The Georgia Direct Action Statute

• Citation: Vol. 12 No. 1 Pg. 0016
• Pages: 0016
• Publication year: 2006

Georgia Bar Journal Volume 12.

GSB Vol. 12, No. 1, Pg. 16. The Georgia Direct Action Statute

GSB Journal
Volume 12, No. 1
August 2006

The Georgia Direct Action Statute

by Michael L. Goldberg

For lawyers handling personal injury cases, the word "insurance" is considered a dirty word to be banned from one's vocabulary. Any witness who says this word on the stand at trial causes the hairs on the back of the lawyer's neck to bristle and the trial judge to roll his eyes. Fear of the I-word has driven lawyers to spend days reviewing and redacting documents and countless hours cautioning witnesses and clients on the evils of the unspeakable. Lawyers know that in a personal injury trial an inadvertent slip of the tongue saying the word "insurance" can result in an immediate mistrial because of its prejudicial effect on the jury.(fn1)

But there is one context in a personal injury case in which the term is welcomed with open arms. The Georgia Direct Action Statute, codified at O.C.G.A. 46-7-12.1, allows plaintiffs injured in an accident with a motor carrier of property or passengers not only to mention the word "insurance" at trial but also to name the insurer as a party to the action. This year is the 75th anniversary of the passage of the Direct Action Statute. Despite the longevity of the statute, many practitioners still do not fully understand the requirements of the statute and its applicability.

History of the Direct Action Statute

The Motor Common Carriers Act was originally adopted in 1931. The original statute was silent as to the joinder of the insurer in suits against the motor carrier.(fn2) The statute was amended in 1937 to include the provision: "it shall be permissible to join the motor carrier and the insurance carrier in the same action, whether arising in tort or contract."(fn3) The law then became known as the Direct Action Statute because it allowed the plaintiff to file suit against the insurer before a judgment was obtained against the insured.(fn4) Although the language of this section of the statute has been slightly modified over the years, the statute continues to include similar language and currently states, "it shall be permissible ... for any person having a cause of action arising under this article to join in the same action the motor common or motor contract carrier and the insurance carrier, whether arising in tort or contract."(fn5)

The original statute also required the motor carrier to file a certificate of financial responsibility with the Public Service Commission ("PSC" or "Commission") (now state revenue commission) covering injury to the public caused by the negligence of the carrier.(fn6) For years, the filing of the certificate was a prerequisite to an action against the insurer.(fn7) This loophole allowed the insurer to avoid a direct action if the carrier had simply failed to file the certificate with the Commission.(fn8)

In 2000, the legislature revised the Direct Action Statute to dispense with the mandatory precondition to suit that the carrier's insurance policy or certificate of insurance be on file with the PSC.(fn9) The legislature explained that "the failure to file any form ... shall not diminish the rights of any person to pursue an action directly against a motor carrier's insurer."(fn10) Under the amended statute, the obligation to file the certificate of insurance is imposed upon the insurer instead of the carrier, and the failure to file the certificate does not affect the plaintiff's ability to file suit against the insurer.(fn11) The current version of the Direct Action Statute became effective on July 1, 2005, and is codified at O.C.G.A. 46-7-12.1. The only significant change from the 2000 statute is that the responsibility of monitoring the motor carrier's filings is now placed on the state revenue commission instead of the PSC.(fn12)

The Direct Action Statute has survived attacks on its constitutionality,(fn13) including challenges based on the equal protection clause in the Georgia Constitution(fn14) and due process. (fn15) Federal law does not preempt the statute due to the state's interest in providing plaintiffs with the right to bring direct actions against insurers of motor carriers to protect its citizens.(fn16)

Prejudicial Effect of Insurance

The mention of liability insurance is ordinarily forbidden at trial because of the assumed prejudicial effect on the jury.(fn17) Georgia courts have repeatedly adhered to the rule that evidence of insurance coverage is so prejudicial by nature that it should not be admitted unless it is clearly relevant to some issue in the case.(fn18) The fear is that the jury will give an award based on the existence of insurancerather than the merits of the case. It is thought by some to be beneficial to the plaintiff to have jurors believe that an award will be paid by an insurer rather than an individual defendant. The Direct Action Statute places the motor carrier's liability insurance directly in front of the jurors for their consideration. Despite the supposed prejudicial effect of the existence of insurance, the Supreme Court of Georgia has held that the statute does not unfairly prejudice...