WHITESIDE v. GEICO INDEMNITY COMPANY
Filing
46
ORDER denying 36 Motion for Summary Judgment; denying 37 Motion for Partial Summary Judgment. Ordered by US DISTRICT JUDGE CLAY D LAND on 12/12/2017. (CCL)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF GEORGIA
COLUMBUS DIVISION
FIFE M. WHITESIDE, Trustee in
Bankruptcy,
*
*
Plaintiff,
*
vs.
CASE NO. 4:16-CV-313 (CDL)
*
GEICO INDEMNITY COMPANY,
*
Defendant.
*
O R D E R
This is a bad faith failure to settle tort case which the
parties confusingly treat as a breach of contract coverage case.
Simply put, Defendant GEICO Indemnity Company had an opportunity
to
settle
a
liability
claim
against
its
insured
insured’s policy limits but failed to do so.
within
its
When it made the
decision not to accept the policy limits demand, no coverage
dispute existed.
Subsequently, a judgment was entered against
its insured in excess of the policy limits.
Because the insured
failed to notify GEICO that she had been served with the lawsuit
and a default judgment was entered against her, GEICO arguably
has
no
policy.
contractual
liability
to
pay
the
judgment
under
its
The issue presented by the parties’ motions for summary
judgment is whether either party is entitled to judgment as a
matter of law on Plaintiff’s bad faith failure to settle tort
claim under these circumstances.
Because genuine fact disputes
exist to be tried, the parties’ motions for summary judgment
(ECF Nos. 36 and 37) are denied.
SUMMARY JUDGMENT STANDARD
Summary judgment may be granted only “if the movant shows
that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”
Civ. P. 56(a).
In determining whether a
genuine
Fed. R.
dispute of
material fact exists to defeat a motion for summary judgment,
the evidence is viewed in the light most favorable to the party
opposing summary judgment, drawing all justifiable inferences in
the opposing party’s favor.
477 U.S. 242, 255 (1986).
Anderson v. Liberty Lobby, Inc.,
A fact is material if it is relevant
or necessary to the outcome of the suit.
Id. at 248.
A factual
dispute is genuine if the evidence would allow a reasonable jury
to return a verdict for the nonmoving party.
Id.
FACTUAL BACKGROUND
On February 26, 2012, Karen Griffis let Bonnie Winslett
borrow
her
Company.1
vehicle,
which
was
insured
by
GEICO
Indemnity
See generally Def.’s Mot. for Summ. J. Ex. A, Ga.
Family Auto. Ins. Policy, ECF No. 36-3 [hereinafter Policy].
While Winslett was driving the vehicle, she struck Terry Guthrie
1
Griffis later denied allowing Winslett to borrow the vehicle and
argued that Winslett had stolen it, but GEICO informed Griffis that it
would be difficult to deny coverage on this basis because Griffis
delayed in reporting the alleged theft and because Griffis was
Winslett’s friend and was visiting Winslett’s home when Winslett
borrowed the vehicle.
2
as he rode his bicycle.
Guthrie went to the emergency room
because of his injuries, and Winslett went to jail because she
did not have a valid driver’s license.
When Winslett was released from jail, she returned to the
apartment complex on 25th Street where she had been staying for
free in an unrentable apartment.
An unidentified lady gave
Winslett a March 5, 2012 letter from GEICO.
The letter stated
that GEICO determined, based on its investigation, that GEICO
was “responsible for the accident.”
Pl.’s Mot. for Summ. J. Ex.
P4, Letter from M. Herndon to B. Winslett (Mar. 5, 2012), ECF
No. 37-6.
GEICO stated that it would handle Guthrie’s claim for
injuries directly with Guthrie’s attorney.
Id.
The letter
asked Winslett to contact GEICO to provide a statement about the
accident details.
Id.
Winslett was “pretty messed up” when she
got the letter, and she concluded that it meant that GEICO had
taken
care
anything
of
everything
and
else.
