State RegulationsGA specificDifficulty 2/5
An insurer in Georgia fails to pay a covered loss within 60 days after the insured's demand. Under O.C.G.A. § 33-4-6(a), the insurer may become liable for the loss plus a penalty of not more than:
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
Under O.C.G.A. § 33-4-6(a), an insurer's bad-faith refusal to pay a covered loss within 60 days after demand exposes it to liability for the loss plus a penalty of not more than 50% of the liability or $5,000, whichever is greater, together with reasonable attorney fees. The formula scales with the size of the loss, so larger bad-faith refusals carry proportionally larger penalties.
Why the other options are wrong
- A) 25% is not the Georgia penalty percentage; the statute uses 50% of the liability (or $5,000, whichever is greater).
- C) The dollar floor in the bad-faith formula is $5,000; $10,000 belongs to the cease-and-desist penalty structure under O.C.G.A. § 33-6-9.
- D) The penalty is not flat — it is the greater of 50% of the liability or $5,000, so it grows with the size of the unpaid loss.
Memory hook
Bad faith after 60 days: half the loss or five grand — whichever bites harder.