Insurance
| Publication year | 2020 |
Insurance
Bradley S. Wolff
Maren R. Cave
Thomas D. Martin
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During this survey period, the courts in Georgia seemed to take a respite from the usual litany of automobile and uninsured motorist (UM) cases, the summaries of which typically populate this annual update. Instead, the courts seemed to focus more on liability insurance issues, rendering many decisions on well-known principles of law and a few important decisions concerning offers of settlement, counteroffers, notice, and the use of intervention in coverage disputes. Particularly noteworthy were two cases involving offers of settlement, one where an offer was deemed inadequate as a time-limited demand and another where acceptance of an offer was deemed inadequate where a proffered release proposed different settlement terms.
In the automobile arena, only one UM decision and one commercial trucking decision involved previously undecided issues. In the former, the Georgia court of Appeals held that an automobile policy may provide UM coverage for a designated group of insureds and no coverage for others. In the latter, the united States court of Appeals for
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the Eleventh Circuit, in an unpublished opinion, held that an umbrella policy issued to cover the owner of a trailer also provided coverage to the driver of the truck who allegedly caused the collision as well as to the driver's employer.
In the property arena, the survey period found both state and federal decisions on first-party issues like non-cooperation, judicial estoppel, valued policy law, diminished value, and principles relating to the proper construction of policy terms. While only a few of the property cases included in this survey have precedential value, the other cases were included because they reflect trends, arguments, or issues that practitioners may consider unique or important in the property insurance arena.1
A. "Tiered" Uninsured Motorist Coverage Permissible
In Jones v. Federated Mutual Insurance Co.,2 the Georgia Court of Appeals held that an automobile insurer may provide UM coverage to only a certain group of insureds and exclude such coverage for all others with the written election of the named insured.3 A husband and wife were test-driving a new vehicle owned by Five Star Automotive Group and insured by Federated Mutual Insurance Co. (Federated Mutual) when the vehicle was rear-ended. The couple brought suit against the at-fault driver and accepted the liability limits from his insurer. However, the couple did not have personal automobile insurance and sought to recover UM benefits from Federated Mutual. The Federated Mutual policy explicitly limited UM benefits to directors, officers, and owners of Five Star and their family members.4 Five Star rejected, in writing, UM coverage for "any other person who qualifies as an insured."5 Federated Mutual was granted summary judgment on the ground that the couple was not within the designated group afforded UM benefits under the policy.6
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On appeal, the Joneses argued that they were "insureds" within the definition provided by O.C.G.A. § 33-7-11,7 and the statute required UM coverage for all insureds unless it is rejected entirely by a named insured.8 The court rejected this argument, holding that the UM statute did not impose an "all or nothing" restriction on insurers and insureds. 9 Rather, relying on Crouch v. Federated Mutual Insurance Co.,10 the court stated that the UM statute protected an insured's right to contract for "tiered" coverage.11 In Crouch, the court held that a policy which provided high UM limits to a car dealership's owner, officers, and directors, but lower limits for all other "insureds," did not run afoul of the statute or public policy: "[a]s long as the mandatory UM minimum is met and optional UM coverage is offered pursuant to statutory requirements, a 'combination[] of sublimits and interests restricted to named insureds and resident relatives' contravenes neither the law nor public policy."12
In Jones, the court extended the rule established by Crouch to allow an insurer, with the insured's written permission, to exclude UM coverage altogether for persons other than a designated group of covered persons.13 Although Crouch and Jones involved commercial insureds, neither case distinguished between personal and commercial policies. Therefore, it appears the court of appeals would also determine that a personal automobile or umbrella policy, which excluded from UM coverage all persons other than the named insured, a spouse, and resident relatives, was enforceable.