Winslett
that
Dep.
she
did
48:11-21,
not
need
ECF
No.
35.
to
do
GEICO
assumed that Winslett received the March 5 letter because it was
not returned to GEICO.
GEICO sent Winslett a letter dated May 2, 2012 stating that
Guthrie’s claim had not yet been settled but that GEICO would
notify Winslett once the claim was resolved.
on the letter.
apartment
Griffis was copied
At some point, Winslett stopped staying at the
complex
on
25th
Street,
3
and
the
May
2
letter
was
returned to GEICO as undeliverable.
Winslett did not have a
telephone, so GEICO could not call her.
On May 15, 2012, Guthrie’s lawyer, Austin Gower with the
firm of Charles A. Gower, P.C., sent a demand letter to GEICO
asserting
that
injuries
and
Winslett
demanding
limit of $30,000.
showing
one
Neosporin
Motrin,
for
and
condition.
the
negligent
policy’s
in
causing
Guthrie’s
injury
liability
bodily
The demand letter contained medical records
emergency
medical bills.
was
room
visit
and
itemizing
$9,908.35
in
The medical records showed that Guthrie received
abrasions,
that
he
that
was
he
was
released
the
prescribed
same
day
Lortab
in
and
stable
Nearly half of the medical bills were for diagnostic
tests that revealed no acute findings.
The demand letter stated that Guthrie suffered “a contusion
to his right hip and chest,” that he had been unable to get
recommended follow-up treatment because he did not have health
insurance,
and
that
he
continued
injuries.2
Pl.’s Mot. for Summ. J. Ex. P8, Letter from A. Gower
2
to
suffer
pain
due
to
his
Plaintiff now argues that Guthrie’s prior neck and back injuries were
exacerbated because of the 2012 wreck and that he later needed surgery
to treat these injuries, but neither this assertion nor any
documentation to support it was included with the demand letter.
Guthrie’s claim for these previous injuries was with GEICO in 2010,
and GEICO authorized its claims examiner to determine whether there
was information in the 2010 file that would apply to Guthrie’s 2012
claim.
GEICO did not point to evidence in its claims activity log
that its adjuster did review the 2010 claim file, though there is
evidence that she asked Guthrie’s attorney for a recorded statement
4
to M. Herndon 2 (May 15, 2012), ECF No. 37-10.
The demand
letter did not contain a claim for lost wages.
The demand
letter stated that the demand would be withdrawn at 5:00 p.m. on
June 12, 2012.
Melissa
Guthrie’s
Herndon,
demand.
a
She
GEICO
sent
claims
Winslett
a
examiner,
copy
of
reviewed
the
letter, although it was returned as undeliverable.
demand
Based on
Herndon’s review of the documentation GEICO received from Austin
Gower,
Herndon
and
her
supervisor
determined
that
the
value
range for Guthrie’s claim was between $12,409.00 and $15,909.00.
By letter dated May 23, 2012, Herndon offered Guthrie $12,409.00
to settle his claim against Winslett, and she asked Austin Gower
to discuss the offer with Guthrie.
Austin
Gower
that
day.
Austin
Herndon also spoke with
Gower
did
not
recall
the
conversation but believes he would have told Herndon that the
counteroffer
was
too
low
and
that
he
would
file
a
lawsuit
against Winslett on Guthrie’s behalf if GEICO did not pay the
policy limits.
Guthrie filed suit against Winslett on May 29, 2012 and
served Winslett on May 30, 2012 at the apartment complex on 25th
Street.
Winslett
asked
the
deputy
who
served
her
with
the
papers for help, and he suggested that she contact the attorney
from Guthrie. Pl.’s Mot. for Summ. J. Ex. P3, Letter from M. Herndon
to C. Gower (Mar. 2, 2012), ECF No. 37-5.
