Insurance - Ralph F. Simpson

• Publication year: 1996

Insuranceby Ralph F. Simpson^*

I. Introduction

Since 1966, Professor Maximilian A. Pock has been the author of the Insurance section of the Annual Survey of Georgia Law.¹ During this period of time, his scholarly analysis of and keen insight into the decisions of the Georgia Appellate Courts have been of great benefit to those of us whose practice dictates that we stay abreast of the trends and movements of the courts as shown by their published opinions. Contributing to a publication such as the Annual Survey of Georgia Law is no easy task, but continuing to do so for such an extended period of time exhibits extraordinary dedication and commitment. For this Professor Pock deserves our gratitude, appreciation, and recognition.

The current article will probably not be as scholarly and may not be consistent with the standard that Professor Pock has established, but hopefully it will be informative and will provide the practitioner with some hint of predictability of the future decisions of the Georgia Appellate Courts regarding insurance issues.

The number of cases reaching the Georgia Appellate Courts during this survey period is less than that of prior years.² The courts continue to struggle with the "easy to read" policies that are currently in widespread use in the state, and the uninsured or underinsured motorist provisions of automobile policies continue to receive the greatest attention from the courts during this survey period.³

The cases selected for inclusion in this article hopefully demonstrate the approach used by our appellate courts in dealing with construction and interpretation of specific policy language and will be presented herein according to the type of policy or insurance being considered.

II. Automobile Insurance

A. Policy Construction

In Dolly Griffin & Associates v. International Indemnity Co.,⁴ the automobile insurance policy issued to Dolly covered a semi-tractor which was used to haul trailers. The tort action that spawned this declaratory judgment action by International Indemnity arose when one Berrey collided with a trailer owned by CSX Transportation. Dolly, using the insured tractor, illegally and negligently parked the tractor on a roadway. International Indemnity's policy provided for payment of Dolly's liability "resulting from the . . . use of a covered auto."⁵

The court of appeals acknowledged that the definition of the word "use" in this context is "elusive" and then applied the liberal definition of the word "use" previously adopted.⁶ Under this definition, the court recognized that a claim against Dolly "might remain viable" for some time after the trailer was disconnected from the tractor, but that if the injury were only "remotely connected" to the use of the tractor, there could be no recovery.⁷ Accordingly, the matter was left for a jury to inquire into the proximity in time, space, and circumstance between the use of the tractor and plaintiff's injuries, and to ultimately determine, as a matter of fact, whether the injuries arose from the use of the insured vehicle.

The court considered for the first time the language of an exclusion in a commercial truck policy in Florida International Indemnity Co. v. Guest.⁸ In the "Exclusive Mileage Exclusion," it was agreed that the insurance "[does] not apply, if any trips of the automobile exceed a 150 mile radius"⁹ of the place where the truck was principally garaged. In this case, the accident occurred within the 150 mile radius, but on a trip where the destination was more than 150 miles. After comparing other similar policy language, which excluded accidents or losses while the vehicle was being operated outside a 150 mile radius,¹⁰ the court decided that there was no coverage in this case.¹¹ In other cases construing Georgia law, courts have held that even with policy language specifying that "[i]t is expressly understood and agreed that occasioned trips beyond the radius specified are not permitted"; coverage resumed when the vehicle on such a nonpermitted trip re-entered the "magic circle" of the specified radius.¹² The distinction between the language, as explained by the court of appeals, is that the language in Guest focused upon the destination of the trip, whereas the other language focused upon the physical location of the vehicle at the time of the accident.¹³

Two cases that deal with the subrogation or reimbursement provisions of automobile policies were decided within the survey period.¹⁴ The continuing controversy centers around the question of whether the language creates a "right of reimbursement" or an assignment of a portion of a personal injury claim.¹⁵ If only a "right of reimbursement" is created, the language is effective. If an assignment is created, it is prohibited by the application of the provisions of section 44-12-24 of the Official Code of Georgia Annotated ("O.C.G.A.").¹⁶

In the first case, Integon General Insurance Co. v. Thompson,¹⁷ the policy of insurance contained a two-part provision. Part A of the policy provided as follows:

