Text of O.C.G.A. § 33-4-6

(a) 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 upon the insurer 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 or $5,000.00, whichever is greater, and all reasonable attorney’s fees for the prosecution of the action against the insurer. The action for bad faith penalties and attorney’s fees may be brought in conjunction with an action for recovery on the policy. The game of the bad faith penalty may not exceed the greater of 50 percent of the liability or $5,000.00, and reasonable attorney’s fees.

This statute creates a private cause of action against insurance companies that refuse to pay valid claims without legitimate justification. Let us examine every element.

What Is Insurance Bad Faith?

Insurance bad faith occurs when an insurer refuses to pay a covered claim, or unreasonably delays payment, without a legitimate basis for doing so. The concept recognizes a fundamental principle: insurance contracts are contracts of the utmost good faith. Policyholders pay premiums in exchange for the promise that the insurer will pay when a covered loss occurs. When the insurer breaks that promise without justification, it acts in “bad faith.”

Bad Faith vs. Good Faith Denial

Not every claim denial constitutes bad faith. Insurers have the right to deny claims that are not covered, dispute the amount of damages, or investigate suspicious claims. A denial is in good faith when there is a reasonable and legitimate basis for the refusal, even if the insurer ultimately turns out to be wrong.

Bad faith exists when the insurer’s refusal is:

• Without any reasonable basis in fact or law
• Based on an unreasonable interpretation of the policy
• Motivated by a desire to avoid a legitimate obligation
• The result of an inadequate investigation
• A delay tactic designed to pressure the claimant into accepting less than owed

The 60-Day Demand Requirement

O.C.G.A. § 33-4-6 requires the insured to make a demand upon the insurer before bad faith penalties can be triggered. The insurer then has 60 days to respond to the demand before bad faith liability attaches.

Elements of a Proper Demand

A valid demand under O.C.G.A. § 33-4-6 should:

• Be in writing
• Identify the policy number and the loss
• State the amount demanded
• Reference O.C.G.A. § 33-4-6 and the bad faith penalty provisions
• Give the insurer a clear deadline (at least 60 days) to pay
• Be sent to the insurer via certified mail or other method providing proof of receipt

When to Send the Demand

The demand should be sent after you have exhausted the normal claims process and the insurer has refused to pay or has unreasonably delayed payment. Sending the demand too early (before the claim has been properly presented) may give the insurer an argument that the claim was not yet ripe for payment.

What Happens After 60 Days

If the insurer pays the claim within 60 days, no bad faith penalty applies. If the insurer refuses to pay within 60 days and the refusal is later found to be in bad faith, the statutory penalty is triggered.

Bad Faith Penalties: 50% + Attorney Fees

The 50% Penalty

Upon a finding of bad faith, the insurer must pay an additional penalty of up to 50% of the liability on the claim, or $5,000, whichever is greater. The penalty is in addition to the underlying claim amount.

For example, if an insurer acts in bad faith on a $200,000 UM/UIM claim:

• Claim amount: $200,000
• Bad faith penalty (50%): $100,000
• Total: $300,000 (plus attorney fees)

Attorney Fees

In addition to the 50% penalty, the insurer must pay the policyholder’s reasonable attorney fees incurred in prosecuting the bad faith action. This is significant because Georgia generally follows the “American Rule,” where each party bears its own attorney fees. O.C.G.A. § 33-4-6 is one of the exceptions, creating a fee-shifting mechanism that punishes bad faith insurers.

Attorney fees under this statute include:

• Fees for prosecuting the bad faith claim
• Fees related to the underlying coverage dispute
• Expert witness fees and costs incurred due to the insurer’s refusal to pay

First-Party Claims: Your Own Insurer

O.C.G.A. § 33-4-6 most commonly applies to first-party claims — claims made by a policyholder against their own insurance company. Examples include:

Uninsured/Underinsured Motorist (UM/UIM) Claims

When you are injured by an uninsured or underinsured driver, you file a claim against your own UM/UIM coverage. If your insurer refuses to pay a valid UM/UIM claim, the bad faith statute applies. UM/UIM bad faith cases are among the most common applications of O.C.G.A. § 33-4-6.

Property Damage Claims

When your insurer refuses to pay for covered property damage (home, vehicle, business), the bad faith penalty can be asserted.

