A Georgia court says an insurer can't just dump policy limits and walk away.
When Safeco Insurance Company of Illinois filed an interpleader action and handed over $100,000 in policy limits to a court registry back in 2014, it may have seemed like a clean and efficient way to close the book on a messy, multi-claimant auto accident case. But a Georgia appeals court has now said that move may have done more harm than good - at least for the company's own policyholder.
On March 16, the Court of Appeals of Georgia reversed the dismissal of a lawsuit brought by Trever Cannon, a Safeco policyholder who was left facing a $1.65 million judgment after a fatal crash on Interstate 516 in Savannah. The ruling sends the case back to trial court and raises pointed questions about how insurers handle claims when their insured's exposure far exceeds available coverage.
The facts trace back to February 2013, when Cannon was driving a Ford F-250 and was cut off by an unknown driver. He lost control, crossed the median, and collided head-on with a vehicle carrying Camie Joyner, her husband, and their minor daughter. Both Joyners were killed. Their daughter was injured.
Cannon's Safeco policy carried bodily injury limits of $50,000 per person and $100,000 per occurrence. By July 2014, Safeco had filed an interpleader action in superior court, depositing the full $100,000 into the court registry and asking to be released from any further financial responsibility under the policy. Notably, Safeco did not secure a release of any claim against Cannon when it tendered those limits. It simply put the money on the table and stepped back.
A month after Safeco filed its interpleader, Linda Barnes - Joyner's mother and the administrator of her estate - sued Cannon for her daughter's pre-death pain and suffering. Safeco took on Cannon's defense. By 2017, Barnes had settled with the Georgia Department of Transportation, leaving only her claim against Cannon and the unidentified driver. The case went to trial in February 2019. The jury awarded Barnes $3 million and assigned 55 percent of the fault to Cannon, resulting in a $1.65 million judgment against him – more than 16 times his policy limits.
Cannon then sued Safeco, arguing that the insurer had acted in bad faith by filing the interpleader and surrendering the policy limits without trying to negotiate a release on his behalf. By doing so, Cannon contended, Safeco removed any incentive for claimants to settle with him within the policy limits. He also alleged that Safeco breached its contract by providing an inadequate defense, claiming the insurer forced its appointed lawyers to work on a shoestring budget. The complaint alleged that when one of the attorneys recommended hiring an accident-reconstruction expert who had already given favorable opinions in Cannon's criminal case, a Safeco agent vetoed the idea, reasoning that there was not much more to be done since the policy limits had already been paid. Cannon further alleged that Safeco failed to interview a key witness who would have supported his account of being cut off by the unknown driver. On top of that, Cannon claimed Safeco refused to pay for an appeal bond, despite the policy containing a provision requiring the insurer to pay premiums on appeal bonds in any suit it defends.
The trial court in Chatham County dismissed all of Cannon's claims. He appealed.
A three-judge panel of the First Division unanimously reversed. On the bad faith claim, the trial court had relied on a Georgia Supreme Court ruling that held an insurer's duty to settle only arises when the injured party presents a valid offer within the policy limits. Since Barnes never made such an offer before Safeco filed its interpleader, the trial court concluded Safeco had no duty to settle.
The appeals court saw it differently. It agreed with the general rule but said it did not address the situation here – where the insurer's own actions effectively prevented any such offer from being made in the first place. The court warned that ruling otherwise would encourage insurers, upon learning that their insured faces liability well in excess of the policy limits, to simply cut off the possibility of settling any claims with a release. Rather than reducing Cannon's exposure, the court found, the interpleader removed any incentive for claimants to settle with him at all.
On the defense claim, the court pointed to the policy language giving Safeco the right to settle or defend any covered claim and to pay all defense costs it incurs. Prior Georgia case law had interpreted nearly identical language to mean that an insurer cannot simply walk into court, deposit the policy amount, and tell the insured the rest is up to him. The appeals court found that the complaint adequately alleged Safeco made a financial decision to prioritize its own interests over Cannon's, which was enough to survive dismissal.
As for the appeal bond, the court found the trial court's reading of the policy too narrow. The complaint alleged that Safeco had refused to pay for any such bond despite the policy provision, and the court held that was sufficient to keep the claim alive at this stage.
The decision also reinstated Cannon's claims for punitive damages and attorney fees, which had been dismissed only because the trial court found the underlying claims failed.
The case now returns to the State Court of Chatham County, where Safeco will have to defend against all of Cannon's claims on the merits. For insurers, the ruling is a reminder that tendering policy limits through an interpleader – without securing a release for the insured – may create more problems than it solves. And that the duty to defend, once undertaken, carries expectations that go beyond simply assigning counsel and showing up for trial.
