An excess judgment entered against the insured generally is the foundation for damages in an extra-contractual lawsuit. However, this can be just one aspect of the insured’s damages. In many states, an excess judgment against the insured is not a prerequisite to an extra-contractual recovery and other damages sustained by the insured as a result of claims handling misconduct are recoverable.
The Georgia Court of Appeals recently held a carrier accountable for additional damages it inflicted on its insured after the carrier tried to save a few thousand dollars in attorneys’ fees.
Mag Mut. Ins. Co. v. Perera, 2026 WL 1693566 (GA Ct. App. June. 11, 2026)
Perera stems from the death of Barbara Bowen after a ballon angioplasty procedure was performed by Perera in 2018. At the time of the procedure, Perera was a cardiovascular surgeon employed by University Hospital in Augusta, Georgia. According to the Court, Perera had a clean professional record at the time of the procedure and had never had any disciplinary, performance or credentialing issues, nor had his medical privileges been challenged, suspended or revoked.
At the relevant times, University Hospital had a professional liability policy issued by Mag Mut. Ins. Co. The policy covered physician employees, like Perera, that provided $1 million in coverage. Under the terms of the policy, Mag Mutual was obligated to defend covered claims, agreed to provide “the strongest defense we can” and to provide the insured with an attorney.
Underlying Claim
In October 2018, a short time after Bowen’s death, counsel for her estate (“Bowen’s counsel”) emailed University Hospital an unfiled malpractice complaint against Perera and indicated the Bowen family would like to attempt a pre-suit mediation before filing. University Hospital forwarded the draft complaint to Mag Mutual and Mag Mutual assigned Benjamin Torres as the claims analyst. In November 2018, Torres emailed Perera to let him know Mag Mutual had received the draft complaint submitted by Bowen’s counsel. Mag Mutual did not retain counsel for Perera at this point.
Later in November, Bowen’s counsel filed the medical malpractice complaint against Perera and Perera was served on December 7, 2018. Mag Mutual still did not retain counsel for Perera and instead emailed Perera on December 21, 2018. In that email, Torres informed Perera that Bowen’s counsel was interested in mediation and willing to stay the litigation for 60 days if a mediation could be scheduled. Perera was reluctant to attend mediation as it would imply he believed the case should be settled and he denied any wrongdoing that led to Bowen’s death.
In early January 2019, University Hospital’s general counsel received notice of a hearing in the malpractice case against Perera and reached out to Mag Mutual to find out who was retained to represent Perera. Mag Mutual still had not retained counsel for Perera and was technically in default. Mag Mutual had secured an extension from Bowen’s counsel until February 28, 2019 for Perera to file an answer but the extension was conditioned on Perera agreeing to participate in a mediation before that date. The general counsel’s office was alarmed to learn no counsel had been retained and immediately requested that a new adjuster be assigned.
Mag Mutual did assign a new adjuster on January 16, 2019 and still had five days to set aside Perera’s default. The new adjuster also learned that Torres had already scheduled a mediation of the malpractice claims against Perera and selected a mediator. The adjuster called Bowen’s counsel to cancel the mediation and informed him that Perera had not authorized any settlement. Bowen’s counsel considered this a repudiation of the agreement to extend Perera’s answer deadline and filed for a default judgment against Perera.
Mag Mutual did not retain counsel for Perera until January 28, 2019. By that time, the period for Perera to automatically get out of default had passed. Retained counsel did try to file an answer and set aside the default, however this was rejected by the Court and a judgment finding Perera liable for Bowen’s death was entered. The only remaining issue to be tried was the issue of Damages.
Mag Mutal Settles The Malpractice Action
Mag Mutual settled the malpractice case against Perera for $1.7 million and paid the full amount of the settlement including $700,000 over its policy limit. Perera did not approve of the settlement but acknowledged that Mag Mutual and University Hospital had the right to settle the lawsuit without his consent. As part of the settlement, Mag Mutual admitted that had the default not been entered against Perera, any settlement would have been nominal at best.
