Introduction
May a liability insurer discharge its obligations to its insured simply by interpleading its policy limits, even when doing so leaves the insured exposed to a multimillion-dollar excess judgment? The Georgia Court of Appeals recently answered that question in the negative. In Cannon v. Safeco Insurance Company of Illinois, — S.E.2d —-, 2026 WL 733689 (Ga. Ct. App. Mar. 16, 2026), the Georgia Court of Appeals reversed the dismissal of an insured’s bad-faith claims and held that a liability insurer cannot fulfill its duties simply by turning over its policy limits without obtaining a release of the claims pending against its policyholder. The decision confirms that interpleader, far from insulating a liability insurer, can itself give rise to bad-faith exposure when the insurer advances its own interests at the expense of its insured.
Interpleader and Liability Insurance
Interpleader is a procedural mechanism by which a party holding funds (here, the insurer) deposits those funds with a court and asks the court to distribute the funds to competing claimants and to discharge the insurer from further liability. It is a tool designed to protect a stakeholder caught between adverse claimants, not a means for an insurer to abandon its policyholder.
Under Georgia law, an insurer has a duty to give “equal consideration” to its insured’s interests when defending and settling claims against its insured. Insurers facing multi-plaintiff, excess-exposure cases increasingly seek to interplead their policy limits and wash their hands of further responsibility. Insurers argue that if they deposit available policy limits with the court, they are entitled to a judicial discharge from further financial responsibility under the policy — even if claims remain pending against the insured. This approach leaves the insured in a precarious position. If the insurer does not negotiate a release of the claims against its insured, the insured remains fully exposed. The claimants still have live claims — potentially for damages far exceeding the policy limits — and the policy proceeds that might have been used as leverage to obtain a release are released to the claimants. The policy limits that the insured purchased for its own protection are turned over to its adversaries without securing any practical benefit for the insured. Moreover, the insurer may either try to withdraw from defending its insured or may only provide a bare-bones defense.
The Cannon Decision
Cannon exemplifies the exposure to policyholders when their insurers interplead their policy limits.
Trever Cannon lost control of his vehicle when a “John Doe” driver cut him off. He crossed the median and struck the Joyners’ vehicle head-on, killing Camie Joyner and her husband and injuring their minor daughter. It was, by any measure, a catastrophic accident — and one that would generate claims far exceeding Cannon’s Safeco auto policy limits of $50,000 per person / $100,000 per occurrence.
Rather than attempting to settle the claims on Cannon’s behalf, Safeco filed an interpleader action, deposited Cannon’s full $100,000 policy limit into the court registry, and asked to be discharged. It secured no release for Cannon from any of the potential claimants.
A month later, Joyner’s mother (as administrator of her estate) sued Cannon. The case went to trial, and the resulting judgment against Cannon was for $1.65 million — more than 16 times the policy limits.
Following the verdict, Cannon sued Safeco for negligence/bad faith, breach of contract, and breach of the implied duty of good faith and fair dealing. Cannon alleged that Safeco did not act in his best interest and defended the case on a “shoestring budget.” The trial court dismissed the case, reasoning that because the claimant had never made a demand for payment of the policy limits before Safeco filed its interpleader, Safeco had no duty to settle. Cannon appealed.
Interpleader May Not Fulfill Insurers’ Duties to Act in Good Faith
Cannon’s appeal asked the Court of Appeals to decide whether Safeco acted in bad faith by interpleading Cannon’s policy limits without attempting to resolve the claims against Cannon. The court framed the central question as “whether an insurer accords its insured the same faithful consideration it gives its own interest . . . when it unconditionally tenders the policy limits and thus cuts off the possibility for the insured to obtain a release of any of the claims against him.”
The court answered with a resounding “no.” “Rather than ‘reduc[ing] the overall risk of excess exposure,’ filing the interpleader action under the circumstances alleged in this case was not only not in Cannon’s ‘best interest,’ but it removed incentive for any claimant to settle a claim against Cannon within the policy limits.” The court relied on persuasive authority from other jurisdictions explaining that an unconditional tender of policy limits that does not release the insured “raises serious questions as to whether the insurer has discharged its policy obligations in good faith” and that such a payment, “which has the effect of bankrolling a plaintiff’s case against the insured, is not made in good faith.” The court further rejected the argument that the insurer had a duty to interplead the funds in the face of multiple excess claims. An insurer’s duties run to its insured — not to those claiming against its insured. Finally, the court held that an insurer has a duty to provide its insured with a competent defense, even if it has interpleaded the policy limits.
Key Takeaways for Insureds, Coverage Counsel, and Risk Managers
Interpleader is not a get-out-of-jail-free card for insurers. Cannon establishes that an insurer cannot use interpleader as a mechanism to shed its obligations while leaving its insured exposed to excess liability. An insurer that tenders its insured’s policy limits without attempting to secure a release for the insured may face bad-faith liability. An insured’s policy limits should be used to resolve claims against the insured, not to benefit the insured’s litigation adversaries. Policyholders should pay close attention any time a liability insurer moves to interplead the insured’s policy limits — and should push back if the insurer has not first attempted to negotiate a settlement that includes a release of claims against the insured.
The duty of good faith is not limited to settlement demands. Safeco argued that its duty of good faith was triggered only if a plaintiff made a valid within-limits demand — something that had not occurred before it filed the interpleader. The Court of Appeals rejected that narrow, formalistic view. Rather, the duty of good faith is an ongoing obligation that runs through every claim-handling decision. Policyholders should be alert to situations where an insurer’s actions are taken to benefit the insurer, not the insured.
Insurers’ duty to defend requires a competent and adequate defense. In addition to challenging the interpleader itself, Cannon alleged that Safeco forced defense counsel to operate “on a shoestring budget” after it interpleaded the policy limits. According to the complaint, when challenged on the thin defense, Safeco stated that there was “not much more we can do [as] we paid our policy limits.” The Court was unpersuaded, holding that an insurer’s duty to defend is not merely a duty to show up — it is a duty to provide a competent and adequate defense:
The insurer’s duty is both to defend actions and to pay judgment against the insured. Otherwise, where the damages exceed the policy coverage, the insurer could walk into court, toss the amount of the policy on the table, and blithely inform the insured that the rest was up to him. This would obviously constitute a breach of the insurer’s contract to defend actions against the insured, for which premiums had been paid, and should not be tolerated by the courts.
Policyholders should insist that their insurers provide an adequate defense against claims.
Conclusion
Cannon v. Safeco delivers a clear message to insurers: Paying out your insured’s policy limits to claimants is not the same as protecting your insured. An insurer that files an interpleader without negotiating a release has arguably placed its own interests ahead of its policyholder’s interests. Cannon shows that an insurer’s duty to act in good faith covers the entire claim handling process and cannot be discharged through self-interested maneuvers or rigid adherence to a formalistic checklist.
