Archive for the 'Insurance' Category

Georgia Court of Appeals: Plaintiff Cannot Stack Policies for Recovery in an Uninsured Motorist Accident

On March 7, 2007, Judy Dunn-Craft was driving a jeep owned by her boyfriend, Steven Vinson, and insured by State Farm. Noticing movement in bushes to her right Dunn-Craft turned around and proceeded back to the area, where she stopped her car in the oncoming traffic lane with her lights on. She exited the car and noticed an injured deer on the side of the road. After investigating the incident and calling for help, Dunn-Craft was struck by Oliver Dwayne Hutchins and suffered severe injuries.
Vinson also owned three additional automobiles, all four insured with State Farm, and all four policies having Dunn-Craft as a listed driver. Dunn-Craft felt that her injuries exceeded the $25,000 provided by Hutchins’ insurance coverage, and sought to stack the State Farm policies owned by Vinson. Dunn-Craft brought suit against Hutchins, his employer, as well as State Farm. All three insurance companies filed motions for summary judgment. The trial court denied partial summary judgment to State Farm, finding that a question of material fact existed as to whether Dunn-Craft could recover UM benefits under the policy insuring the jeep, but granted summary judgment on State Farm’s claims that Dunn-Craft was not eligible to stack the other three policies in Vinson’s name because she was not the named insured or the spouse or resident relative of the named insured. The trial court also granted summary judgment to the other insurers.
Dunn-Craft appealed the verdict, arguing the trial court erred in determining that she was not entitled to stack Vinson’s insurance policies. The Court of Appeals disagreed. The court found that O.C.G.A §33-7-11(a)(1), which provides the statutory basis for stacking, created two categories of insured persons. The first category consists of “the named insured and, while resident of the same household, the spouse of any such named insured and relatives of either, while in a motor vehicle or otherwise.” Coverage for this first classification attaches to the insured regardless of location and such insureds need not be in the insured automobile. Although Dunn-Craft was a listed driver on Vinson’s State Farm renewal premium notices, the court ruled this did not make her a named insured. The second category consists of “any person who uses, with the expressed or implied consent of the named insured, the motor vehicle to which the policy applies.” The court found that because Dunn-Craft was standing near the jeep at the time she was struck, and not inside the vehicle, a genuine issue of material fact existed as to whether she was entitled to UM coverage under the second category of coverage. It reiterated the fact, however, that she was not entitled to stack the State Farm policies because she was not a named insured on those policies.
In light of this decision, it is extremely important not to conflate an individual as a “listed driver” on a policy with being a “named insured.” Georgia law affords different types of protection based on one’s status, the latter being able to stack insurance policies for coverage purposes, the former being unable to do so.

For more information, please contact Timothy Buckley III, Esq. at (404) 633-9230.

Fulton County Judge: Uninsured Motorist Carrier Liable for Umbrella Policy Limit As Well As Uninsured Motorist Coverage

In 2001, Georgia’s uninsured motorist (UM) law was changed to make the limit of automobile coverage the default amount of UM coverage. A Georgia Court of Appeals decision, Abrohams v. Atlantic Mut. Ins. Agency, 282 Ga.App. 176 (2006), held that provision applied to umbrella policies as well.

In August 2007, Carol Thurman was injured in a motor vehicle accident involving Stephen Brown and an unknown driver who cut across traffic. Thurman later filed suit against Brown and “John Doe,” the unknown driver. USAA, Thurman’s UM carrier carrier, undertook the Doe defense. After a two-day trial, a Fulton County jury awarded Thurman $1,370,031. USAA subsequently filed a motion to reduce the verdict to no more than $300,000, the per-person limit of Thurman’s primary policy’s UM benefits. USAA also argued that Thurman’s umbrella policy, which carried a $1 million per occurrence limit, contained no UM coverage.

USAA contended that, under Abrohams, it should be liable for no more than the $15,000 minimum coverage available under the umbrella policy when it was issued in 1989, along with the $300,000 UM benefits contained in the primary policy. The judge disagreed, ruling that under Abrohams, USAA was liable for the full $1 million umbrella policy limit as well as the $300,000 UM coverage. The judge stated that, under applicable law, unless an insured driver had expressly rejected UM coverage being included in an umbrella policy, that policy’s limits must be available for payout even though the insured never signed up for or paid premiums for such coverage. The judge adjusted the award to $1.3 million. USAA has since filed a second motion for new trial or reduction in the verdict which is pending as of this writing.

For more information, please contact Timothy Buckley III, Esq. at (404) 633-9230.

