Bobby C. Lawson, Plaintiff-appellant, v. State Farm Mutual Automobile Insurance Company, Defendant-appellee, 802 F.2d 410 (11th Cir. 1986)

The issue presented in this appeal is whether an action "to recover benefits" is a prerequisite to maintaining an action for penalties or punitive damages under OCGA Sec. 33-34-6(b) and (c). Because this question involved Georgia insurance law, we certified it for resolution by the Georgia Supreme Court, which answered it in the negative, 347 S.E.2d 565. We agree with the Georgia Supreme Court's determination, and thus reverse the judgment of the district court.

The relevant facts were set forth in our certification.

Bobby Lawson, an epileptic, claimed that he was injured on November 12, 1982, when he suffered an epileptic seizure, fell down in the middle of North Peachtree Road, in Atlanta, and was struck by an automobile driven by Susan McCahan, the daughter of a State Farm insured. Although some question exists as to whether McCahan's vehicle actually struck Lawson, State Farm decided to verify for payment the reasonable medical expenses associated with Lawson's injuries. It is undisputed that State Farm paid all claims for personal injury protection benefits submitted by Lawson at least seven months prior to his filing suit. Nevertheless, Lawson brought this action against State Farm for statutory penalties, punitive damages, and attorney's fees pursuant to OCGA Sec. 33-34-6(b) and (c) for State Farm's failure to pay his claims within the time period required by the statute.

State Farm moved for summary judgment contending that the statute did not create an action solely to recover benefits and that the payment of all of Lawson's claims for benefits before the initiation of his lawsuit extinguished any cause of action which he might have had for penalties and attorney's fees.

Lawson v. State Farm, 784 F.2d 350, 351 (11th Cir. 1986).

The district court agreed with State Farm, stating:

The operative words of subsection (b) which create a cause of action are those which state that 'the person entitled to the benefits may bring an action to recover them.' However, if the benefits have already been recovered, as is the case here, the statute clearly provides no cause of action. Likewise, subsection (c), which deals with the recovery of punitive damages, also grants a cause of action 'to recover the benefits' and Lawson in this case clearly has no cause of action.

Upon certification, however, the Georgia Supreme Court arrived at a different conclusion:

We answer the certified question in the negative. OCGA Sec. 33-34-6(b) provides that benefits required to be paid without regard to fault become overdue when not paid within thirty days after the insurer receives reasonable proof of loss. This subsection states that ' [i]n the event the insurer fails to pay each benefit when due, the person entitled to the benefits may bring an action to recover them and the insurer must show that its failure or refusal to pay was in good faith, otherwise the insurer shall be liable for a penalty not exceeding 25 percent of the amount due and reasonable attorney's fees.' OCGA Sec. 33-34-6(c) provides in addition to the penalties of subsection (b), 'in the event that an insurer fails or refuses to pay a person the benefit which the person is entitled to under this chapter within 60 days after proper proof of loss has been filed, the person may bring an action to recover the benefits; and, if the insurer fails to prove that its failure or refusal to pay the benefits was in good faith, the insurer shall be subject to punitive damages.'

The apparent purpose of the legislature in enacting the 30/60 day requirements of OCGA Sec. 33-34-6 was to assure prompt payment of claims by imposing penalties and damages on insurers failing to meet the deadlines. If an insurer could avoid these penalties and damages by making payment after the deadline, there will be no incentive in the statute to meet the deadline. The issue of the insurer's good faith is to be determined by the events and circumstances during the 30/60 day time period. Payment thereafter to a claimant's medical suppliers, as in this case, should not prevent a suit by the claimant for the penalties and damages. To interpret the statute otherwise would make it possible for unscrupulous insurers to ignore the due date of the statute with impunity so long as payment to suppliers is made sometime before suit for benefits is brought. As we understand the statute, the words, 'failure or refusal to pay' refers to payment 'when due,' and do not authorize a late payment. It is not simply the total failure to pay, but the failure to make timely payment which gives rise to penalties and damages. In our view the conjunctive expressions relating the suit to recover benefits to the recovery of penalties and damages should not be construed so as to defeat the purpose of the statute.

Whether the acceptance of late payment by the claimant himself should estop him from bringing a suit for penalties and damages is a different issue, and not before us in this case.

We hold that an action to recover benefits is not a prerequisite to maintaining an action for penalties or punitive damages under OCGA Sec. 33-34-6.

Accordingly, the judgment of the district court is reversed.

REVERSED.