5
listed on the Complaint.
spoke
with
should
do.
a
Winslett called the Gower firm and
paralegal
Sparks
insurance company.
named
told
Jowanda
Winslett
to
Sparks
get
in
about
what
she
touch
with
the
Winslett also spoke with a social worker at
the homeless task force about what to do with the suit papers,
and the social worker told Winslett to get in touch with the
insurance company.
Winslett did not contact GEICO.
Instead,
she said, “The hell with this shit” and ripped up the papers.
Winslett Dep. 79:8-19.
Winslett did not know how GEICO would
receive notice of the suit if she did not tell GEICO about it.
After Winslett was served on May 30, 2012, no one notified
GEICO of the lawsuit: not Winslett, not Griffis, not Guthrie,
not anyone at the Gower firm.
On June 1, 2012, Herndon called
the Gower firm to follow up on her settlement offer.
No one was
available to take her call, so she left a voicemail for Austin
Gower asking if there was a response to GEICO’s offer.
telephone call was not returned.
Herndon called the Gower firm
to follow up again on June 27, 2012.
for
Austin
returned.
Gower.
That
That
telephone
She left another voicemail
call
was
likewise
not
Herndon sent a letter to the Gower firm as “a follow
up attempt to settle” Guthrie’s claim against Winslett.
Pl.’s
Mot. for Summ. J. Ex. P12, Letter from M. Herndon to C. Gower
(Jun. 27, 2012).
No one from the Gower firm responded.
Herndon
called the Gower firm to follow up again on July 17, 2012.
6
She
was again told that neither an attorney nor a paralegal was
available, so she left a message for the paralegal, Sparks.
No
one from the Gower firm returned that telephone call.
On August 1, 2012, Superior Court Judge Gil McBride held a
short hearing on Guthrie’s motion for default judgment against
Winslett.
amount
He entered a default judgment against Winslett in the
of
informed
$2,916,204.00.
GEICO
via
letter
On
August
that
a
8,
2012,
default
Austin
judgment
Gower
had
been
entered against Winslett, and he demanded payment.
On August 20, 2012, GEICO determined that it should send
Winslett a reservation of rights letter stating that GEICO may
determine that Winslett had no coverage because GEICO was not
notified of Guthrie’s lawsuit.
Winslett
a
reservation
apartment complex.
of
On August 22, 2012, GEICO sent
rights
letter
at
the
25th
Street
The letter stated that GEICO “does not waive
any of its rights or admit any obligations under the policy” and
quoted the policy’s notice provision.
Pl.’s Mot. for Summ. J.
Ex. P14, Letter from E. Holmes to B. Winslett (August 22, 2012),
ECF No. 37-16.
GEICO then hired attorney Ted Theus to represent
Winslett pursuant to a reservation of rights.
Pl.’s Mot. for
Summ. J. Ex. P16, Fax from T. Theus to B. Avery (Aug. 24, 2012),
ECF No. 37-18.
Theus sent Winslett a letter at the 25th Street
apartment complex.
to
represent
The letter stated that GEICO retained Theus
Winslett
pursuant
7
to
a
reservation
of
rights.
There is no evidence that Winslett received the letter from
GEICO or the letter from Theus.
When Theus did not hear from Winslett, he went to her last
known address (the 25th Street apartment complex) and tried to
find her.
Theus Aff. ¶ 3, ECF No. 41.
Theus was told that
Winslett no longer lived at the apartment but that he might find
her through several homeless outreach ministries; Theus spoke
with individuals at several ministries and asked them to have
Winslett contact him if they saw her.
Id. ¶4.
Winslett did
contact Theus on September 20, 2012, and told him that she was
staying with her boyfriend in a trailer park in Alabama.
Id.
¶ 6.
Theus personally met with Winslett on September 23, 2012.
Id.
He told Winslett that GEICO would represent her under a
reservation of rights and that a “coverage issue was presented”
because GEICO did not receive notice of the lawsuit against her
until after a default judgment had been entered.
Id.
