Insurance

• Publication year: 2021

Insurance

Thomas D. Martin

Bradley S. Wolff

Maren R. Cave

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Insurance

Thomas D. Martin^*

Bradley S. Wolff^**

Maren R. Cave^***

I. Introduction

During this Survey period, the courts in Georgia remained active despite the pandemic.¹ In the property arena, the Survey disclosed only a few decisions from the Georgia court of Appeals but several from the district courts in Georgia as parties grappled with coverage disputes relating to policy time limits, bad faith, and the effects of COVID-19 on business losses. In the automobile arena, the Georgia court of Appeals addressed sovereign immunity, and the Georgia Supreme court refined the "cause test" for evaluating a series of collisions. In the uninsured motorist (UM) arena, the court of appeals weighed in on various issues relating to UM coverage, including late notice, vehicles that qualify for UM coverage, and renewal actions against UM carriers. In the third-party arena, the relevant decisions during the Survey period concerned responses to time-limited demands and the ongoing complexities associated with responding appropriately.

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II. Property Insurance Cases

A. Agency

In American Reliable Insurance Co. v. Lancaster,² the Lancasters brought suit against American Reliable Insurance Company (American) and an insurance agent asserting breach of their policy and bad faith.³ The Lancasters purchased insurance for their property from a local insurance agent. They remitted their first premium payment to the agent. Subsequently, American issued a policy to the Lancasters. Toward the end of the policy period, American mailed a renewal notice to the Lancasters informing them of the sum due to renew the policy and how to pay the premium through American's website or via mail. The notice also indicated that the policy sent was a direct-bill policy as opposed to an agency-bill policy. The Lancasters claimed that they never received this notice.⁴

Eventually, American mailed a notice to the Lancasters informing them that it would terminate their policy if they did not pay the premiums. This notice also included instructions on how to pay. The Lancasters claimed that they never received the notice. Instead, the Lancasters paid premiums to the same local agent from whom they acquired the policy. When the Lancasters suffered a total fire loss, they requested coverage. American denied their claim. The Lancasters brought suit against American and the agent.⁵

The Bleckley Superior Court concluded that there were genuine issues concerning the agent's status.⁶ The court of appeals disagreed. The court of appeals held that the agent was not an actual or apparent agent of American for purposes of accepting renewal premiums.⁷ American's notices indicated that customers should pay premiums directly to American. The Lancasters failed to show that American authorized the agent to accept the premium payments on its behalf.⁸ The court also rejected the Lancasters' claim that American's cancellation did not bind them because they never received it. American's proof of mailing from the United States Postal Service was sufficient to satisfy the requirements of notice.⁹ Besides, the policy expired by its own terms for

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non-payment; thus, a cancellation notice from American was not required.¹⁰ Finally, because the Lancasters' claims against American failed as a matter of law, so too did their claims under the bad faith statute, section 33-4-6 of the Official Code of Georgia Annotated.¹¹

B. Suit Limitation Periods

In Premier Eye Care Associations v. Mag Mutual Insurance Co., Premier Eye Care Associates, P.C. (Premier) brought suit against Mag Mutual Insurance Company (MAG) claiming breach of an insurance policy and bad faith.¹² A leak from a restaurant located in a suite above Premier damaged Premier's office. Premier submitted various claims with MAG. MAG made multiple payments to Premier for personal property damages, expenses, and loss of income. Then, for months, MAG did not make any additional payments to Premier as the parties negotiated a possible settlement on remaining claims. When negotiations failed, MAG paid its assessment of Premier's business interruption claim.¹³

Dissatisfied with MAG's payments, Premier made a bad faith demand. The parties attempted mediation but were unsuccessful. Approximately two years after failed negotiations and over three years after the loss occurred, Premier filed suit against MAG. MAG filed a motion to dismiss, arguing that Premier's complaint was time-barred by a two-year time limit in the policy. In response, Premier argued that MAG waived the suit limitation provision when it paid portions of the claim and engaged in mediation within months of the two-year deadline. Premier also argued that MAG could not enforce the time limit because MAG breached the contract and acted in bad faith. The Fulton State Court granted MAG's motion.¹⁴