Medical Payments (MedPay) Claims

If your auto insurer refuses to pay medical payments coverage for accident-related treatment, the bad faith statute applies.

Homeowner’s Insurance Claims

When a homeowner’s insurer denies a covered loss (fire, storm, theft, water damage) without a reasonable basis, the policyholder can pursue bad faith penalties.

Health Insurance Claims

While health insurance disputes may also implicate ERISA (for employer-provided plans), non-ERISA health insurance claims are subject to O.C.G.A. § 33-4-6.

Third-Party Claims: The Other Driver’s Insurer

An important limitation of O.C.G.A. § 33-4-6 is that it applies to claims by an insured against their own insurer. It does not directly create a bad faith cause of action for third-party claimants (i.e., the injured person making a claim against the at-fault driver’s insurer).

However, third-party bad faith exists in Georgia through case law. If the at-fault driver’s insurer acts in bad faith by refusing to settle within policy limits when liability is clear, the insurer may face an excess judgment. This is governed by the Holt v. Southern General Insurance Company framework, discussed below.

The Holt Demand: A Strategic Tool

While not directly based on O.C.G.A. § 33-4-6, the Holt demand (named after Southern General Ins. Co. v. Holt, 262 Ga. 267 (1992)) is a closely related strategic tool used in personal injury cases.

What Is a Holt Demand?

A Holt demand is a time-limited settlement demand sent to the at-fault party’s liability insurer, offering to settle the claim for the policy limits. The demand is structured to create consequences if the insurer fails to accept:

• The demand specifies a reasonable deadline for acceptance (typically 30 days)
• The demand identifies specific conditions that must be met (release of the insured, payment amount, payment method)
• If the insurer fails to accept within the deadline, and a jury subsequently returns a verdict exceeding the policy limits, the insurer may be liable for the entire excess judgment under a bad faith theory

Strategic Significance

The Holt demand puts the insurer in a bind: if liability is clear and the damages exceed the policy limits, the insurer’s refusal to tender the policy limits exposes its own insured to an excess judgment — and exposes the insurer to a bad faith claim by its insured for failing to settle. This creates enormous pressure on the insurer to pay policy limits promptly.

Requirements for an Effective Holt Demand

• The demand must be specific as to amount, deadline, and terms
• The demand must be reasonable and capable of acceptance
• The claimant must be willing and able to settle on the stated terms
• The demand must provide the insurer with sufficient information to evaluate the claim
• The deadline must be reasonable (30 days is typical; very short deadlines may be found unreasonable)

Proving Bad Faith

The burden of proving bad faith falls on the policyholder. To prevail, you must show:

1. Covered Loss

The loss must be covered by the policy. If the insurer correctly determined that the claim was not covered, there is no bad faith regardless of how the denial was communicated.

2. Demand Made

A proper demand must have been sent and the 60-day period must have elapsed without payment.

3. Bad Faith Refusal

The insurer’s refusal must have been in bad faith — meaning it lacked a reasonable basis. Evidence of bad faith includes:

• The insurer denied the claim without conducting a reasonable investigation
• The insurer ignored or misinterpreted clear policy language
• The insurer applied internal guidelines or algorithms that produced unreasonable valuations
• The insurer delayed payment without justification
• The insurer made unreasonable demands for documentation or proof
• The insurer’s own adjuster recommended payment, but management overruled it
• Similar claims were paid by the insurer under similar circumstances

Standard of Proof

Bad faith under O.C.G.A. § 33-4-6 is determined by a preponderance of the evidence standard (not the higher “clear and convincing” standard required for punitive damages). This makes it somewhat easier to prove than punitive damages under O.C.G.A. § 51-12-5.1.

Common Insurance Bad Faith Tactics

Insurance companies use numerous tactics to avoid paying valid claims. When these tactics lack a reasonable basis, they may constitute bad faith:

Unreasonable Delay

Dragging out the claims process for months or years without resolution. The insurer requests redundant documentation, reassigns adjusters, or simply stops responding.

Lowball Offers

Offering a settlement amount that is grossly below the claim’s value, hoping the policyholder will accept out of desperation or frustration.

Unreasonable Interpretation of Policy Language

Interpreting ambiguous policy provisions against the policyholder, or applying exclusions that clearly do not apply to the circumstances of the claim.

