,000.00 in coverage. A hospital was claiming a lien on the case for the $22,000.00. The insurance company for the at fault party tendered its limits of $25,000.00 to the injured claimant but did not pay the hospital. The hospital then sued the insurance company for its claimed lien.
In the Wellstar case, a panel of three judges of the Court of Appeals created new law by providing a “safe harbor” from a bad faith claim by allowing insurance companies to pay settlement funds to the hospital directly rather than pay the injured claimant.
Georgia law has long provided for an action called an interpleader that allows for someone who has competing claims made against it to put the funds into the court registry and let the court sort the mess out. An insurance company faced with a situation like in Wellstar could easily interplead the funds and get a court order distributing the funds. Such an action would avoid any claim of bad faith against the insurance company.
Further, the Wellstar decision overlooks the fact that the attorney and not the hospital is the one who prosecuted the claim and, therefore, created the fund of money that the insurance company is paying. An attorney’s lien for his work is superior to any lien of the hospital. Moreover, the decision overlooks the common-fund doctrine, which Georgia adheres to. The common fund doctrine provides that where an attorney creates a fund of money from which a passive entity can share in the funds, that passive recipient must share in the attorney’s fee. The court completely ignores this equitable principle.
Hopefully, this will decision will not remain on the books for long in Georgia. It is bad for Georgians.
