In a recent significant victory for insurers, the Northern District of Georgia held that allegations that an insurer mishandled a first party claim for insurance proceeds cannot support an action in tort. Rather, such allegations may exclusively support a breach of contract claim or a statutory cause of action.
In Valles v. State Farm Fire & Cas. Co., No. 1:19-CV-5593-MLB, 2021 WL 322097 (N.D. Ga. Feb. 1, 2021), a pipe burst in the insured’s home, and he submitted a claim under his homeowners policy. The insurer disputed the amount of loss, and although the insured requested pursuant to the policy that the insurer send an appraiser to evaluate the damage, the insurer never did. The insured then filed a civil action alleging breach of contract as well as tort claims such as fraud and tortious interference.
The court dismissed the tort claims at the pleadings stage. It noted that a defendant’s breach of contract may give rise to a tort cause of action only if the defendant has also breached “an independent duty created by statute or common law.” Valles, 2021 WL 322097, at *3. “[A]bsent a legal duty beyond the contract, no action in tort may lie upon an alleged breach of a contractual duty. There must be an independent injury over and above the mere disappointment of plaintiff's hope to receive his contracted-for benefit.”
Crucially, the court determined that “Georgia law is clear that improper claims handling is a matter of contract, not tort, because it almost never triggers a duty outside the contract itself. That means an insurer does not trigger an independent legal duty when it fails to pay the plaintiff the full amount of damages owed under the insurance policy or when it otherwise botches the manner in which it processes Plaintiff’s claim for coverage.”
Under Valles and the authority cited therein, insurers can expect their handling of first party claims to be governed by the insurance policy they wrote and Georgia statutes governing first party claims such as O.C.G.A. § 33-4-6, rather than Georgia common law on torts.
If you have any questions concerning Georgia law on claims handling, please contact Seslee Smith, Ryan Burke, or a member of the Insurance Practice.