Perera’s Troubles Continue
Normally, extinguishing the excess judgmentt would have put an end to Perera’s saga. However, the settlement had to be reported to various boards and databases as the case involved allegations of medical malpractice. Virtually all hospitals have access to these databases for purposes of credentialing and hiring decisions and the report of the settlement with Bowen’s estate became a permanent mark on Perera’s record. Mag Mutual attempted to downplay the settlement with these databases by submitting information that the settlement was the result of its mistake but this mea culpa did not find its way onto the databases.
Roughly a year after the settlement, Perera found out that his employment with University Hospital would be eliminated. He began searching for a new position and submitted 30 applications for vascular surgeon job openings. He was unable to secure any full-time positions for which he was eligible and each such position indicated that candidates with malpractice settlements on their records would not be considered.
It became clear that Perera would not be hired by any hospitals given his record. Perera determined his only option was to open a private practice. Unfortunately, this came with a decrease in pay of well over a million dollars in just the three years after opening his own office. After suffering these losses, Perera was left with little choice but to pursue Mag Mutual for his personal damages.
Extra-Contractual Lawsuit
Perera sued Mag Mutual for its dismal claims handling and brought claims for breach of contract, breach of fiduciary duty, bad faith refusal to defend, negligence and cross negligence. Additionally, Perera sought attorneys’ fees and recovery of litigation expenses based on Mag Mutual acting in bad faith. After motion practice, the trial court allowed Perera to proceed on a breach of contract theory and to seek attorneys’ fees and litigation expenses for Mag Mutual’s bad faith.
Perera’s suit proceeded to trial. The jury found in his favor and awarded $9,109,775 in damages consisting of Perera’s lost wages. The jury also awarded Perera $3,120,711 in attorneys’ fees and expenses based on its finding that Mag Mutual had acted in bad faith. The Court entered judgement against Mag Mutual based on the jury’s verdict.
Appeal
Mag Mutual wasn’t happy with the verdict and appealed to the Georgia Court of Appeals. Mag Mutual essentially argued that Perera’s lost wages weren’t recoverable under a breach of contract claim for failing to properly defend him and that his damages were limited to the $1.7 million settlement that had already been paid by Mag Mutual. Additionally, Mag Mutual contended that it hadn’t acted in bad faith and could not be liable for attorneys’ fees and expenses. These were losing arguments.
The court of appeals determined that damages for an insurer’s misconduct were not limited to the amount of any settlement or excess judgment. Instead, the insured could collect consequential damages traceable to the insurer’s misconduct. Here, sufficient evidence existed that Mag Mutual’s failures had caused the settlement with Bowen’s estate and the required reporting of the settlement had led to Perera’s inability to find a job and lost earnings. Thus Perera’s wage losses were consequential damages caused by Mag Mutual’s mishandling of Perera’s defense.
Additionally, the court of appeals determined that there was sufficient evidence that Mag Mutual’s conduct was undertaken in bad faith. The evidence showed that Mag Mutual had refused to assign counsel because it did not want to incur defense costs. Mag Mutual knew that their own claims handlers had indicated they were pushing for early mediation because Bowen’s claims against Perera were defensible and early mediation before defense counsel involvement was a way to control the cost of defense. In the eyes of the Court of Appeal, this was a conscious decision by Mag Mutual not to retain an attorney to save money and not a mere mistake in handling the claims against Perera. Instead, this decision demonstrated Mag Mutual’s bad faith.
While paying an excess judgment or settlement in excess of the policy limits is a start, it is simply not enough to make an insured whole from a carrier’s poor claims handling. The Perera decision recognized as much by holding Mag Mutual responsible for all losses and damages traceable to its misconduct. While Perera focused on the insured’s lost wages, other “personal” damages suffered by the insured should also be recoverable especially when the insured is forced into protracted litigation with the claimant. This may well include emotional distress, fears of bankruptcy and damage to credit that are every bit as traceable to poor claims handling as Perera’s lost wages were. When properly supported by documentary and testimonial evidence, these damages can be extensive.
Need Assistance with a Bad Faith Situation?
Kirk Presley enjoys helping individuals and other lawyers with bad faith cases.
If you would like to speak with him about a bad faith case email him at kirk@presleyandpresley.com or call him at (816) 931-4611.