Insurance

• Publication year: 2017

Insurance

Bradley S. Wolff

Maren R. Cave

Stephen M. Schatz

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Insurance

by Bradley S. Wolff^*

Maren R. Cave^**

and Stephen M. Schatz^***

I. Introduction

During this survey period, the Georgia state and federal courts decided questions of first impression related to uninsured motorist (UM) coverage holding that, although umbrella policies are no longer required to provide UM coverage, the statutory notice requirements must be strictly followed before such coverage can be dropped in a renewal and that the "vertical exhaustion requirements" contained in excess policies do not violate the UM statute. Another first impression decision involved the correct interpretation of the statute providing for pre-suit offers in motor vehicle injury cases and whether timely payment may be a condition of acceptance. Other cases decided in this period included decisions addressing the interpretation, enforcement and reformation of policy language, whether use of a vehicle in violation of company policy is contrary to coverage for a permissive user, single versus multiple occurrences, and exclusions from coverage.¹

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II. Uninsured Motorist Coverage Issues

A. Strict Compliance and Proof Required to Terminate UM Coverage in an Umbrella Policy

In Massey v. Allstate Insurance Co.,² the Georgia Court of Appeals held as a matter of first impression that Georgia's statute governing the cancellation and nonrenewal of automobile insurance policies, section 33-24-45³ of the Official Code of Georgia Annotated (O.C.G.A.), applies to the uninsured motorist coverage in umbrella policies even after the 2008 amendment to O.C.G.A. § 33-7-11,⁴ which exempted umbrella policies from the requirements of O.C.G.A. § 33-7-11.⁵ The court determined that Allstate was therefore required to follow the statute's notice requirements when it decided not to renew the UM coverage previously included in Massey's umbrella policy.⁶ In interpreting O.C.G.A. § 33-24-45, the court held that nothing in the plain language of the statute limited "automobile policies" to primary policies only, nor excluded umbrella policies that included automobile coverage.⁷ Further, the court held that the Georgia General Assembly's amendment of O.C.G.A. § 33-7-11 could not also impose a limitation on the scope of O.C.G.A. § 33-24-45 without doing so expressly.⁸

Having determined that the nonrenewal statute applied to Massey's umbrella policy, the court next considered whether Allstate sufficiently proved compliance with the statute's notice requirements.⁹ These requirements include notice to the policyholder by personal delivery or U.S. mail.¹⁰ When mailed, proof of a postal receipt issued by the U.S. Post Office must be "exactly followed" or the notice of nonrenewal will be ineffective.¹¹ Although Allstate produced some evidence showing that it had sent the required notice to its policyholder, it could not produce a postal receipt.¹² The court rejected Allstate's argument that requiring an insurance company to retain and produce a U.S. Post Office receipt for a

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mailing four years earlier would be unreasonable¹³ and held that Massey's UM coverage was renewed with the same coverage limits as had been previously provided.¹⁴

B. UM Carrier Must Prove Insured Made an Affirmative Choice of Unequal Limits

Section 33-7-11(a)¹⁵ of the O.C.G.A. makes a policy's UM limits equal to the liability limits by default, but an insured may "affirmatively choose" lower limits for UM.¹⁶ In Government Employees Insurance Co. v. Morgan,¹⁷ the Georgia Court of Appeals held that where an insured adds UM coverage to a policy after having previously rejected that coverage, the insured has a new opportunity to choose the policy limits and must make an affirmative choice of lower UM limits or the policy will be construed to provide UM coverage with limits equal to the liability coverage limits.¹⁸ The court in Morgan also held the insurer must prove the insured made such an election and the insured's passive acceptance without objection of several years of policy renewal declarations showing the policy limits were insufficient to carry that burden of proof.¹⁹

The issue in this case began with the Morgans's election to discontinue their UM coverage between 1992 and August 2003. When the Morgans renewed their UM coverage in August 2003, they were allegedly not aware of the limits of their UM coverage and did not discuss the limits during the renewal process. After a loss, the insureds claimed their UM coverage should have had limits equal to their liability limits.²⁰ In holding for the Morgans, the court stressed that the statute required an affirmative choice by the insured to have a lower amount of UM coverage.²¹ Although the insured's choice need not be in writing, the insurer must come forward with evidence that shows an insured's

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affirmative choice rather than merely passive acceptance of the lower limits.²²