If we make a payment under this policy and the person to or for whom payment was made has a right to recover damages from another, we shall be subrogated to that rights. That person shall do: 1. Whatever is necessary to enable us to exercise our rights; and 2. Nothing after loss to prejudice them.¹⁸

Part B of the policy provided as follows: "If we make a payment under this policy and the person to or for whom payment is made recovers damages from another, that person shall: 1. Hold in trust for us the proceeds of the recovery; and 2. reimburse us to the extent of our payment."¹⁹

Considering Part B, the court held that it "merely" allows the insurance company to seek reimbursement if the insured recovers damages, and the court further held that Part B is not an assignment of a personal injury cause of action.²⁰ The court went further to state that the insurer is entitled to reimbursement regardless of whether the insured is completely compensated for his losses by the recovery.²¹

In the second case, Southern General Insurance Co. v. Watson,²² the enterprising plaintiff's attorney attempted to avoid the problem and to recover the medical payments benefits in addition to the recovery from the tortfeasor. However, his attempt failed. He planned to settle with the tortfeasor and then to sue for the medical payments benefits. Southern General had refused to pay the benefits based upon a reimbursement clause in its policy that was similar to the one in Integon.²³ Southern General argued that if it paid the medical payments benefits, Watson would have to give them right back.²⁴ The court of appeals agreed and reiterated its position in Integon by holding that Southern General could exercise its right to recover medical payments regardless of whether Watson received full compensation for his other damages.²⁵

The "permissive driver" provisions of auto policies drew attention from the Georgia Court of Appeals and the Georgia Supreme Court this survey period. One case, Prudential Property & Casualty Insurance Co. v. Walker,²⁶ involves the older policy language²⁷ and presents the usual fact pattern that brings into play the "second permittee" doctrine.²⁸ Under this doctrine if the use falls within the scope of the permission granted the first permittee, coverage is usually extended to a third person using the car without express permission to do so.²⁹

In Walker, the insured loaned his son a car for him to take his belongings from Roswell to school in Statesboro. He was to return the car to his father a few weeks later on Easter weekend. In the meantime, the son loaned the car to a friend to drive to Tallahassee, Florida, to be fitted for a bridesmaid's dress. On the trip to Tallahassee, this "second permittee" had a wreck. Although the son had permission to use the car while he was at school, he had been instructed not to loan the car to anyone and not to drive it to Florida, Savannah, or anywhere else.³⁰

The majority held that the use by the second permittee was not within the use or scope of permission given to the insured's son by his father.³¹ The use of the second permittee in this case exceeded the scope of permission extended by the insured to his son.³² However, Presiding Judge McMurray entered a strong dissent that provides a more accurate analysis of this transaction. Judge McMurray recognized that the son's permission extended to the use of the car as a substitute for his own vehicle and that the instructions given to the son not to go to Florida were aimed at getting him back home for Easter.³³ Therefore, he reasoned, allowing the friend to use the vehicle in the interim to go to Florida did not defeat the purpose of this restriction by the father.³⁴ In fact, the minority found a jury question existed as to the "precise parameter of that scope of permission."³⁵ A jury had tried the case and found, in response to a special interrogatory, that the second permittee did have permission to use the vehicle.³⁶ The majority reversed the judgment of the trial court by deciding that the trial court erred in failing to direct a verdict for the insurer.³⁷

In Hurst v. Grange Mutual Casualty Co.,³⁸ the Georgia Supreme Court interpreted the newer "permissive driver" provision found in most auto policies. This new provision is stated as an exclusionary provision that withholds coverage for "any person . . . [using] a vehicle without a reasonable belief that [that] person is entitled to do so."³⁹ This is the provision that the court of appeals has had considerable difficulty construing. The supreme court's analysis of the court of appeals decisions is particularly enlightening in that it amply demonstrates that court's propensity to decide cases on a fact-specific basis that fails to provide judicial guidance and predictability for the bench and bar. However, the supreme court's opinion provides a sound analysis of the policy provision and construes it to end the...