Faulty Workmanship Constitutes “Occurrence” Under Commercial General Liability Policy

The Supreme Court of Georgia recently held that an insured’s faulty workmanship constitutes an “occurrence” within the meaning of the insured’s commercial general liability policy. American Empire Surplus Lines Ins. Co. v. Hathaway Development Comp., Inc., 2011 WL 768117 (Ga., 2011).

In American Empire, Hathaway, a general contractor, sued Whisnant, its plumbing subcontractor, for costs of repairs and damage to surrounding properties caused by Whisnant’s faulty workmanship. After obtaining a default judgment, Hathaway sought payment from American Empire, Whisnant’s insurer. American Empire denied liability, asserting that Hathaway’s claim was not covered under Whisnant’s policy because it did not arise out of an “occurrence,” defined under the policy as “an accident, including continuous or repeated exposure to substantially the same, general harmful conditions.” In granting summary judgment to American Empire, the trial court held that Whisnant’s negligent workmanship could not be deemed an “accident.” The Georgia Court of Appeals reversed, holding that because Whisnant caused damage to surrounding properties, Whisnant’s acts constituted “occurrences” within the meaning of the policy. American Empire appealed.

Because Whisnant’s policy did not define the term “accident,” the Georgia Supreme Court looked to the commonly accepted meaning of the term. When used in an insurance policy, an “accident” is deemed to be “an event happening without any human agency, or, if happening through such agency, an event which, under circumstances, is unusual and not expected by the person to whom it happens.” It also means “an unexpected happening rather than one occurring through intention or design.” Applying this definition, the Court found that policies with similar “occurrence” language provided coverage for “the risk that…defective or faulty workmanship will cause injury to people or damage to other property.” Because Whisnant’s faulty workmanship caused damage to neighboring properties, such acts constituted an “occurrence” under Whisnant’s policy. In affirming the decision of the Court of Appeals, the Supreme Court held that an occurrence can arise where faulty workmanship causes unforeseen damage to other property. The Court also rejected the notion that Whisnant’s acts could not be deemed accidents because they were performed intentionally, holding that a deliberate act, performed negligently, is an accident if the effect is not the intended or expected result.

For more information, please contact Denny Brown at (404) 633-9230.

“Regular Use” Provision Bars Coverage for Non-Incidental Use of Borrowed Vehicle

The Georgia Court of Appeals recently held that the “regular use” exclusion in an insured’s automobile insurance policy barred coverage for an accident that occurred while the insured was using a friend’s car. State Automobile Mutual Insurance Co. v. Todd, 2011 WL 753282 (Ga.App., 2011).

In Todd, the insured had an automobile insurance policy that specifically excluded from liability coverage “[a]ny vehicle, other than ‘your covered auto,’ which is: a. owned by you, or b. furnished or available for your regular use.” On August 16, 2003, while driving her friend Ernest Camden’s car, the insured was involved in a collision with another vehicle operated by Steve Purvis. The insured had borrowed Camden’s car to go on vacation and was returning from a nine-day trip when the accident occurred. She had been staying with Camden and did not have her own vehicle, so Camden allowed her to use his car. Because Camden had certain health issues, the insured used his car to run all of his errands in exchange for food and other necessities. Following a divorce earlier that year, the insured’s husband gave her a truck pursuant to a court order, but the insured preferred to drive Camden’s car. At times, the insured parked the car at her house and drove it while Camden was out of town. When asked whether she drove the car daily, the insured replied: “Regularly, but maybe not a daily basis, but regularly.”

As a result of the accident, Purvis’s passenger, Anthony Bonner, sustained injuries and subsequently sued the insured. The insurer filed a declaratory judgment action seeking a ruling that it was not obligated to defend the insured because Camden’s car was available to the insured for her regular use and was thus excluded from coverage. The trial court denied the insurer’s motion for summary judgment.

The Georgia Court of Appeals reversed since the purpose of the “non-owned regular use provision is to cover occasional or incidental use of other cars without the payment of an additional premium, but to exclude the habitual use of other cars, which would increase the risk on the insurance company without a corresponding increase of the premium.” The covered use has also been described as “casual” and “infrequent,” while “regular use” has been held to suggest a “principal (though not necessarily exclusive) use.” Applying this reasoning and definition, the Court held that the insured, by her own admission, regularly used Camden’s car. Therefore, the insurer was not obligated to defend the insured.

For more information, please contact Denny Brown at (404) 633-9230.