Failure to Investigate

Denying a claim without conducting a thorough investigation of the facts and circumstances. Georgia courts have found bad faith where insurers denied claims based on incomplete or biased investigations.

Requiring Unnecessary Documentation

Demanding documentation that is not required by the policy or that the insurer knows the policyholder cannot provide, as a pretext for denial.

Misrepresenting Policy Provisions

Telling the policyholder that their claim is not covered when it is, or misstating the policy terms to justify a denial.

Pressuring Quick Settlement

Contacting the injured policyholder shortly after an accident, before the full extent of injuries is known, and pressuring them to accept a quick, low settlement.

Bad Faith in UM/UIM Claims

UM/UIM (Uninsured/Underinsured Motorist) bad faith claims are among the most common applications of O.C.G.A. § 33-4-6 in Georgia personal injury practice. When your own auto insurer handles your UM/UIM claim, it acts in a dual capacity — it is both your insurer and, in effect, the defender of the uninsured/underinsured driver’s interests.

The Inherent Conflict

This dual role creates an inherent conflict of interest. The insurer has a contractual obligation to pay valid UM/UIM claims promptly, but it also has a financial incentive to minimize or deny those claims. When the financial incentive overrides the contractual obligation, bad faith occurs.

Common UM/UIM Bad Faith Scenarios

• Refusing to pay UM/UIM benefits after the at-fault driver’s liability is established
• Disputing the extent of injuries without a reasonable medical basis
• Requiring the policyholder to arbitrate or litigate despite clear liability and documented damages
• Applying unreasonable “reduction” formulas that undervalue the claim
• Asserting the policyholder was comparatively at fault without factual support

The Demand Process in UM/UIM Claims

To trigger bad faith penalties in a UM/UIM case, the policyholder must:

1. Submit the UM/UIM claim with supporting documentation
2. Allow the insurer a reasonable time to investigate and evaluate
3. Send a formal demand under O.C.G.A. § 33-4-6 specifying the amount claimed
4. Allow 60 days for payment
5. If the insurer refuses, file suit asserting both the underlying UM/UIM claim and the bad faith penalty claim

Key Georgia Case Law on Insurance Bad Faith

Southern General Ins. Co. v. Holt (1992)

The seminal Georgia Supreme Court case establishing the framework for third-party bad faith claims. The Court held that an insurer that fails to settle within policy limits when liability is clear and the demand is reasonable may be liable for the full excess judgment.

Cotton States Mut. Ins. Co. v. Brightman (2000)

The Georgia Supreme Court addressed the standard for bad faith under O.C.G.A. § 33-4-6, holding that the question is whether the insurer had a “reasonable and probable cause” for refusing to pay. If the insurer’s refusal was based on a reasonable evaluation of the facts and law, no bad faith penalty applies — even if the insurer’s evaluation was ultimately incorrect.

Cagle v. State Farm Fire & Cas. Co. (2012)

The Court of Appeals addressed the interaction between the bad faith penalty statute and the insurer’s duty to investigate, finding that an unreasonable investigation can support a finding of bad faith.

Howell v. Southern Heritage Ins. Co. (2016)

The Court of Appeals discussed the elements required for a proper demand under O.C.G.A. § 33-4-6, emphasizing that the demand must clearly identify the claim and the amount demanded.

Relationship to Punitive Damages

O.C.G.A. § 33-4-6 provides a statutory penalty that is separate from and in addition to punitive damages under O.C.G.A. § 51-12-5.1. However, the two remedies address different aspects of insurer misconduct:

Bad Faith Penalty (O.C.G.A. § 33-4-6)

• Applies specifically to insurance claims
• Requires a 60-day demand
• Capped at 50% of the claim or $5,000 (whichever is greater)
• Includes attorney fees
• Proven by preponderance of the evidence

Punitive Damages (O.C.G.A. § 51-12-5.1)

• Applies to tort actions generally
• Requires willful misconduct, malice, fraud, or wantonness
• Capped at $250,000 in non-product liability cases
• Proven by clear and convincing evidence

In egregious cases of insurance bad faith, both remedies may be available. The bad faith penalty addresses the insurer’s failure to pay the specific claim, while punitive damages address the broader pattern of misconduct.

Frequently Asked Questions About Georgia Insurance Bad Faith