State RegulationsGA specificDifficulty 2/5
A Georgia insurer receives a demand from its policyholder and, in bad faith, refuses to pay a covered loss within 60 days after the demand. In the resulting lawsuit, what additional penalty may the court impose on the insurer under Georgia law?
Select an option to reveal the answer and the full 3-part explanation — free, no signup.
Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
Under O.C.G.A. § 33-4-6(a), an insurer that in bad faith refuses to pay a covered loss within 60 days after demand becomes liable for the loss PLUS a penalty of not more than 50% OF THE LIABILITY OR $5,000, WHICHEVER IS GREATER, and also reasonable attorney fees. The dual 50%-or-$5,000 structure is the Georgia formula; the penalty scales with the loss when the loss is large.
Why the other options are wrong
- A) The penalty is not flat; O.C.G.A. § 33-4-6(a) sets it at 50% of the liability or $5,000, whichever is GREATER, so larger losses yield larger penalties.
- B) 25% is not the Georgia percentage; O.C.G.A. § 33-4-6(a) uses 50% of the liability or $5,000, whichever is greater.
- C) The Georgia formula always involves both the 50% figure and the $5,000 alternative; O.C.G.A. § 33-4-6(a) does not use a bare 50% with no dollar floor.
Memory hook
Bad faith costs half or five grand — whichever bites harder — plus the lawyer's bill.