Insurer’s Actual Notice of Accident Did Not Relieve Insured of Obligation to Provide Written Notice of Accident

In Lankford v. State Farm Mut. Auto. Ins. Co., 2010 WL 4723394 (Ga.App., 2010), the Georgia Court of Appeals held that an insured is still required to provide its insurer with timely notice of an accident under the insured’s policy even if the insurer receives prior notice from an unrelated third party. In Lankford, the insured, while driving his employer’s truck, was involved in a collision with Charles Kaucky, who had an automobile insurance policy that provided $50,000 in liability coverage. The insured also had a policy with the same insurer, which provided potential uninsured motorist (UM) coverage in excess of Kaucky’s policy. Three days after the accident, the insured received a letter from the insurer referencing Kaucky’s policy and discussing the insured’s “recent accident.” One year later, after the insured had undergone back surgery, the insured first discussed his injuries with the insurer. Almost two years after the accident, the insured first provided written notice of the accident to the insurer and raised the issue of UM coverage. Soon thereafter, the insured filed suit against the insurer seeking UM coverage. The insurer moved for summary judgment, asserting that it had not received timely written notice under the policy, which required written notice of the accident “as soon as reasonably possible.” The trial court granted summary judgment, holding that the insured had failed to provide the requisite notice or present any facts to justify his delay.

It is well established that where an insured has not demonstrated justification for failure to give notice under the policy, the insurer is not obligated to provide coverage. Although the “as soon as reasonably possible” language affords some leeway in providing notice, Georgia courts have found that a two-year delay constitutes an unreasonable delay as a matter of law. The insured argued that his oral notice to the insurer one year after the accident should have been sufficient. However, the Georgia Court of Appeals also refused to find that one year amounted to a reasonable delay.

The insured also asserted that this claim should not be barred because the insurer had actual notice of the accident, pointing to the fact that he received a letter from the insurer referencing the accident three days later. However, notification by an unrelated third party does not relieve the insured from his separate, contractual obligation to provide notice to the insurer under his own policy. It was only a matter of coincidence that the insured and Kaucky shared the same insurer. All of the correspondence submitted on behalf of the insured prior to the lawsuit referenced Kaucky’s policy without mentioning the insured’s own policy. The insurer would have been entitled to conclude from this correspondence that the insured was a stranger seeking benefits under Kaucky’s policy. In affirming summary judgment, the court held that there is no requirement that an insurer cross-reference the names of all parties involved in an accident to determine whether they have the same

For more information, please contact Denny Brown at (404) 633-9230.

Mere Negotiation for Settlement Does Not Waive Insurer’s Contractual Limitation Defense

The Georgia Court of Appeals recently held that an insurer’s settlement negotiations with its insured did not amount to a waiver of its contractual limitation defense. Stone Mountain Collision Center v. General Cas. Co. of Wisconsin, 2010 WL 3516748 (Ga.App. 2010).

The insured purchased a commercial policy providing that any action against the insurer must be “brought within 2 years after the date on which the direct physical loss or damage occurred.” On January 16, 2006, the insured notified the insurer that it had suffered a loss by theft in November 2005. On November 17, 2006, the insurer offered to settle the claim at the actual cash value of $75,577.85, upon receipt of a proof of loss, and informed the insurer that if it replaced the goods within 180 days as provided by the policy, it may be able to claim some or all of an additional $17,533.97, which would be held by the insurer. Over the next year, the insurer extended the same offer several times, which the insured rejected with various counteroffers. When the insurer failed to respond to the latest rejection, the insured filed suit for breach of the policy on July 23, 2008. The trial court granted summary judgment to the insurer on the grounds that the complaint was barred by the two-year limitation period contained in the policy.

On appeal, the insured argued that the insurer waived the limitation period by continuing settlement negotiations. Generally, an insurer cannot take advantage of a limitation provision where, by its acts in negotiating toward settlement, it has led the insured to believe that it will be paid without filing suit. However, mere negotiation for settlement, unsuccessfully accomplished, is not the type of conduct designed to lull the insured into a false sense of security so as to constitute waiver of the limitation defense.

The last written communication between the parties occurred on May 17, 2007, when the insurer gave the insured an additional 30 days to purchase replacement goods. The insured argued that the fact that the claims adjuster sent letters extending the offer after the limitation period created a jury question as to whether waiver occurred. However, a claims adjuster is not authorized to waive a contractual limitation period without express authority from the insurer. The record contained no other evidence of negotiations between the parties before the limitation period expired from which the insured could infer that the insurer had agreed to extend the limitation period. Furthermore, there is no evidence of an affirmative promise or other act waiving the limitation or an actual or constructive fraud leading the insured to believe the limitation period would be enlarged. Therefore, the negotiations that occurred did not induce the insured into believing that it would not have to file suit within two years as provided by the policy.

