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Georgia Insurance Law

Old Precedents and New Developments

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Georgia Insurance Law: Update 2014

I. General Liability

II. Professional Liability

III. Property

IV. Auto

V. Bad Faith

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General Liability

Who is an “Insured”? Nuvell National Auto Finance v. Monroe Ins. Co. (Ga. App. 2013). Repossession company had general liability policy covering “you” re: “autos you do not own” and “while used in your business.” Insured hired an independent contractor (Brown) to get the car. Brown ran over the car buyer with tow truck during repossession. (1)   Tow truck was a unowned car – no possession yet (2)   Incident was close enough to insured’s “business”

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General Liability

What is an “Occurrence”? The Key to Coverage under a GL Policy:

“property damage” and “bodily injury” caused by an “occurrence.” Definition:

“An accident, including continuous or repeated exposure to substantially the same general harmful conditions.”

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General Liability

What is an “Occurrence”? OLD CASE: Southern Guaranty v. Anderson (Ga. App. 1998)

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General Liability


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General Liability


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General Liability


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General Liability

What is an “Occurrence”? OLD CASE: Southern Guaranty v. Anderson (Ga. App. 1998) Insurer filed DJ to escape duty to defend in civil suit.

Insured claimed that she did not intend to injure bus driver. - refused to testify in deposition, citing Fifth Amendment. COURT: Possible “Occurrence”

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General Liability

What is an “Occurrence”? NEW CASE: Leverette v. Meritplan Ins. Co. (11th Cir. 2014) Altercation on the golf course.

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General Liability

What is an “Occurrence”? NEW CASE: Leverette v. Meritplan Ins. Co. (11th Cir. 2014) Altercation on the golf course.

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General Liability

What is an “Occurrence”? NEW CASE: Leverette v. Meritplan Ins. Co. (11th Cir. 2014) Altercation on the golf course. District Court:

Injuries could not be result of accidental means

“Self defense” was not relevant to policy language

Intent to cause specific injuries was not material AFFIRMED

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General Liability “Occurrence” – Construction Defects? OLD CASE: Sawhorse, Inc. v. Southern Guarantee (Ga. App. 2004).

Georgia courts have consistently find no “occurrence” where faulty workmanship only causes damage to the work itself and not to other property.

● Insured hired to build second story above pre-existing structure.

● Insured’s work was faulty; also damaged pre-existing structure.

● Damage to pre-existing structure was an “occurrence.”

● Cost to replace insured’s faulty work was not covered.

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General Liability

“Occurrence” - Construction Defects

NEW CASE: Taylor Morrison Homes v. HDI-Gerling Ins. Co. (Ga. 2013) Certified to Georgia Supreme Court:

(1) Does “occurrence” require damage to other property?

NO

(2) Can “breach of contract” claim be an “occurrence”?

YES

“Motor Vehicle” Exclusion Hays v. Georgia Farm Bur. Mut. Ins. Co. (Ga. App. 2012).

Two deer hunters

+ One raised deer stand + Lots of beer + One portable toilet + Truck = Hunter fell twenty feet, injured

NO COVERAGE 15

GL Exclusions

“Child Care” Exclusion State Farm Fire & Cas. Co. v. Bauman (Ga. App. 2012).

Insured had child-care operation - but not on holidays, vacations, weekends, or when own child was sick HO policy excluded “child-care services” - exception: “occasional child-care services offered by the insured.”

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GL Exclusions

“Child Care” Exclusion State Farm Fire & Cas. Co. v. Bauman (Ga. App. 2012).

Insured had child-care operation - but not on holidays, vacations, weekends, or when own child was sick HO policy excluded “child-care services” - exception: “occasional child-care services offered by the insured.”

“A word or phrase is ambiguous only when it is of uncertain meaning, and may be fairly understood in more ways than one so that it involves a choice between two or more constructions of the contract."

NO COVERAGE 17

GL Exclusions

AMBIGUOUS?

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GL Conditions

Notice Condition OLD CASE: S.C. Ins. Co. v. Coody (M.D. Ga. 1997)

Duty is Triggered: If insured actually knew or should have known of the possibility that it might be held liable for the occurrence in question.” OBJECTIVE STANDARD

Insured “cannot avoid the requirement of prompt notice by claiming that it believed it was not liable.”