B. Tractor-Trailer Accidents Involve Both Units of the Vehicle
Where an umbrella policy is issued to cover liability arising from the use of a commercial trailer, does the coverage extend to accidents caused by the driver of a truck pulling the trailer as a matter of law? In Great American Insurance Co. v. Moore Freight Service, Inc.,14 the United States Court of Appeals for the Eleventh Circuit held that the truck driver and his employer were entitled to coverage even though the umbrella policy was limited solely to the trailer, and the trailer
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arguably "played no role" in causing the collision.15 The driver of the tractor-trailer drove through a red light and collided with another vehicle, severely injuring the other driver and his passenger. The injured driver then sued the tractor-trailer driver, his employer, and Colonial Cartage Corporation (Colonial Cartage), the trailer owner. Colonial Cartage was a named insured under a commercial umbrella insurance policy issued by Great American Insurance Company (Great American). The driver of the tractor-trailer was an employee of Moore Freight, which also owned the tractor. Great American filed a declaratory judgment action, contending that the trailer did not cause the accident and that its umbrella coverage did not apply because the driver and Moore Freight were not insureds under its policy.16 The underlying policy, from which Great American's coverage obligation was determined, extended "insured" to include not only the policyholder, but also "[a]nyone . . . while using with [the policyholder's] permission a covered 'auto' [that the policyholder] own[s], hire[s] or borrow[s] . . . ."17 The underlying policy excluded the following from this definition: "[t]he owner, or any 'employee', agent or driver of the owner, or anyone else from whom [the policyholder] hire[s] or borrow[s] a covered 'auto.'"18
The Eleventh Circuit, in an unpublished opinion, affirmed the trial court's ruling against Great American, based on the decisions of other courts, holding that accidents involving tractor-trailers are deemed to have occurred from the use of both the tractor and the trailer as a matter of law.19 The court rejected Great American's argument that the policy exclusion applied because Moore Freight owned the truck which was "hired" or "borrowed" by the trailer owner.20 Instead, the court held that, because nothing in the policy unambiguously excluded coverage in this situation, the policy would be construed in favor of coverage.21 Because the driver and his employer were "insureds" with respect to their use of the trailer, the exception from coverage based on Moore Freight's ownership of the truck would not be applied where the
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accident was deemed to have arisen from the use of the combined tractor-trailer.22
A. Bad Faith and the Duty to Settle
In perhaps the most important and closely watched liability insurance decision of this past year, the Georgia Supreme Court held that an insurer's duty to settle only arises when the injured party presents a valid offer to settle within the insured's policy limits.23 First Acceptance Insurance Company of Georgia, Inc. v. Hughes24 began after First Acceptance Insurance Company of Georgia, Inc.'s (First Acceptance) insured caused an automobile accident that resulted in his death, injuries to several others, and claims that exceeded the minimum limits of his coverage.25 Counsel for one of those claimants sent a letter to First Acceptance offering to settle his clients' claims for the "available policy limits" and expressing an interest in attending a joint settlement conference with the other individuals injured in the accident.26 Notably, that settlement letter did not contain any time limit for First Acceptance to respond. When First Acceptance did not respond after forty-one days, the claimants revoked their offer to settle and proceeded with their lawsuit.27
After a DeKalb County jury awarded the claimants $5.3 million, the administrator of the estate of First Acceptance's insured filed suit against the insurer, alleging First Acceptance was negligent and acted in bad faith by failing to settle for the policy limit demand.28 Summary judgment was granted to First Acceptance, but later reversed by the Georgia Court of Appeals.29
In concluding First Acceptance was indeed entitled to summary judgment, the Georgia Supreme Court focused specifically on the lack of any time deadline presented in the letter demanding policy limits, calling into question whether First Acceptance was even required to
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respond within the thirty-day period alleged by the claimants.30 The court concluded it was not required to respond within that period of time and that First Acceptance's failure to do so was not bad faith. 31 As a result, the supreme court concluded that First Acceptance was entitled to summary judgment as the offer "was not a time-limited settlement demand" and "First Acceptance was not put on notice that its failure to accept the offer within any specific period would constitute a refusal of that offer."32 In the Hughes decision, the Georgia Supreme Court expressly concluded as a matter of law that First Acceptance did not act unreasonably in failing to...
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