Insurance

• Jurisdiction: Georgia,United States
• Publication year: 2022
• Citation: Vol. 74 No. 1

Insurance

Myrece Johnson

Maren R. Cave

Thomas D. Martin

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Insurance

Myrece Johnson^*

Maren R. Cave^**

Thomas D. Martin^***

I. Introduction

During this Survey period, the courts in Georgia were somewhat quiet in the area of insurance following fairly active survey periods during the pandemic.¹ In the three areas of insurance that typically dominate this annual update—automobile, liability, and property insurance—there were only a few cases in each area that seemed to break new ground or offer useful insights to practitioners of insurance law. This Survey period saw very few cases in the area of Georgia uninsured/underinsured (UM) law, which is typically the most active area of insurance decisions year after year. In fact, in this Survey period, legislative changes seemed to take center stage. There were significant legislative changes governing time-limited demands as well as changes to the Department of Insurance statutes governing the practices of public adjusters in Georgia. These statutory changes appear to be the most significant insurance law development during the Survey period.

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II. Automobile Insurance

A. Motor Vehicle Liability Insurance

1. Sovereign Immunity

Under Georgia law, the sovereign immunity afforded to local governments for claims arising out of the negligent use of a motor vehicle is waived up to certain statutory limits, including an aggregate amount of $700,000 "because of bodily injury or death of two or more persons in any one occurrence."² The waiver can be expanded to a greater amount in several ways, including through the purchase of "commercial liability insurance in an amount in excess of the waiver."³ In Atlantic Specialty Insurance Co. v. City of College Park,⁴ the Supreme Court of Georgia considered how this statutory scheme interacted with an "immunity endorsement" in a commercial liability policy providing $5 million in coverage, which stated that the insurer had no duty to pay damages "unless the defenses of sovereign and governmental immunity are inapplicable to you."⁵ Ultimately, the supreme court reversed the decision of the Georgia Court of Appeals and determined that the language of the immunity endorsement limited the available coverage to the statutory amount of $700,000.⁶

In this case, the city's police officers were involved in a high-speed chase with a third party when that third party struck a vehicle carrying several individuals.⁷ Three people were killed, and their representatives sued the city. The city held an insurance policy with Atlantic Insurance Company which provided a $1 million business auto limit and a $4 million excess liability limit.⁸ Each coverage section included a policy endorsement stating that "[w]e have no duty to pay 'damages' on your behalf under this policy unless the defenses of sovereign and governmental immunity are inapplicable to you."⁹ When the plaintiffs brought suit to recover the full $5 million policy limit for the city's alleged negligence pursuant to Official Code of Georgia Annotated

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sections 36-92-2(a)(3)¹⁰ and 36-92-2(d)(3),¹¹ Atlantic intervened to limit the coverage provided to the city to the $700,000 in accordance with the statutory waiver provision and applicable policy endorsements.¹² The State Court of Fulton County held the immunity endorsement was unenforceable because it "improperly attempted to 'contract around' the sovereign immunity waiver 'requirements' of O.C.G.A. §§ 36-92-2 and 33-24-51."¹³ The court of appeals affirmed.¹⁴

The supreme court reversed the court of appeals and held that immunity was waived up to $700,000 in accordance with O.C.G.A. § 36-92-2(a)(3) but was not waived up to the full $5 million policy limit.¹⁵ The court noted that an insurance policy does not have to cover all claims, but only those claims agreed to by the parties and paid for through premiums.¹⁶ According to the court's plain reading of the immunity endorsements, the policy "does not cover claims for damages to which the defenses of sovereign and governmental immunity do apply."¹⁷ The court also read the immunity endorsements in conjunction with O.C.G.A. § 33-24-51(c),¹⁸ which specifies that a municipality is "'liable for damages in excess of the amount of immunity waived as provided in Code Section 36-92-2 . . . only to the extent of the limits or the coverage of the insurance policy.'"¹⁹ The insurance policy at issue expressly did not cover claims which were barred by sovereign immunity and therefore did not provide coverage in excess of the $700,000 statutory minimum.²⁰ The court's interpretation was bolstered by additional language in the immunity endorsements which made clear the policy did not "constitute, nor reflect an intent by [the City], to waive or forego any defenses of sovereign and governmental immunity."²¹

The court rejected the policy arguments, which the court of appeals found persuasive, pointing out Atlantic agreed that the policy provided coverage up to the waiver limit of $700,000 and had never argued