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GL Conditions

Notice Condition

NEW CASE: OneBeacon Am. Ins. Co. v. Catholic Diocese of Savannah (11th Cir. 2012). Diocese sued for molestation Diocese notified insurer of claim 21 months later Summary judgment for insurer: AFFIRMED (1) Notice was late – insured gave no specific credible excuse, just an affidavit (2) Insurer need not show prejudice to invoke condition

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GL Conditions

Notice Condition

NEW CASE: Eels v. State Farm Mut. Ins. Co. (Ga. App. 2013) Some policies specify how notice of an occurrence must be given. Georgia courts enforce these provisions, despite the “actual notice” rule. Here, notice condition that required “timely, written notice” The insured’s mother had informed the insurer of an accident verbally, but this was insufficient. The written notice was two years after the incident, so it was untimely as a matter of law.

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GL Conditions

Notice Condition

NEW CASE: Garner & Glover Co. v. Barrett (Ga. App. 2013) 2005: Accident at gas company plant; sued for $10M

Gas company told its agent to notify primary CGL insurer. Gas company assumed that its broker would notify excess insurer.

2007: primary insurer asked gas company to notify excess insurer. Court found no duty of broker to notify excess insurer - because insured did not specifically tell it to do so; - would not find this duty in “course of dealing” as this was first claim. Two-year delay breached policy condition to notify “as soon as practicable”

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GL Conditions

Cooperation Condition

OLD CASE: Wolverine Ins. Co. v. Sourrough (Ga. App. 1970)

After auto collision, insured would not cooperate with insurer

Insurer sent letter requesting cooperation and threatening disclaimer.

Insured replied and made an appointment with the adjuster;

- when the insured went to the office, the adjuster was out.

Adjuster asked insured to call back and make another appointment, the insured did not.

Insured and the adjuster never managed to get together to communicate about claim.

Court: record was insufficient to support denial under cooperation clause.

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GL Conditions


NEW CASE: State Farm Fire and Cas. Co. v. King Sports (11th Cir. 2012).

Insured sold golf clubs; sold for trademark infringement Insurer appointed defense counsel; insured would not reply to counsel

Five months after suit: Defense counsel filed “answer” Insurer filed DJ on coverage

Six months after suit: Insured’s employee told defense counsel to stop calling him Defense counsel filed intention to withdraw

Eleven months after suit: Insured’s employee signed “set up” settlement with Plaintiff

NO COVERAGE

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GL Conditions


NEW CASE: Vaughan v. ACCC Ins. Co. (Ga. 2012) Insurer made several attempts to contact insured. Insured replied once, confirmed address. Insurer was able to investigate claim and photograph car. Defense counsel made several attempts to contact insured. Insured replied to defense counsel, confirmed address. Defense counsel made more unsuccessful attempts to communicate. Insured did not appear at court hearing. Judge refused continuance, awarded judgment to claimant. Insurer withdrew defense, refused to pay judgment.

Hoover v. Maxum Indemnity Company

Supreme Court of Georgia June 18, 2012

GL – Reservation of Rights

OLD CASE: Richmond v. Georgia Farm Bureau Mut. Ins. Co. (Ga. 1975).

An insurer questioning coverage for a claim may: n  Defend the claim and waive policy defenses; n  Deny coverage and refuse to defend; n  Defend under a mutual non-waiver agreement; or n  Defend under a reservation of rights


Hoover v. Maxum Ins. Co. (Ga. 2012) n  EWES employee, James Hoover, is injured at

work in 2004, and sues EWES in tort

n  EWES fails to notify its insurer, Maxum, until October 2006, over two years later, and 7 days before the Answer to Hoover’s complaint is due

n  Four days later, Maxum denies EWES’s claim based on an Employer’s Liability Exclusion


Maxum’s coverage position letter:

•  This denial letter is “not intended as a waiver of any other policy defenses”

•  Maxum “continues to reserve the right to raise any other coverage defenses”

•  Maxum reserves its right to assert that: “coverage for this matter may be barred or limited

to the extent the insured has not complied with the notice provisions under the policy”


Hoover v. Maxum: Majority Opinion

•  Insurer cannot deny on one ground & ROR on other grounds

•  ROR is just a way for an insurer to provide a defense while still keeping open the option of denying coverage

•  “A reservation of rights is only available to an insurer who undertakes a defense”