For more information, please contact Denny Brown at (404) 633-9230.

Supreme Court of Georgia Adopts Definition of “Accident” Advocated by Insurance Companies

In State Auto Property and Cas. Co. v. Matty, 2010 WL 678946 (Ga. Mar. 1, 2010), the Georgia Supreme Court answered a certified question from a United States District Court “about how to determine the meaning of the term ‘accident’ in an automobile liability insurance policy when the word is not expressly defined in the policy and, more specifically, how to determine if there has been one accident or two when an insured vehicle strikes one claimant and then very shortly thereafter strikes another.”  In answering this question, the Georgia Supreme Court adopted the “cause” theory to aid in the construction of the word “accident.”  The “cause” theory is the clear majority rule and provides that the number of accidents is determined by the number of causes of injuries.

The decision originates from an automobile accident in which the insured driver struck a bicyclist, killing him.  Approximately one second later, the driver’s vehicle struck a second bicyclist, seriously injuring him.  The driver’s insurance policy contained a bodily injury liability limit of $100,000 for “each accident.”  The policy also provided that this amount was the “maximum limit of liability for all damages resulting from any one auto accident,” regardless of the number of “[c]laims made” or “vehicles involved in the auto accident.”  However, the policy did not define “accident” or “any one auto accident.”  The plaintiffs contended that there were two accidents and that they were entitled to two payments of the $100,000 limit, whereas the insurer argued that the incident constituted one accident and that it was responsible for providing only a single limit of $100,000 regardless of the number of claimants.

According to the “cause” theory, if “[t]here was but one proximate, uninterrupted, and continuing cause which resulted in all of the injuries and damage,” then only one “accident” has occurred.  In the context of automobile accidents involving multiple non-simultaneous collisions, “courts look to whether, after the cause of the initial collision, the driver regained control of the vehicle before a subsequent collision, so that it can be said there was a second intervening cause and, therefore, a second accident.”

Accordingly, the Georgia Supreme Court found that the insurance policy at issue contemplated that there could be a single accident in which there were multiple vehicles, injured parties, and claims.  Having clarified the legal issue that the district court found uncertain, the Georgia Supreme Court left it to the district court to decide whether there had been but one cause which resulted in all of the injuries and damages.

For more information, please contact Timothy Buckley III, Esq. at (404) 633-9230.

Court Upholds Assumption of the Risk Defense in “Car Surfing” Case

The Court of Appeals recently held that Georgia’s assumption of the risk doctrine applied in a case where a teenager was injured while “car surfing” on a friend’s automobile.  Teems v. Bates, 2009 WL 2902487 (Ga.App. Sept. 11, 2009).  Assumption of the risk is a complete defense in a lawsuit alleging negligence. 

Late one night, three friends drove to a church parking lot where Teems suggested that she and Mercurio “surf” on Bates’s car.  Mercurio was reluctant and told Teems that she thought it was dangerous.  Nevertheless, the two agreed to do it and Bates told them he would be careful driving around while they lied on top of his car.  After Teems and Mercurio took their positions on the roof of the car, Bates began driving at a speed of 10-15 miles per hour.  When he made a sharp right-hand turn, Teems was thrown from the car and onto the pavement, resulting in severe injuries. 

When Teems sued Bates for negligence, Bates responded that Teems assumed the risk of injury and that she was therefore barred from recovery.  In Georgia, the assumption of the risk defense applies if the plaintiff (1) had actual knowledge of the danger, (2) understood and appreciated the risks associated with the danger, and (3) voluntarily exposed himself to those risks.  When a person voluntarily participates in an obviously dangerous activity, that person necessarily assumes the risks attendant to that activity.  Here, the Court held that car surfing constituted an inherently dangerous activity that posed obvious risks to anyone who participated, and despite being made aware of the danger, Teems voluntarily chose to expose herself to it. 

Interestingly, the Court likened car surfing to an amusement park thrill ride, where a person accepts the risks generated by normal changes in speed and direction.  Therefore, when Teems agreed to car surf, she assumed the risks of changes in speed and direction, including the risk that she would fall off the moving vehicle.  Therefore, because Teems assumed the risk of injury by engaging in an obviously dangerous activity, she was precluded from recovering damages, and a verdict for the defendant was affirmed.

For more information, please contact Timothy Buckley III, Esq. at (404) 633-9230.

Notice Requirements in a Fair Labor Standards Act Lawsuit

The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in Federal, State, and local governments.  For the FLSA to apply, there must be an employment relationship between an employer and an employee.

