GA Code § 10-7-30 (2021)
2021 Georgia Code|Title 10 - Commerce and Trade|Chapter 7 - Suretyship|Article 2 - Relative Rights of Creditor and Surety|§ 10-7-30. Bad Faith Refusal of Corporate Surety to Perform Suretyship Contract

  For the purposes of this Code section, the term "obligee" shall include any obligee or beneficiary pursuant to the terms of the contract of suretyship.   In the event of the refusal of a corporate surety to commence the remedy of a default covered by, to make payment to an obligee under, or otherwise to commence performance in accordance with the terms of a contract of suretyship within 60 days after receipt from the obligee of a notice of default or demand for payment, and upon a finding that such refusal was in bad faith, the surety shall be liable to pay such obligee, in addition to the loss, not more than 25 percent of the liability of the surety for the loss and all reasonable attorney's fees for the prosecution of the case against the surety. The amount of such reasonable attorney's fees shall be determined by the trial jury and shall be included in any judgment rendered in such action; provided, however, that such attorney's fees shall be fixed on the basis of competent expert evidence as to the reasonable value of such services, based on the time spent and legal and factual issues involved, in accordance with prevailing fees in the locality where the action is pending; provided, further, that the trial court shall have the discretion, if it finds such jury verdict fixing attorney's fees to be greatly excessive or inadequate, to review and amend such portion of the verdict fixing attorney's fees without the necessity of disapproving the entire verdict. The limitations contained in this Code section in reference to the amount of attorney's fees are not controlling as to the fees which may be agreed upon by the plaintiff and his attorney for the services of such attorney in the action against the surety.    (Ga. L. 1973, p. 825, § 1; Ga. L. 1980, p. 1159, § 1; Ga. L. 1982, p. 3, § 10.)   Editor's notes.   - In Houston Gen. Ins. Co. v. Brock Constr. Co., 241 Ga. 460, 246 S.E.2d 316 (1978), it was held that this chapter, with the exception of this section, was not intended to govern compensated sureties. However, Ga. L. 1981, p. 870, § 1, amends O.C.G.A. § 10-7-1 so as to abolish the distinction between contracts of suretyship and guaranty. Balboa Ins. Co. v. A.J. Kellos Constr. Co., 247 Ga. 393, 276 S.E.2d 599 (1981). See the Editor's note to O.C.G.A. § 10-7-1.   Law reviews.   - For article, "A Georgia Practitioner's Guide to Construction Performance Bond Claims," see 60 Mercer L. Rev. 509 (2010).   JUDICIAL DECISIONS    O.C.G.A. § 33-4-6 is virtually identical to O.C.G.A. § 10-7-30, except that the statute deals with the liability of insurance companies on their insurance contracts rather than the liability of corporate sureties on their suretyship contracts. Columbus Fire & Safety Equip. Co. v. American Druggist Ins. Co., 166 Ga. App. 509, 304 S.E.2d 471 (1983).   Strict construction.    - This section, being in derogation of the common law, must be strictly construed. Travelers Indem. Co. v. Sasser & Co., 138 Ga. App. 361, 226 S.E.2d 121 (1976).   Section refers to payment to obligee, not claimant.    - This section, which provides damages and attorney fees for default by a corporate surety, refers to the payment to the obligee of the penalty and not to a claimant. Travelers Indem. Co. v. Sasser & Co., 138 Ga. App. 361, 226 S.E.2d 121 (1976).    Continued failure to pay the claim after the suit was filed may not be counted as part of the 60-day deadline set forth in subsection (b) of O.C.G.A. § 10-7-30. Columbus Fire & Safety Equip. Co. v. American Druggist Ins. Co., 166 Ga. App. 509, 304 S.E.2d 471 (1983).   Estoppel.    - Indemnitors were estopped from contending that the insurer's failure to pay the owner's claim prior to trial constituted a breach of fiduciary duty on the insurer's part, when the reason the insurer defended the owner's claim instead of paying the claim prior to trial was because the president of one of the indemnitors denied any liability in the matter and resisted efforts to settle. M-Pax, Inc. v. Dependable Ins. Co., 176 Ga. App. 93, 335 S.E.2d 591 (1985).   Unavailable remedies.    - The 60-day performance period provided by subsection (b) of O.C.G.A. § 10-7-30 began to run on the date that the surety received the obligee's demand letter and not on the date that the surety was "aware of" the obligee's claim on the bond, and this period was not waived by the surety's denying, prior to 60 days, any obligation on the bond. Consulting Eng'rs Group, Inc. v. Pace Constr., 613 F. Supp. 1192 (N.D. Ga. 1985).    Plaintiff may not recover a bad faith penalty or attorneys' fees pursuant to O.C.G.A. § 10-7-30 in a suit brought under the Miller Act. United States v. All Am. Bldg. Sys., 847 F. Supp. 69 (N.D. Ga. 1994).   No award for additional attorney's fees on appeal.    - Since the trial court did not err in striking the bad-faith penalty and attorney fees awarded to the plaintiff, its motion for an award of additional attorney fees on appeal will be perforce, denied, both because of this holding and because the Court of Appeals is not empowered by statute or otherwise to grant such relief. Columbus Fire & Safety Equip. Co. v. American Druggist Ins. Co., 166 Ga. App. 509, 304 S.E.2d 471 (1983).   Withdrawal of first notice of default.    - When a contractor's letter to the subcontractor specified that no claim was being made against the performance bond "at this time," the prior notice of default was clearly intended to be withdrawn, and since the subcontractor was not again declared in default until less than 60 days before suit was filed, and since no demand for payment was made against the surety until that same date, it follows that the surety cannot be held liable for a bad-faith penalty and attorney fees. Columbus Fire & Safety Equip. Co. v. American Druggist Ins. Co., 166 Ga. App. 509, 304 S.E.2d 471 (1983).   Jurisdiction.    - Subcontractor's action against surety for breach of payment bond contract, bad faith, and attorney fees was within the superior court's subject matter jurisdiction. Harry S. Peterson Co. v. National Union Fire Ins. Co., 209 Ga. App. 585, 434 S.E.2d 778 (1993).    Cited in American Druggist Ins. Co. v. Georgia Power Co., 145 Ga. App. 104, 243 S.E.2d 319 (1978); Houston Gen. Ins. Co. v. Brock Constr. Co., 241 Ga. 460, 246 S.E.2d 316 (1978); Balboa Ins. Co. v. A.J. Kellos Constr. Co., 247 Ga. 393, 276 S.E.2d 599 (1981); United States ex rel. Gen. Elec. Supply Co. v. Minority Elec. Co., 537 F. Supp. 1018 (S.D. Ga. 1982); Blue Cross & Blue Shield of Georgia/Atlanta, Inc. v. Merrell, 170 Ga. App. 86, 316 S.E.2d 548 (1984); Ayers Enters., Ltd. v. Exterior Designing, Inc., 829 F. Supp. 1330 (N.D. Ga. 1993).   RESEARCH REFERENCES   ALR.    - Act or default of employee covered by fidelity bond or insurance, 62 A.L.R. 411; 77 A.L.R. 861; 98 A.L.R. 1264.   Conclusiveness and effect, upon surety, of default or consent judgment against principal, 59 A.L.R.2d 752.   Validity of statute allowing attorney's fee to successful claimant but not to defendant, or vice-versa, 73 A.L.R.3d 515.