•  A “reservation of rights does not exist so that an insurer who has denied coverage may continue to investigate to come up with additional reasons on which denial could be based”


Lessons for Georgia Insurers •  Two Viable Options for Questionable Claims:

•  Deny the claim on all possible defenses •  Defend the insured and ROR on all possible defenses

•  File a declaratory judgment action •  Immediately, if insured objects to ROR •  Raise all defenses in DJ complaint •  Must defend to file DJ action

•  Avoid boilerplate language in reservation of rights •  Name every ground for denial at all stages of dispute

(reservation of rights, pleadings, discovery, motions)

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Recoupment of Defense Costs

Illinois Union Ins. Co. v. NRI Construction (N.D.Ga. 2012). Insurer agreed to defend under ROR (late notice), filed DJ.

“There is a split in the jurisdictions as to the right of reimbursement of defense fees.”

The majority view affords the insurer such a right where it (1) timely and explicitly reserves right to recover the costs; and (2) provides specific and adequate notice of intent to do so.

Court followed majority view (unjust enrichment)

General Liability

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III. Property

IV. Auto

V. Bad Faith

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Directors & Officers Progressive Cas. Ins. Co. v. FDIC (N.D. Ga. 2012). “Insured v. insured” exclusion did not apply to claims made by the FDIC as receiver. The court found this language ambiguous because claims were brought on behalf of the failed bank.

St. Paul Mercury Ins. Co. v. Miller (N.D. Ga. 2013). “Insured v. insured” exclusion in D&O policy precluded coverage for suit brought against two bank officers by the FDIC, which had taken over the bank as receiver.

Davis v. Bancinsure, Inc. (N.D. Ga. 2013). Court applied the “insured v. insured” exclusion where it explicitly excluded not only claims brought by or on behalf of the bank, but also claims by or on behalf of receivers.

Professional Liability

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III. Property

IV. Auto

V. Bad Faith

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Property Binders

Georgia Farm Bureau Mut. Ins. Co. v. T&G Enters, Inc. (Ga. App., Nov. 1, 2013).

Insured owned several rental properties, and bought liability and fire coverage for each of them from the same insurer.

Insured purchased a new property, requested “the same coverage.”

Insurer sent a binder listing three optional packages of insurance, one of which included theft, but insured did not select an option.

Before a final policy was issued, new property was subject to a theft.

Citing O.C.G.A. 33-24-33, court remanded for a determination of what “the usual terms” of the insured’s other policies would cover.

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Property Diminution in Value

OLD CASE: State Farm Auto Ins. Co. v. Mabry (Ga. 2001)

Standard automobile policies let insurer pay “lesser of ” repair cost or lost value

Court found that all wrecked-and-repaired autos have “stigma”

Insured was entitled to be “made whole” = both repair costs and lost value

OLD CASE: NUCO Investments v. Hartford (N.D. Ga. 2007)

Insured hotel had mold damage

Insured claimed both repair costs and “diminution in value” due to “stigma”

Insured cited Mabry; Insurer claimed Mabry applicable only to autos.

COURT: covered - policy allowed insured option of selecting valuation option.

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Royal Capital Development LLC v.

Maryland Casualty Company

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Diminution in Value

Insuring Agreement:

“We will pay for direct physical loss of or damage to Covered Property”

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Diminution in Value

Loss Payment:

1. In the event of loss or damage ... at our option we will either:

a. Pay the value of lost or damaged property; or

b. Pay the cost of repairing or replacing the lost or damaged property;

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Property Diminution in Value

NEW CASE: Royal Capital v. Maryland Cas. Co. (Ga. 2012)

11th CIRCUIT: Certified

SUPREME COURT:

The Mabry Rule applies to policies covering real property

Relied on tort precedents

Remanded for interpretation of policy at bar

11th CIRCUIT: Covered.

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Property Notice Condition

NEW CASE: Cureton v. State Farm Fire & Cas. Co. (M.D. Ga. 2014)

October 2010: Insured husband was incarcerated for ten days.

Insured’s wife sold his property when he was in jail.

May 2010: Insured notified homeowner insurer of theft claim.

Policy required prompt notice of any claim

Court: six-month delay was unreasonable

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Property

Limitation of Suit

OLD CASE:

Nicholson v. Nationwide Mut. Fire Ins. Co. (N.D. Ga. 1981).

