Multiple claimant and insufficient limit cases are complex and difficult for insurers to handle for insureds. However, difficult and complex situations are when insureds need their insurer to exercise the highest level of claims handling. An insurer should still strive to secure the most protection and the greatest release of liability possible for the insured.
Taking the path of least resistance and interpleading the limits into Court without securing a release of the insured provides limited protections to the policyholder and poses a risk of extra-contractual exposure to the insurer. This risk is more pronounced in jurisdictions that lack a safe harbor statute which precludes extra-contractual liability if the insurer timely interpleads the funds into the Court.
Canon v. Safeco Ins. Co. of Ill., 2026 WL 733689 (Ga. Ct. App. 2026)
In February 2013, Trever Cannon was driving his truck on the interstate when an unidentified vehicle cut him off. Attempting to avoid hitting the unidentified vehicle, Cannon lost control of his truck and crossed the median into oncoming traffic. Unfortunately, Cannon struck a vehicle driven by Camie Joyner. Ms. Joyner and her husband were killed and their daughter was injured.
Safeco Interpleads the Policy Limits
At the time of the wreck, Cannon carried an auto policy issued by Safeco. The Policy only provided $50,000 per person and $100,000 per occurrence for bodily injury liability coverage. This presented a significant issue since there were at least 3 claims that could be made against Cannon and all were likely to exceed the per person bodily injury limits.
Roughly 17 months after the collision, Safeco decided to interplead the $100,000 per occurrence limits into Court. The Interpleader action did not secure a release for Cannon from any claims. Instead, Safeco requested that all the claimants:
Be required to interplead and settle between themselves their right to the sum paid by Safeco into the registry of [the] Court, and that Safeco be discharged from any and all financial responsibilities under the contract of insurance…resulting from the vehicle collision.
Underlying Lawsuit
A month after the Interpleader was filed, Camie Joyner’s mother, as the Administrator of her Estate (“Estate”), filed a lawsuit against Cannon, the unidentified driver and the Georgia Department of Transportation for Camie’s wrongful death. Safeco agreed to defend Cannon and it does not appear that Safeco raised any coverage issues.
After settling with the Georgia Department of Transportation, the Estate proceeded to a jury trial against Cannon and the unidentified driver. The jury returned a $3,000,000 verdict in favor of the Estate and assigned Cannon fifty-five percent of the fault. Ultimately, the court entered a judgment in the amount of $1,650,000 against Cannon. The judgment was upheld on appeal.
Extra-Contractual Lawsuit
After his unsuccessful appeal, Cannon filed a lawsuit against Safeco centering on the way it handled the claims against him. Cannon asserted two claims against Safeco. The first was a negligence/bad faith failure to settle claim. Through that claim Cannon argued that Safeco had filed the interpleader action and paid the limits of the Policy into Court without any consideration of Cannon’s interests. The second claim alleged breach of contract and the implied duty of good faith and fair dealing based on Safeco’s failure to provide an adequate defense to Cannon for the claims made by the Estate.
Safeco strongly disagreed with Cannon’s claims and filed a motion to dismiss for failure to state a claim. The trial court agreed and granted Safeco’s motion. Cannon appealed.
Appellate Decision
Cannon chose to appeal the dismissal of both his negligence/bad faith failure to settle claim and his claim for Safeco’s failure to provide an adequate defense. The Court agreed with Cannon’s points and determined that his pleadings did set forth valid claims.
On the negligence/bad faith failure to settle claim, the court recognized that an insurer must give equal consideration to the interests of the insured when determining whether and how to settle. Further, the court noted that the Estate had not made a demand for the limits of the Policy before Safeco pursued the Interpleader action. The lack of a demand was not fatal to Cannon’s claims as the Court determined that Safeco’s initiation of the Interpleader action could be viewed as Safeco precluding and disincentivizing the claimants from making an offer to settle. Cutting off the possibility for Cannon to secure a release of at least some of the claims for the available policy limits was not in Cannon’s interests and arguably only served Safeco’s mission to eliminate its obligations under the Policy. Further, to hold that an insurer could not be liable if it pursues an interpleader action would encourage insurers to pursue these actions quickly rather than attempting to secure releases for the insured.
The Court also agreed that Cannon’s claims based on Safeco’s handling of his defense were valid based on his pleadings. The Court noted that it was not enough that Safeco had agreed to defend Cannon as filing an answer and showing up for trial was not enough. Cannon had alleged that Safeco forced retained counsel to work on a shoestring budget. Safeco had refused to authorize and pay for retained counsel to hire an accident reconstructionist or interview a key witness. In so refusing, Safeco’s representative explained to the attorney there was “not much more we can do as we paid our policy limits.”
The Court also rejected Safeco’s argument that Cannon’s claims were merely an attempt to hold Safeco vicariously liable for retained counsel’s malpractice. Instead, Cannon’s allegations provided a basis for finding that Safeco made a financial decision to put its interests above Cannon’s when it hamstrung his defense counsel.
The Safeco decision came at the motion to dismiss stage and more proof will be needed to hold Safeco liable for the excess judgment. However, the Safeco decision illustrates that an insurer cannot simply offer its policy limits through an interpleader action to escape extra-contractual exposure in a multiple claimant scenario. Instead, the Court made clear that every action taken by the insurer should have the goal of advancing the financial interests of the insured; protections Cannon purchased when he paid his premium.
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