The state's plaintiffs and defense bars will be intently watching the Georgia Supreme Court Tuesday morning as the justices weigh whether personal injury lawyers have routinely manipulated the state's bad faith law to “set up” insurers with massive judgments far in excess of their policy limits.

There has been an increasing outcry from the insurance defense bar about the use of time-limited demands for an insured's policy limits, often putting insurers under pressure to capitulate or face a “bad faith” lawsuit for failing to settle within the time demands.

They became known as “Holt demands” after the 1992 case in which the Georgia Supreme Court held that, if an insurer knows its insured is liable and the damages likely exceed policy limits, the insurer can be subject to bad faith damages if it fails to settle within those limits.

The law has been tightened so that insurers have at least 30 days to respond, but defense lawyers say some plaintiffs lawyers tack on variety of stipulations or otherwise try to play “gotcha” with insurers.

In First Acceptance Insurance Company of Georgia v. Hughes, defense lawyers and several business groups supporting them think they have a good example to plead their case.

The case began with a 2008 crash in Gwinnett County when Ronald Jackson rear-ended a car driven by Julie An, causing a chain-reaction wreck involving five vehicles. Jackson died of his injuries nearly two months later.

Jackson's acceptance policy carried a $25,000 per person, $50,000 per accident limit.

Five claims were filed against Jackson's estate, including two by An and her 2-year-old daughter, Jina Hong, who was the most seriously injured, incurring more than $327,000 in medical bills.

The insurer's investigation quickly revealed Jackson was liable, and the lawyer representing An and Hong faxed the insurer, First Acceptance, demanding Jackson's insurance information “within thirty days of the date of this letter,” and a second fax that offered a global settlement for the policy limits.

The insurer didn't interpret the letters as a time-limited demand and filed them. An's lawyer rescinded the offer and filed suit in DeKalb County six weeks later.

The case went to trial in 2011 and ended with a jury award of more than $5.4 million against Jackson's estate.

DeKalb County State Court Judge Mike Jacobs tossed the case on summary judgment, but the Georgia Court of Appeals said the issue of whether First Acceptance acted in bad faith should have been left to the jury.

More than 20 lawyers have entered appearances in the Supreme Court case, which includes amicus briefs from the Georgia Chamber of Commerce, Georgia Chemical Council, Associated General Contractors of Georgia, the Homebuilders Association and the National Federation of Independent Business, among others.

“The well-intentioned, but hopelessly flawed articulation of the test for bad faith failure to settle claims, originally set forth in Holt and its progeny, cannot be permitted to continue and expand,” the amicus brief argues.