Fire at insured property. “Suit Against Us” clause required within one year of loss

COURT: “Ambiguous”

- Insured can wait a year after insurer’s denial

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Property Misrepresentation on Application

NEW CASE: Jackson v. Peerless Ins. Co. (11th Cir. 2013).

Insured stated in application that the insured property was his primary residence, and that he had existing homeowners insurance.

- he only stayed ten nights in the house

- he had let previous homeowners insurance lapse

* Underwriter testified that insurer would not have issued policy.

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Property Limitation of Suit

NEW CASE: White v. State Farm Fire & Cas. Co. (Ga. 2012)

Rule 120-2-20.02:

No first party insurance coverage for loss or damage to any type of real or personal property shall contain a contractual limitation requiring commencement of a suit or action within a specified period of time less favorable to the insured than that specified in the ‘Standard Fire Policy’…

O.C.G.A. § 33-32-1:

Requires that Standard Fire Policy terms apply to fire coverage of multiple-lines policies.

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Property Limitation of Suit

NEW CASE:

Dalton v. State Farm Fire & Casualty Co. (N. D. Ga.)

By statute, insurers cannot reduce “suit limitation” clause to less than two years, with regard to fire claims. Most policies allow only one year for other types of loss.

Insured’s water heater exploded, causing extensive water damage.

After claim negotiations ended, insured sued insurer, 18 months later.

Court allowed insured to recast their claim as a “fire” claim instead of a “water damage” claim, in order to avoid breach of limitation period).

Property - Subrogation

Georgia Cas. and Sur. Co. v. Woodcraft by MacDonald (Ga. 2013).

n  Insured owned a commercial garage damaged by a gas explosion. n  Insurer paid limits of commercial property policy, sued third party n  Insured: insured must be “made whole” before pursuing subrogation. n  Trial court agreed. n  On appeal, Insurer prevailed:

Georgia law does not require them in commercial property policies. (only in health and workers compensation policies)

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III. Property

IV. Auto

V. Bad Faith

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Auto Insurance CANCELLATION

Reynolds v. Infinity Gen. Ins. Co. (Ga. 2010)

● O.C.G.A. § 33-24-44(b): to cancel a policy, an insurer must deliver written notice stating the time when the cancellation will be effective, which shall not be less than thirty days from the date of mailing or delivery in person of such notice of cancellation. ● Insurer’s notice of cancellation, which provided the insured with the option of paying past-due premiums to reinstate coverage, was effective.

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Auto Insurance WHAT CAN BE EXCLUDED?

NEW CASE: Sapp v. Canal Ins. Co. (Ga. 2011) Radius-of-use limitation in motor carrier's insurance policy - excluded any incident occurring more than 50 miles from Tifton, GA Court: This reduced or negated insurer's obligations to the motoring public - radius-of-use limitation was invalid,

- insurer was subject to liability up to the policy limit.

Auto Insurance - UM UM means uninsured motorist

Mougrh v. Progressive Max Ins. (Ga. App. 2012)

Insured was involved in traffic accident with another car - followed other car back to its owner’s home - where father was waiting in driveway with gun

COURT: Father was never inside vehicle driven by his daughter Vehicle itself did not cause insured’s death No UM coverage.

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Auto Insurance - UM Settlement Allocation

Carter v. Progressive Mountain Ins. Co. (Ga. App. 2013)

Plaintiff was hit by a drunk driver w/ $30,000 in liability insurance.

OCGA § 33-24-41.1 allows plaintiffs to settle with liability insurers for part of their injuries while preserving their right to seek UM (because defendant would then be “uninsured”).

- Plaintiffs cannot recover punitive damages from UM.

Carter’s settlement allocated $29,000 to punitive damages and only $1,000 to compensatory damages.

Court of Appeals affirmed MSJ for UM insurer – Plaintiff could not pursue UM coverage because settlement with insured was invalid.

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III. Property

IV. Auto

V. Bad Faith

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Bad Faith

First Party: Bad Faith Statute

Third-Party: Failure to Settle

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Bad Faith O.C.G.A. § 33-4-6 Standard: (1) Insured makes Demand (2) Insurer does not pay within 60 days (3) Insurer does not have ‘good cause” Penalty: Additional 50% or $5,000 (whichever greater)

Plus attorney fees

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Bad Faith Statutes O.C.G.A. § 33-4-6:

Only the insured has right to seek penalty - not assignable to third party claimant

O.C.G.A. § 33-4-7 (auto)

Third-party claimants may seek penalty

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Bad Faith Equipco International, LLC v. Certain Underwriters at Lloyds, London, (Ga. App. 2013) Cargo liability insurance policy was not a “motor vehicle liability insurance policy” so third-party claimant could not sue insurer under O.C.G.A. § 33-4-7. Only the insured can seek bad faith penalty against the insurer under O.C.G.A. § 33-4-6.