C. An Insured Must Exhaust all Underlying Insurance Policies Before Recovering UM Benefits from Excess Insurers

In Coker v. American Guarantee & Liability Insurance Co.,²³ another matter of first impression, the United States Court of Appeals for the Eleventh Circuit determined that the vertical exhaustion requirements of the defendant-insurers' excess liability policies superseded O.C.G.A. § 33-7-11.²⁴ In Coker, while driving a truck owned by his then employer, Ansco, a third-party driver struck the plaintiff. The plaintiff sued the other driver, which resulted in a $5.5 million consent judgment against the other driver.²⁵

The defendant was severely underinsured, and there was no dispute that at the time of the accident, the plaintiff was an insured under Ansco's multiple policies. Ansco's policies were structured vertically as follows: Liberty Mutual provided the first layer of coverage with limits of $5 million; Westchester Fire Insurance provided the next level of coverage with limits of $10 million; Great American Insurance, American Guarantee and Liability Insurance, and Endurance American Specialty Insurance provided the next three layers of protection, respectively.²⁶

The plaintiff settled with Liberty Mutual and Westchester for less than their policy limits, and a substantial portion of the judgment remained unpaid. He then sought UM benefits from the three remaining excess carriers and brought suit when they refused to pay.²⁷ The issue before the court was whether Coker's failure to exhaust the Liberty Mutual and Westchester policies precluded Coker's recovery from the excess insurers.²⁸

In affirming summary judgment to the insurers, the court based its reasoning on three premises.²⁹ First, the court held that O.C.G.A. § 33-7-11 does not void "the vertical exhaustion requirements of umbrella and excess liability policies governed by Georgia law."³⁰ Second, the court determined that nothing in the section "proscribes the use of coverage

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limitations that depend on the exhaustion of underlying policy limits in a tiered insurance scheme."³¹ Third, the court determined that a vertical exhaustion requirement does not undermine the remedial purpose of O.C.G.A. § 33-7-11.³²

The court noted a potential tension between vertical exhaustion requirements and Georgia law that UM insurers have "a statutory obligation to provide UM coverage up to the injury limits of their respective policies."³³ However, the court determined the operation of that section, unlike "other provisions" of insurance policies voided by O.C.G.A. § 33-7-11,³⁴ did not void the vertical exhaustion requirements.³⁵ As the court put it, "[w]ithout an explicit proscription from the Georgia courts, we cannot conclude that section 33-7-11 would render void the vertical exhaustion requirement that, under Georgia law, is the defining characteristic of an excess liability policy."³⁶

The court in Coker cited Progressive Classic Insurance Co. v. Nationwide Mutual Fire Insurance Co.,³⁷ where the Georgia Court of Appeals held that an umbrella policy "more closely identified" with the deceased must pay before a more remote primary policy, and distinguished the "vertical exhaustion" requirement at issue in Coker from cases involving "horizontally aligned" policies where "other insurance" clauses contrary to the stacking rules developed by the courts have been held void.³⁸

D. Notice: "Promptly" is not "As Soon As Possible" and Policy Language Determines Outcomes

Auto insurance policies typically require a person claiming UM benefits to notify the insurer of an accident. The various descriptions of the time period within which such notice must be given has been the subject of occasional litigation. In Progressive Mutual Insurance Co. v.

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Bishop³⁹ and GEICO Indemnity Co. v. Smith,⁴⁰ the Georgia Court of Appeals reached opposite results regarding insurance policy notice requirements.⁴¹

In Bishop, the court held that the claimants' failure to notify Progressive of an accident until ten months and twenty-five days after its occurrence was not unreasonable as a matter of law, and the court affirmed the decision of the trial court.⁴² In that case, Bishop's policy provided the following:

For coverage to apply under this policy, you or the person seeking coverage must promptly report each accident or loss even if you or the person seeking coverage is not at fault. You or the person seeking coverage must provide us with all accident/loss information including time, place, and how the accident or loss happened.⁴³

The court, relying on the policy's lack of a requirement for the insured to give notice within a specific period of time, held that timeliness of the notice was a jury question.⁴⁴ The court concluded its opinion by pointing out that Progressive was responsible for creating a jury question by using "promptly" rather than stating a more definite time period.⁴⁵

In contrast, the court in Smith held that the trial court erred by denying summary judgment to GEICO when an insured failed to...