Opinion ID: 3063786
Heading Depth: 2
Heading Rank: 3

Heading: Bad faith penalty and attorney’s fees

Text: Johnston cross-appeals, arguing that the district court erred in granting Companion’s motion for judgment as a matter of law on the bad faith verdict. In 8 The collapse occurred in 2004, but Brown did not prepare an estimate for permanent repairs until 2006. Companion, however, has not argued that the 2006 estimate inaccurately reflects the 2004 cost of repairs. We therefore will not consider this issue. See Doe v. Dekalb County Sch. Dist., 145 F.3d 1441, 1445 n.4 (11th Cir. 1998) (issues not raised in a party’s brief are considered abandoned). 13 the alternative, Johnston argues that even if judgment as a matter of law was appropriate, the district court erred in vacating the attorney’s fees award.
We review a district court’s order granting a motion for judgment as a matter of law de novo. Rossbach v. City of Miami, 371 F.3d 1354, 1356 (11th Cir. 2004).
Johnston argues that the district court erred in vacating the award of a bad faith penalty. He asserts that Companion’s initial denial of his claim was in bad faith because the damage to the warehouse was clearly within the parameters of the policy, Companion failed to investigate the claim in a timely manner, Companion implied to Johnston and Brown that the damage would be covered under the policy, and that in reliance on Companion’s implication that the damages would be covered, Brown engaged in temporary repairs that resulted in spoliation of evidence. Most of the facts that Johnston points to are irrelevant to proving a claim for bad faith failure to pay. Under Georgia law, a court may impose a bad faith penalty against an insurer and require it to pay the insured’s attorney’s fees in the following situation:9 9 Johnston argues that Companion engaged in what he refers to as both “normal” and “abnormal” bad faith. “Abnormal” bad faith is a creature of Alabama caselaw, see In re 14 In the event of a loss which is covered by a policy of insurance and the refusal of the insurer to pay the same within 60 days after a demand has been made by the holder of the policy and a finding has been made that such refusal was in bad faith, the insurer shall be liable to pay such holder, in addition to the loss, not more than 50 percent of the liability of the insurer for the loss . . . O.C.G.A. § 33-4-6. “To prevail on a claim for an insurer’s bad faith under O.C.G.A. § 33-4-6, the insured must prove: (1) that the claim is covered under the 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.” Lavoi Corp., Inc. v. Nat’l Fire Ins. of Hartford, 666 S.E.2d 387, 391 (Ga. Ct. App. 2008). These requirements are strictly construed. BayRock Mortgage Corp. v. Chi. Title Ins. Co., 648 S.E.2d 433, 435 (Ga. Ct. App. 2007). “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.” Ga. Farm Bureau Mut. Ins. Co. v. Williams, 597 S.E.2d 430, 432 (Ga. Ct. App. 2004). A penalty for bad faith is not permissible “where the insurance company has any reasonable ground to contest the claim and where there is a disputed question of fact.” S. Fire & Cas. Ins. Co. v. Nw. Ga. Bank, 434 S.E.2d 729, 730 (Ga. Ct. App. 1993) (quotation Simmons v. Cong. Life Ins. Co. & Insurers Admin. Corp., 791 So.2d 371, 379 (Ala. 2000), and has not been recognized by any Georgia courts. We therefore will only examine the facts in light of what Johnston refers to as “normal” bad faith, which is recognized under Georgia law. 15 omitted). In the present case, the first two elements of a § 33-4-6 bad faith claim were satisfied because the jury found that the insurance claim was covered under the policy and it is undisputed that Johnston sent a demand, to which Companion did not respond within 60 days. We agree with the district court, however, that Johnston failed to prove the third element of a bad faith claim. Companion had a legitimate, although ultimately unsuccessful, challenge to Johnston’s claim. Johnston argues that he was deceived by Companion as to the purpose of its investigation, but he does not allege that Companion’s subsequent denial of payment was done in bad faith, as required for a bad faith claim under Georgia law. See Ga. Farm Bureau Mut. Ins. Co., 597 S.E.2d at 432. We conclude that the evidence does not support the jury’s conclusion that Companion engaged in a bad faith failure to pay. Although the jury ultimately found that the decay was not “hidden from view,” Companion’s theory at trial was not so unreasonable as to be considered “frivolous and unfounded.” Because Companion’s reason for denying coverage was not so unbelievable as to sink below the minimal threshold of “any reasonable ground to contest the claim,” S. Fire & Cas. Ins. Co., 434 S.E.2d at 730 (emphasis added), the district court did not err in granting judgment as a matter of law on the bad faith claim. 16
Having concluded that the district court did not err in granting judgment as a matter of law on the bad faith penalty, Johnston may not collect attorney’s fees under O.C.G.A. § 33-4-6 because that statute only applies to cases in which the insurer acted in bad faith. Johnston argues, however, that he was also entitled to attorney’s fees under O.C.G.A. § 13-6-11. O.C.G.A. § 13-6-11 allows the jury to award attorney’s fees “where the plaintiff has specially pleaded and has made prayer therefor and where the defendant has acted in bad faith, has been stubbornly litigious, or has caused the plaintiff unnecessary trouble and expense.” Georgia courts have explicitly stated that in cases where a plaintiff alleges that an insurer engaged in bad faith by refusing to pay a claim, an action “for attorney fees and expenses of litigation under OCGA § 13-6-11 is not authorized.” Howell v. Southern Heritage Ins. Co., 448 S.E.2d 275, 276 (Ga. Ct. App. 1994). Johnston is precluded under Georgia law from availing himself of O.C.G.A. § 13-6-11 because “[t]he penalties contained in OCGA § 33-4-6 are the exclusive remedies for an insurer’s bad faith refusal to pay insurance proceeds.” Id. The district court therefore did not err in vacating the jury’s attorney’s fees award. 17