The Georgia Court of Appeals affirmed.¹⁵ The court of appeals reiterated an oft-stated principle that "mere negotiation for settlement, unsuccessfully accomplished, is 'not that type of conduct designed to lull the claimant into a false sense of security so as to constitute a waiver of the limitation defense.'"¹⁶ Premier was aware that MAG did not intend to fully pay the amounts that Premier claimed because MAG did not

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acquiesce to numerous letters Premier sent complaining about the inadequacy of MAG's payments. Moreover, although MAG participated in mediation, the parties failed to reach a settlement after which Premier had approximately seven months to file suit before the two-year limitation period expired. Premier did not submit any evidence to show that MAG continued to negotiate or even communicate at all during that time.¹⁷ Nevertheless, Premier waited almost two more years before filing suit. Accordingly, the court rejected Premier's allegations of waiver.¹⁸

During the Survey period, there were several decisions from Georgia's federal district courts concerning suit limitation periods. In Chambers v. State Farm Fire & Casualty Co.,¹⁹ the United States District Court for the Northern District of Georgia upheld a one-year suit limitation period, despite the insured's claim that the Georgia Supreme Court's COVID-19 judicial emergency orders tolled the time limit.²⁰ Conversely, the United States Court of Appeals for the Eleventh Circuit, in an unpublished opinion, upheld the general principle that appraisal will toll the suit limitation period while the appraisal is ongoing.²¹ The United States District Court for the Southern District of Georgia applied a "delayed discovery rule" in Rountree v. Encompass Home & Auto Insurance Co., despite relying upon cases from other jurisdictions and only one Georgia case that was physical precedent only.²²

In JSPS, Inc. v. First Nonprofit Insurance Co.,²³ the United States District Court for the Middle District of Georgia concluded that a question of fact might exist regarding an insurance company's possible waiver of a one-year suit period where the company did not deny the claim until after the one-year period expired.²⁴ Likewise, relying upon an earlier decision from the Middle District concerning unresolved diminished value (DV) claims,²⁵ the Northern District in Huck v. Philadelphia Indemnity Insurance Co.²⁶ rejected strict enforcement of a one-year suit period where the carrier failed to address DV claims before the suit period expired.²⁷

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C. Water Damage and Bad Faith

During the Survey period, the district courts in Georgia also addressed bad faith issues in several water damage cases. In Valles v. State Farm Fire & Casualty Co.,²⁸ the Northern District rejected an insureds attempt to bring tort claims against an insurer for allegedly underpaying the insured's claim when the only legal duty the insured relied upon for the tort claims was the insurer's duty under the insurance policy.²⁹ The Northern District rejected the insured's attempt to create independent duties under the Fair Business Practices Act and the Unfair Claim Settlement Practices Act.³⁰

Furthermore, the district court rejected the insured's attempts to formulate fraud and misrepresentation claims out of mere allegations that the insurer mishandled the claim.³¹ The district court held such claims failed because they related solely to the insurer's alleged failure to pay the insurance claim, a duty that arose under the insurance contract.³² For the same reasons, another judge in the Northern District rejected tort and extra-contractual claims brought in another water damage and mold case.³³ In Passmore v. Travelers Casualty & Surety Co.,³⁴ the Southern District granted the insurer's motion for summary judgment on bad faith relating to damages from Hurricane Irma³⁵ but denied the insurer's motion regarding the insured's alleged failure to submit documents substantiating her claim.³⁶ The Southern District concluded that there were disputed questions concerning the insured's cooperation and some conflicting opinions about the amount of the loss.³⁷

D. COVID-19

The district courts also weighed in on several COVID-19-related property cases, particularly as those cases related to business losses. The Northern District in Henry's Louisiana Grill, Inc. v. Allied Insurance Co. of America³⁸ set the stage, rejecting a restaurants claim for lost business

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income resulting from the public health emergency Georgia's Governor Kemp declared in an executive order.³⁹ According to the Northern District, the emergency order did not create a "direct physical loss" necessary to a business income claim.⁴⁰ The district court also rejected the insured's request for civil authority coverage because the governor's order did not limit access to private businesses or their operations.⁴¹

Similarly in Johnson v. Hartford Fire Insurance Co.,⁴² another judge in the Northern District concluded that a group of dentists and dental practices seeking certification in a class action...