The accident involved, in the words of the Linthicums' expert witness, “bad facts.” As alleged, Hopkins, who was driving while intoxicated, struck the Linthicums' son while he was crossing the street with his older brother, fled the scene, and took his car to a body shop for repair. According to the Linthicums, their son lived “under an hour” after the accident.

The Linthicums' retained an attorney, Tom Bordeaux, who sent a letter of representation to Mendakota Insurance. On July 25, 2008, Ms. Moulton called Mr. Bordeaux who, Ms. Moulton recorded, “stated he [had] other avenues to pursue re[garding] ins[urance] (IE dram shop), so [he was] not … ready to accept [the Hopkins policy] limits quite yet” and he would “be filing [a] claim on [the brother's] behalf.”

Mr. Bordeaux's notes of the conversation stated that he would “at some point … be making a demand for the policy limits but … [was] waiting to see about the criminal action.”

On August 7, 2008, Ms. Moulton mailed Mr. Bordeaux a letter that disclosed the limits of liability and contained a copy of the Hopkins insurance policy.

On September 29, 2008, Ms. Moulton called Mr. Bordeaux and left a voice message, but he did not return the call.

On October 8, 2008, Ms. Moulton called Mr. Bordeaux. Ms. Moulton recorded that Mr. Bordeaux had agreed to review and “sign [a] limited release.” Mr. Bordeaux's notes reflected that he had asked “whether this is simply going to be a matter of [him] writing a letter and them sending the checks in these claims (plural) and [Ms. Moulton] said yes”; that he inquired if he “could settle [the child's] case – which is both a wrongful death claim and an estate claim – without getting the estate probated”; and that he “need[ed] to think this through thoroughly … [to] make sure that we're not sliding one claim over the other” or “just end up paying the funeral home and the hospital.”

The next day, Ms. Moulton sent Mr. Bordeaux a letter by facsimile that tendered the limits of the Hopkins policy “to settle the case of Cynthia and Christopher Linthicum, Natural Parents of …, A Minor, Deceased.” Ms. Moulton also sent a release for the parents to sign.

Ms. Moulton remained in contact with Mr. Bordeaux. According to Ms. Moulton's notes, she spoke with Mr. Bordeaux on January 21, 2009, and he said that the “case is 'on hold' pending the criminal prosecution” and he “[had] no info on [a] trial date.” Ms. Moulton said she left messages on Mr. Bordeaux's voice mail on March 17, June 22, and August 12.

On August 27, 2009, Ms. Moulton spoke with Mr. Bordeaux's assistant, who stated that Hopkins' trial had been continued and that Mr. Bordeaux “[would] not be able to conclude matters pending [the] outcome of … trial.” Ms. Moulton also spoke with Mr. Bordeaux's assistant on December 4, 2009, who stated that the trial date “[had] been pushed out further” to “sometime in [20]10.”

On May 12, 2010, Mr. Bordeaux mailed Ms. Moulton a letter “demand[ing] the limits of [the] policy … [for] $25,000.00, in full and final settlement of [the Linthicums'] claims for the wrongful death of their child” in exchange for the “execut[ion of] a full release of … all claims for the wrongful death….” Mr. Bordeaux demanded notice, “in writing, by 5 p.m. EDT on May 24, 2010, of … acceptance,” or the offer would be “automatically withdrawn as of that time” and a “suit [filed] against Mr. Hopkins.”

Mendakota Insurance received the letter on May 17, 2010. Ms. Moulton did not respond to the offer.

On June 15, 2010, Ms. Moulton received a copy of the Linthicums' complaint, which sought damages for the wrongful death of their son. Ms. Moulton called Mr. Bordeaux and told his assistant that Mendakota Insurance already had tendered the policy limits for the claim.

On June 16, 2010, Mr. Bordeaux mailed Ms. Moulton a letter that stated she had failed to respond to the “very specific proposal to settle” and, in the meantime, “the two year statute of limitations [had expired] on the wrongful death claim.” Mr. Bordeaux acknowledged that Ms. Moulton had “some 20 months ago” offered to “settle significantly more than the wrongful death claim” because the release included “any and all claims, demands, damages, costs, expenses, loss of services, actions and causes of actions” belonging to the Linthicums for “all personal injury, disability, property damage, loss or damages of any kind” and “demanded indemnification as to 'any additional sum of money … pa[id] on account of the injuries to'” their son. The “letter of May 12, 2010,” Mr. Bordeaux explained, “proposed to settle the wrongful death claims only.”

The Linthicums agreed to settle the wrongful death action for $1.2 million, and in exchange Hopkins assigned to the Linthicums any claim that he might have against Mendakota Insurance. The insurance company paid the Linthicums the limits of the Hopkins policy.

The Linthicums sued Mendakota Insurance, alleging that it was liable for “negligently, carelessly, unreasonably, foolishly, stubbornly, litigiously, or in bad faith failing or refusing to settle [their] claim for the wrongful death of their child within the applicable limits of [the Hopkins insurance] policy.”

The U.S. District Court for the Southern District of Georgia granted summary judgment in favor of Mendakota Insurance. It ruled that the insurer had not acted in bad faith because the Linthicums' “counter-offer to accept the policy limits in exchange for settling only [their] claim for wrongful death” would not “fully settle [their] claims against Mr. Hopkins.” The counter-offer, the district court determined, exposed Hopkins to potential liability for the child's pain and suffering.

The Linthicums appealed, arguing that the district court had erroneously “relied on a possible pain and suffering claim for a non-existent estate in ruling that Mendakota had no duty to respond to an offer to settle the wrongful death claim only.” That “created a new type of 'safe harbor' for automobile liability insurance companies” that, the Linthicums argued, conflicted with existing Georgia law. They contended that Mendakota Insurance had “ignored a reasonable opportunity to settle” and, by so doing, had “violated its fiduciary duty to its insured.”

The Eleventh Circuit's Decision

The Eleventh Circuit affirmed.

In its decision, the circuit court explained that, under Georgia law, an insurer was not liable for failing to respond to a time-sensitive offer to settle for policy limits when the offer did not resolve fully the claim against its insured.

Mendakota Insurance, the circuit court found, had not acted negligently or in bad faith for failing to accept the Linthicums' offer to settle. The circuit court observed that, early in the negotiation process, the Linthicums' attorney had told the insurance adjuster that the “case … [involved] both a wrongful death claim and an estate claim.” Later, the circuit court pointed out, the Linthicums had made a “demand [for] the limits of [the] policy … in full and final settlement of their claims for the wrongful death of their child” and offered to “execute a full release of … all claims for the wrongful death.”

According to the circuit court, that “was not an offer to fully settle a claim within the policy limits to which [Mendakota Insurance] had a duty to respond” because the offer left unresolved the “estate claim” that the Linthicums had identified as a potential basis for recovery. Moreover, the Linthicums had acknowledged in their June 16, 2010 letter to Mendakota Insurance that the offer “proposed to settle the wrongful death claims only.”

The Eleventh Circuit was not persuaded by the Linthicums' contention that their offer was for full settlement because they had “presented no estate claim,” explaining that the possibility existed that they could sue both for the wrongful death of their child and for his pain and suffering under Georgia law.

The circuit court concluded, therefore, that Mendakota Insurance had not been obligated to accept the Linthicums' offer to settle only the “wrongful death claim.”

The case is Linthicum v. Mendakota Ins. Co., No. 16-16593 (11th Cir. May 3, 2017).