As insurance coverage practitioners, we know the drill. Plaintiff’s counsel sends an in-limits, time-limited demand to the insurance company. Defense counsel knows that failure to timely meet the demand could expose the insured (and insurer) to excess liability. But defense counsel wants to ensure that any medical liens are paid from the policy limits before the money is tendered to Plaintiff. As such, many states have enacted legislation that gives insurers the right to inquire about liens. For example, in Georgia, Ga. Code Ann. § 9-11-67.1 (West) provides:

(d) Upon receipt of an offer to settle set forth in subsection (a) of this Code section, the recipients shall have the right to seek clarification regarding terms, liens, subrogation claims, standing to release claims, medical bills, medical records, and other relevant facts. An attempt to seek reasonable clarification shall not be deemed a counteroffer.

Although it preceded the law, a recent Eleventh Circuit case illustrates some of the issues that may arise regarding what constitutes “reasonable clarification” under the statute.

Background Facts:

Christopher Brown drove his car across the center line into oncoming traffic and struck Amy Kemper, who was riding a motorcycle. Brown was drunk. Kemper was airlifted from the scene; she suffered serious injuries and incurred extensive medical bills. At the time of the accident, Equity insured Brown under a policy with a $25,000 limit. Equity quickly determined that Brown’s liability far exceeded the $25,000 policy limit.

With the help of an attorney, Kemper sent a demand letter to Equity, offering to sign a release if Equity delivered the $25,000 check to her before a specific date. Kemper also wrote, “PLEASE DO NOT contact me, or my Friends as this Demand is very simple [sic].” Equity responded to Kemper’s demand letter within the time required. It sent her a $25,000 check, a limited release, and a Medicare form. However, Equity included the following language in its response:

In concluding the settlement, we are entrusting that you place the money in an escrow account in regards to any and all liens pending. This demand is being asserted to protect the lien’s interest and in accordance with recent case law, Southern General Insurance Co. v. Wellstar Health System, Inc.

Kemper’s attorney returned the check to Equity, calling its escrow demand unacceptable: “Ms. Kemper has over one million dollars of medical bills, is catastrophically injured, and needs this money to live.” Kemper obtained a $10 million consent judgment against Brown, and Brown assigned Kemper his claim against Equity. Kemper sued Equity for bad faith failure to settle.

Lien Law in Georgia

Under Georgia law, medical providers are entitled to a lien against an injured party’s cause for action against the tortfeasor who caused the parties’ injuries and the tortfeasor’s insurer. See Ga. Code Ann. § 44-14-470(b) (West). “[T]he lien allows the hospital to step into the shoes of the insured for purposes of receiving payment from the tortfeasor’s insurance company for economic damages represented by the hospital bill.” S. Gen. Ins. Co. v. Wellstar Health Sys., Inc., 315 Ga. App. 26, 726 S.E.2d 488, 492 (2012). In order to perfect the lien, the medical provider must provide “written notice to the patient [injured party] and, to the best of the [medical provider]’s knowledge, the persons … and their insurers claimed by the injured person . . . to be liable for damages arising from the injuries. Allstate Fire & Cas. Ins. Co. v. Kennestone Hosp., Inc., 348 Ga. App. 335, 822 S.E.2d 832, 833 (2019). In other words, the medical provider may perfect the lien against the insured and insurer without giving the insured or the insurer notice of the lien. Thus, an unwary insurer could tender the policy limits to the injured party, unaware that a medical provider perfected a lien against it before it settled the injured party’s claim. This scenario, which could expose the insurer to double liability, is one all defense counsel must avoid.

Analysis- Kemper v. Equity Ins. Co., 396 F. Supp. 3d 1299, 1300 (N.D. Ga. 2019), rev’d and remanded, No. 19-12999, 2020 WL 5085875 (11th Cir. Aug. 28, 2020):

The Case of the Imaginary Lien

Judge Michael Brown ruled in favor of the insurer, holding that Equity had not negligently failed to settle by requiring the victim of a drunk driving accident to put a $25,000 policy limit in escrow. The district court granted Equity’s motion for summary judgement, holding that it did not act in bad faith as a matter of law. In doing so, the district court relied on Southern General Ins. Co., 315 Ga. App. 26. In Wellstar., 315 Ga. App. 26, the Georgia Court of Appeals created a “safe harbor” for insurers who may be faced with failure-to-settle claims. The safe harbor applies when “(1) the insurer promptly acts to settle a case involving clear liability and special damages in excess of the applicable policy limits, and (2) the sole reason for the parties’ inability to reach a settlement is the plaintiff’s unreasonable refusal to assure the satisfaction of any outstanding hospital liens.” Wellstar., 726 S.E.2d at 493.

Despite the lack of outstanding medical liens in Kemper, the district court held that Wellstar applied:

It may be that Wellstar involved actual, verified liens, but the Georgia court’s opinion provides a broader manner in which an insurance company may protect itself when faced with competing risks of liability to an insured and liability to potential lien holders. Given the clear priority that lien holders have under Georgia law and the guidance from the Georgia Court of Appeals that [Equity’s adjuster] could seek assurance that liens would be satisfied, it was unreasonable for Ms. Kemper to refuse to provide that assurance while also demanding that Equity not contact her. In the light of these facts, Equity’s inability to confirm the existence of any lien does not prevent it from obtaining the benefit of the Wellstar “safe harbor.”

The district court’s Kemper opinion would have allowed insurance companies to indefinitely delay an injured parties’ recovery, potentially making it impossible for injured parties with extensive medical bills to recover settlement money from insurance companies. If an insurance company can legally demand that lay people form escrow accounts for hypothetical liens, no injured person—or families of loved ones killed in an accident—would be able to efficiently cash their settlement checks.

Eleventh Circuit Opinion

On August 28,2020, the Eleventh Circuit revived Ms. Kemper’s lawsuit against Equity. The Eleventh Circuit concluded that there were issues of fact regarding whether Equity’s response to Ms. Kemper’s demand was reasonable. According to the panel, the case involves “numerous factual issues surrounding the issue of negligence and bad faith, even bearing Wellstar in mind.” In particular, the court noted the following facts that weigh in favor of Ms. Kemper: (1) Equity knew that Ms. Kemper was a state employee with likely insurance coverage for her medical bills, so there was no reasonable basis for it to fear liens from her medical providers; (2) Equity nevertheless checked for outstanding liens against Ms. Kemper and found none; (3) Equity’s counsel thought Wellstar likely did not apply and had advised Equity against sending the escrow demand; (4) although Ms. Kemper had demanded that Equity not contact her, Equity could not identify how contacting Ms. Kemper would have enabled it to settle; (5) Equity did not know how Ms. Kemper could comply with the escrow demand; (6) Equity’s escrow demand referred to “any and all liens pending” and was not limited to medical liens; and (7) the escrow demand was not limited in time. Given these and other factual distinctions between this case and the circumstances described in Wellstar, a jury must decide whether Equity’s conduct was reasonable.

The panel also referred future parties in similar disputes to Ga. Code Ann. § 9-11-67.1. The statute does not apply to Ms. Kemper’s dispute with Equity. But it provides guidance regarding policyholder/injured party demand letters and insurance companies’ ability to seek clarification of such demands.


  • Before tendering the policy limits to an injured party, defense counsel should ensure that the injured party’s medical providers have not perfected any liens against the insured or insurer.
  • Ga. Code Ann. § 9-11-67.1 (d) gives the insurer the right to seek reasonable clarification from the injured party regarding liens before tendering the policy limits.
  • As it stands, Wellstar does not allow insurance companies to indefinitely withhold settlement money from injured parties to cover potential, future liens.