Insurance Bad Faith and Excess Verdicts
Insurance companies have a duty to protect their policyholders. When they refuse to settle a claim within policy limits, and the jury returns a higher verdict, they’ve created an excess verdict. That’s where bad faith law comes in.
What Is Bad Faith?
Bad faith happens when an insurer unreasonably refuses to settle, gambling with its policyholder’s money. If the jury awards more than the policy covers, the insurer can be liable for the full amount — not just the policy limits.
Why Bad Faith Law Exists
Without this rule, insurers would always gamble, knowing the worst that could happen is paying the policy limit. Bad faith law forces insurers to act reasonably, protecting both policyholders and injured plaintiffs.
Georgia and South Dakota Approaches
Georgia: Recognizes first- and third-party bad faith. Statutes and case law allow recovery beyond policy limits when insurers act unreasonably.
South Dakota: Courts likewise allow bad faith claims, giving policyholders and plaintiffs a remedy when insurers abuse their power.
Why It Matters
Bad faith law is one of the few levers plaintiffs have to hold insurers accountable. It keeps the playing field fair when companies try to protect profits over people.