In a lawsuit against an employer for claims pursuant to the FLSA, employees or former employees of a defendant may join as plaintiffs if they consent in writing and thereby “opt in.”  The preliminary determination of whether an employee should be allowed to gather information from the employer and send notice of the action.  At the preliminary stage, the plaintiff may seek “conditional certification.”  At this point, the plaintiff’s burden is very low and will likely be granted because the employer can later file a motion for decertification if discovery reveals that certification was not appropriate.  If the plaintiff can show that there are others that are “similarly situated,” he will be allowed to send notice to such individuals.  Although the Eleventh Circuit has not provided a specific definition for “similarly situated,” the Court has made it clear that “similarly situated” includes more than just the mere facts of job duties and pay provisions.  Instead, the court will consider job titles, if the potential plaintiffs worked at the same geographical location, the extent to which different time periods and different decision makers were involved, and whether the alleged treatment of each potential plaintiff is similar to that of the named plaintiffs.

If the plaintiff is allowed to send notice, the employer is only required to provide information on “similarly situated” employees for the past three (3) years because the longest applicable statute of limitations is three (3) years, which requires a finding of willful violations.  Also, courts may limit notice to a particular geographical area.  This includes a specific facility, terminal, office branch, etc.  Notice should include information concerning any fees or advances a plaintiff would be obligated to pay; that the court has not expressed an opinion concerning the merits of FLSA claims; and that it is an action seeking overtime from a specific employer that they may join.  In matters where the defendants are unable to provide plaintiffs with adequate information concerning former employees who were potential class members, notice via newspaper, radio and/or posts may be permitted.

Once discovery is complete, the employer has the right to file a motion for decertification, asserting that the individuals are not “similarly situated” and that the action should not be allowed to proceed to trial as a collective action.  At this point, the plaintiff burden is much higher.  However, it could be argued that the damage has been done because the plaintiff has been provided contact information of former and/or current employees who may have FLSA claims and may subject the employer to signification FLSA litigation whether proceeding as a collective action or individual claims.

For more information, please contact Timothy Buckley III, Esq. at (404) 633-9230.

Bad Faith Claims Against Insurance Companies For Failure to Pay Claims

O.C.G.A. § 33-4-6 provides a cause of action for penalties and attorney’s fees when an insurer is guilty of “bad faith” in refusing to pay a claim submitted by its insured. This statute addresses losses covered by insurance an insurance policy where the insurance company refuses to pay for such loss within 60 days after a demand has been made by the holder of the policy. To prevail on a claim for an insurer’s bad faith, the insured must prove: (1) that a demand for payment was lodged against the insurer at least 60 days prior to filing suit and (2) that the insurer’s failure to pay was motivated by bad faith. “The purpose of the statute’s demand requirement is to adequately notify an insurer that it is facing a bad faith claim so that it may make a decision about whether to pay, deny or further investigate the claim within the 60-day deadline.” Primerica Life Ins. Co. v. Humfleet, 217 Ga.App. 770, 458 S.E.2d 908 (1995).

The demand must notify the insurance company with some degree of specificity that the insured is asserting a claim for bad faith. Id. The demand may not be sent unless the insured’s right to payment has vested under the policy. “Demand must be made at a time when the insured is legally in a position to demand immediate payment, and it is not in order if the insurer has additional time left under the terms of the insurance policy in which to investigate or adjust the loss and therefore has no duty to pay at the time the demand is made.” Dixie Construction Products, Inc. v. WMH, Inc., 179 Ga.App. 658, 659, 347 S.E.2d 303, 304 (1986).

After showing that a timely demand was sent, the insured must demonstrate that the refusal to pay the claim was in “bad faith.” Federal Ins. Co. v. National Distributing Co., Inc., 203 Ga.App. 763, 768, 417 S.E.2d 671, 676 (1992). Although the statute does not define “bad faith,” the Court of Appeals has held that bad faith under O.C.G.A. § 33-4-6 means “a frivolous and unfounded refusal to pay a claim.” United Services Automobile Association v. Carroll, 226 Ga.App. 144, 148, 486 S.E.2d 613, 616 (1997). In those cases in which an insured is successful in pursuing a bad faith claim under O.C.G.A. § 33-4-6, the insurance company has typically failed to conduct a proper investigation of the claim. Georgia Farm Bureau Mut. Ins. Co. v. Murphy, 201 Ga.App. 676, 411 S.E.2d. 791 (1991).

For more information, please contact Denny Brown at (404) 633-9230.

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