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Bad Faith - “Demand” OLD CASE: Cotton States Mut. Ins. Co. v. Clark (Ga. App. 1966) ADJUSTER: “Well, we won’t pay you anything” INSURED: “Well, if you won’t pay me I’ll have to take you to court” ADJUSTER: “I’ll see you in court, Mr. Clark.” OLD CASE: S. Realty Mgmt., Inc. v. Aspen Ins. Co. (N.D. Ga. 2008) “The mere specter of a lawsuit at a time when immediate payment is due appears to be enough to constitute a sufficient demand.”

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Bad Faith - “Demand” NEW CASE: Balboa Life & Cas. v. Home Builders (Ga. App. 2010) 2006: Home was destroyed by fire, Mortgagee made claim 2007: Mortgagee sent demands and information to insurer. 2008: Insurer requested foreclosure data showing mortgagee had

right to payment under policy -Mortgagee provided data and sued without waiting 60 days

Demand insufficient under O.C.G.A. § 33-4-6 (60 days) No attorney fees under O.C.G.A. § 13-6-11 (exclusive remedy)

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Bad Faith - Conduct NEW CASE: Matrix Transport Resources LLC v. Standard Fire Ins. Co. (S.D. Ga. 2011).

Coverage dispute involving a defective yacht.

Coverage depended on the nature of the defects.

Insurer denied coverage based on expert report.

Court granted summary judgment to Insurer:

“Reliance on an independent evaluator”

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Bad Faith - Conduct

NEW CASE: State Farm Fire and Cas. Co. v. King Sports (11th Cir. 2012).

Insurer told insured it would “split file” between liability coverage… … but did not. Court granted summary judgment to insurer; this was not by itself evidence of bad faith.

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Duty to Settle

OLD CASES: Southern General Ins. Co. v. Holt (Ga. 1992)

Bad Faith

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Duty to Settle

OLD CASES: Cotton States Mut. Ins. Co. v. Brightman (Ga. 2003)

Bad Faith

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Duty to Settle NEW CASE: McReynolds v. Krebs (Ga. 2012) Insurer received a time-limited “Holt demand” Insurer intended to meet the demand, replied to claimant: “please call me to discuss how the lien ... will be resolved.” Claimant withdrew offer, tried to leverage bad-faith penalties Supreme Court : response was a counteroffer rather than an unconditional and unequivocal acceptance. Dissent: response not a counteroffer, just an invitation to discuss

Bad Faith

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Duty to Settle NEW CASE: Southern Gen. Ins. Co. v. Wellstar Health Systems (Ga.App. 2012) If clear liability and special damages in excess of policy limits, Insurer has “safe harbor” from liability for bad faith if: (1) acts promptly to settle the case; and (2) the sole reason for the parties' inability to reach a settlement is the plaintiff's unreasonable refusal to assure the satisfaction of any outstanding hospital liens.

Bad Faith

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Duty to Settle NEW STATUTE: O.C.G.A. § 9-11-67.1 (1)   Defines what are “material” terms to a settlement demand

- Amount - Scope of release

(2)  Deadlines:

- Acceptance 30 days from Demand - Payment 10 days from Acceptance

(3)  Clarification: - Insurer may ask about liens - Not “material” so offer is not “rejected”

Bad Faith

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How is Georgia Different? 1. First-Party (Property) Coverage:

- Insured can collect repair cost and value

2.  Third-Party (Liability) Coverage: - Insurer need not show prejudice if late notice - Standard ISO exclusions are not “ambiguous”

3.  Bad Faith - First-party: limited by § 33-4-6 - Third-party: limited by § 9-11-67.1 (auto) - Summary judgment is often proper

4. Procedure - DJ: sometimes mandatory, sometimes impossible - Choice-of-Law: “home town” rule

georgia insurance law - institute of continuing legal ... · pdf filecertified to georgia...

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