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otherwise.²² While the legislature intended for some protection to those injured by a government automobile, the legislature "did not guarantee full compensation or require local government entities to purchase liability insurance . . . above the automatic waiver limits."²³ The immunity endorsements allow for coverage in the amount determined by the legislature and nothing more, and did not contravene public policy.²⁴

B. Uninsured/Underinsured Motorist Cases

1. Recovery and Attorney's Fees

In Curry v. Allstate Property & Casualty Insurance Co.,²⁵ the court of appeals rejected an insurer's attempt to limit the recovery of attorney's fees to only those incurred in the bad-faith action brought pursuant to O.C.G.A. § 33-7-11(j)²⁶ and allowed for a possible award of such fees incurred in the underlying tort action and the bad faith action.²⁷ The court also reaffirmed its earlier decision in which it determined the penalty for bad faith is limited to 25% of the policy limit and not 25% of the verdict against the tortfeasor.²⁸

The UM dispute arose out of a motor vehicle accident wherein the negligent driver was insured for $25,000, and the plaintiff-insured held a $30,000 UM policy with Allstate Property & Casualty Insurance Co. (Allstate).²⁹ The insured demanded the full policy limit, which was denied, and the plaintiff obtained a $85,579.02 verdict against the negligent driver. The insured then filed suit against Allstate for rejecting his claim in bad faith under O.C.G.A. § 33-7-11(j), seeking 25% of the entire tort verdict and attorney's fees associated both with the O.C.G.A. § 33-7-11(j) and underlying tort suit in damages.³⁰

On appeal, the court reversed the trial court's finding that attorney's fees are recoverable by an insured only in the bad-faith matter brought pursuant to O.C.G.A. § 33-7-11(j).³¹ The court considered the statutory language which allows for recovery of "all reasonable attorney's fees for

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the prosecution of the case under this Code section."³² The court found that the phrase "this Code section" could only be interpreted to reference all of O.C.G.A. § 33-7-11 and not just subsection (j), in part because subsection (j) also used the term "subsection" to limit recovery in other situations, which suggests the legislature intended the two phrases to have different meanings.³³ Because the legislature failed to use the more specific phrase in subsection (j) in the portion authorizing an award of attorney's fees, the court determined the legislature "did not foreclose the possibility of recovering attorney fees incurred in the underlying tort action."³⁴ However, the court limited this holding and noted that the insured must be able to put forward "sufficient evidence that such expenses were attributable to the insurer's bad faith" in order to be recoverable.³⁵ The court also highlighted the difficulty a UM claimant may have in proving attorney's fees if the underlying suit were related to the bad faith of the insurer due to the "requirement that a UM claimant first obtain an underlying tort judgment before pursuing the bad faith claim."³⁶

2. Traditional UM Coverage and Allocation of the Underlying Settlement

In Allstate Property & Casualty Insurance Co. v. Nay,³⁷ the court of appeals rejected the insured's attempt to "avoid reduction of her UM coverage to zero" by allocating the majority of the $100,000 liability settlement to punitive damages and determined that the insurer did not owe any part of the $100,000 in UM coverage.³⁸ The insured settled with the negligent party for the full amount of coverage ($100,000) under the negligent party's liability insurance policy, and in the limited release, the insured allocated $99,000 of the settlement to punitive damages. The insured then sought the full $100,000 in available UM coverage from the insured's own UM carrier, notwithstanding her election of traditional, reduced-by UM coverage.³⁹ The court determined that while the insured could allocate the liability settlement as she had in this case, such an allocation did not "prevent the reduction of traditional UM coverage by

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the amount paid out under a tortfeasor's liability coverage."⁴⁰ The court reiterated that while such an allocation did not result in a forfeiture of UM coverage, it also did not allow the insured to avoid the set-off of liability coverage to the difference-in-limits of UM coverage; because a set-off in this case left no available UM coverage, the insurer was entitled to summary judgment.⁴¹

III. Liability Insurance

A. Late Notice

The United States Court of Appeals for the Eleventh Circuit reiterated the critical importance of the insured itself providing notice as required under a policy's conditions in Jenkins v. CLJ Healthcare, LLC.⁴² CLJ Healthcare performed liposuction on Jenkins's daughter, who passed away following complications from the procedure.⁴³ Owners Insurance insured CLJ Healthcare through a policy...