We hear talk of another round of “tort reform” legislation including a “loser pays” rule. But some of the folks talking about it may not realize that Georgia already has five different “loser pays” rules.

One of the five forms of “loser pays” rules in Georgia is in O.C.G.A. § 9-11-68. Passed as part of the 2005 tort reform legislation, it provides for an award of attorney fees and expenses against a party that refuses to accept a settlement  offer and at trial does not improve upon the rejected offer by at least 25%. See Smith v. Baptiste, 287 Ga. 23, 694 S.E.2d 83 (2010).

Soon after this law was passed, I began hearing insurance adjusters and defense lawyers express the idea that it could backfire. They were right, as the largest fee “loser pays” awards have been against defendants and insurers that refused opportunities to settle for far less than the ultimate value of claims. Perhaps that realization explains why in the past seven years, I have received offers of judgment under this statute only a couple of times.

However, I hear anecdotal accounts that it is used more often against lawyers in high volume settlement practices who are reluctant to take cases to trial.

This tort reform statute provides that at any time more than thirty days after the service of the lawsuit and at least thirty days before trial (or twenty days if it is a counter-offer), either party may serve upon the other party a written offer with a caption referring to the Code section, to settle a tort claim for the amount of money specified in the offer, with either dismissal or entry of judgment accordingly.

Such an offer must be in writing, refer to the Code section, identify the parties and claims involved, state with particularity any conditions, the total amount of the proposal, whether it includes attorney fees and expenses, and be accompanied by a certificate of service showing service by certified mail or statutory overnight delivery.

If the plaintiff rejects an offer of settlement made by a defendant, the defendant is entitled to recover reasonable attorney’s fees and expenses of litigation incurred from the date of the rejection of the offer through the entry of judgment “if the final judgment is one of no liability or the nal judgment obtained by the plaintiff is less than 75 percent of such offer of settlement.”

If a defendant rejects an offer of settlement from a plaintiff, and the plaintiff recovers a final judgment more than 125% of the amount of the offer, the plaintiff is entitled to recover reasonable attorney’s fees and expenses of litigation incurred from the date of the rejection of the offer of settlement through the entry of judgment. An offer under this provision remains open for thirty days unless withdrawn in writing prior to acceptance in writing.

A counteroffer is a rejection, but may be couched as an offer in compliance with the statute. Either acceptance or rejection of such an offer must be in writing and served upon the offeror. An offer that is neither withdrawn nor accepted within 30 days is deemed rejected. There may be multiple successive offers.

If the conditions for award of fees and expenses apply, and the underlying judgment is appealed, the trial court can award the fees and expenses only if the judgment is affirmed.

Moreover, if the trial court determines that an offer under this statute was “not made in good faith in an order setting forth the basis for such a determination,” it may disallow any such award. In at least one case, the Court of Appeals upheld a trial judge’s decision to deny an award of attorneys’ fees and costs under this provision based on the offer having not been made in good faith. Great West Cas. Co. v. Bloomfield, 303 Ga.App. 26, 31(5), 693 S.E.2d 99 (2010).

The court’s opinion provides substantial analysis that could be helpful in arguing that an offer of settlement does not justify attorneys’ fees. In that case, for example, the court noted that a defense verdict, while relevant to consideration of a defendant’s good faith, was not dispositive, and that other evidence, such as the defendant’s subsequent offer that was many times higher than the § 9-11-68 offer, could provide a basis for denial of fees under an abuse of discretion standard.

A double-edged sword, this tort reform provision is used much less than was expected when it became law. It may be used when one side makes an offer for a realistic valuation of the case at least a month before trial. For example, if the value of the case exceeds policy limits, the plaintiff may join an offer under O.C.G.A. § 9-11-68 with a time-limit settlement offer to induce a reasonable settlement. Similarly, the defendant may utilize this section to induce settlement by making an offer keyed to a completely realistic case valuation.

See summary post, “Does Georgia need more than five ‘loser pays’ rules?”

Ken Shigley is immediate past president of the State Bar of Georgia and current chair of the board of the Institute for Continuing Legal Education in Georgia. Lead author of Georgia Law of Torts: Trial Preparation & Practice (West, 2010-12), he has an AV Preeminent rating in Martindale-Hubbell Law Directory and Bar Register of Preeminent Lawyers, double board certification in Civil Trial Advocacy and Civil Pretrial Advocacy from the National Board of Legal Specialty Certification (formerly National Board of Trial Advocacy), and is listed in Super Lawyers (Atlanta Magazine), Legal Elite (Georgia Trend) and Who’s Who in Law (Atlanta Business Chronicle). In the American Association Justice, he is a board member of the Trucking Litigation Group and secretary of the Motor Vehicle, Highway & Premises Liability Section.