A federal court in Georgia dismissed insureds' bad-faith claim after determining that the insureds' communications did not constitute a pre-suit demand as required under Georgia law. Butler v. Nationwide Mutual Fire Ins. Co., No. 1:21-cv-02138, 2022 U.S. Dist. LEXIS 41026 (N.D. Ga., Mar. 8, 2022).
The insureds filed a claim following a fire. Shortly thereafter, the insureds sent a letter to the insurer's representatives informing them that the house and its contents were so devastated by the fire that it should be deemed a total loss. The insureds retained multiple experts, including a fire restoration contractor, a structural engineer, and an industrial hygienist, to comment on the extent of the fire damage and resultant mold. The insureds frequently communicated to the insurer that the extent of the loss was great and requested that the insurer take more swift action. The insurer accepted coverage for the claim following a letter from the insureds' attorney that demanded full policy limits and bad faith, but the insureds sued alleging bad faith by the insurer.
The insurer moved to dismiss, arguing that the insureds did not leave their bad-faith demand open for 60 days following the bad-faith demand from the inureds' attorney before filing the lawsuit as required under Georgia law. The insureds argued that the insurer was placed on notice of bad faith as early as the insureds' initial letter advising of a total loss. The court noted that it must assess whether the communication explicitly mentions bad faith, demands payment for the claim, or states that litigation is forthcoming. The court analyzed the multiple communications between the insurer and the insureds to determine whether a demand was made earlier than the "formal" demand from the insureds' attorney. The court found that the insureds' earlier communications failed to demand bad faith because the language was insufficient, noting that the letter was "polite and kind" and did not demand payment.
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