Theus
obtained an affidavit from Winslett regarding the collision and
sent it to GEICO the next day.
After Theus met with Winslett, he filed a motion on her
behalf to set aside the default.
The motion to set aside was
denied, and that decision was later affirmed by the Georgia
Court
of
Appeals.
Guthrie
filed
an
involuntary
bankruptcy
petition as a creditor of Winslett and brought a claim against
GEICO for bad faith.
GEICO hired a lawyer to represent Winslett
8
in
the
bankruptcy
action,
and
the
lawyer
dismiss the involuntary bankruptcy.
filed
a
motion
to
That motion was denied, and
Winslett was adjudicated a Chapter 7 Debtor.
Fife Whiteside,
the Trustee in Bankruptcy (“Trustee”), brought this action on
behalf
of
the
Winslett
bankruptcy
estate
to
recover
damages
caused by GEICO’s failure to settle Guthrie’s claim.
DISCUSSION
The Court must resolve two issues in deciding the parties’
motions for summary judgment:
(1) does a genuine fact dispute
exist on whether GEICO failed to act as a reasonable insurer
would act when it failed to accept Guthrie’s demand for the
$30,000 policy limits; and (2) if it does, does a genuine fact
dispute exist on whether Winslett suffered damages proximately
caused
by
GEICO’s
failure
to
addresses each issue in turn.
settle
the
claim.
The
Court
There is no dispute that Georgia
law applies in this diversity case.
See, e.g., Gasperini v.
Ctr. for Humanities, Inc., 518 U.S. 415, 427 (1996) (“Under the
Erie
[R.R.
federal
Co.
courts
v.
Tompkins,
sitting
in
304
U.S.
diversity
64
apply
(1938)]
state
doctrine,
substantive
law[.]”).
I.
Is There a Genuine Fact Dispute on Whether GEICO Breached
its Duty to its Insured?
An
insurance
company
may
be
liable
for
damages
to
its
insured “based on the insurer’s bad faith or negligent refusal
9
to settle a personal claim within the policy limits.”
Cotton
States Mut. Ins. Co. v. Brightman, 580 S.E.2d 519, 521 (Ga.
2003).
and
“A claim for bad-faith failure to settle sounds in tort
involves,
at
least
in
part,
a
claim
that
the
insurer’s
conduct exposed the insured’s personal property to loss.”
Gen.
Ins.
1997).
Co.
v.
Ross,
489
S.E.2d
53,
57–58
(Ga.
Ct.
S.
App.
An “insured may sue the insurer for failure to settle
only when the insurer had a duty to settle the case, breached
that
duty,
insured
and
its
beyond
the
insurance contract.”
breach
proximately
damages,
if
caused
any,
damage
to
by
contemplated
the
the
Delancy v. St. Paul Fire & Marine Ins.
Co., 947 F.2d 1536, 1545–47 (11th Cir. 1991).
As the Court
previously observed, “[a]n insurer acts in bad faith if it acts
unreasonably
in
responding
(or
failing
to
respond)
to
a
settlement offer” and “is negligent in refusing to settle a
claim if an ordinarily prudent insurer would consider it an
unreasonable
risk
to
try
the
case
instead
of
settling
it.”
Dickerson v. Am. Nat. Prop. & Cas. Co., No. 3:07-CV-111 (CDL),
2009 WL 1035131, at *6 (M.D. Ga. Apr. 16, 2009).3
3
In other
GEICO argues that Georgia courts have not recognized a negligent
failure to settle claim based on an insurer’s failure to handle a
claim as an ordinarily prudent insurer would. But the Georgia Supreme
Court, in affirming the denial of a directed verdict against an
insurer for refusal to settle a personal injury action, did state that
the insurer’s conduct must be “[j]udged by the standard of the
ordinarily prudent insurer” and that “the insurer is negligent in
failing to settle if the ordinarily prudent insurer would consider
choosing to try the case created an unreasonable risk.”
Brightman,
10
words,
an
insurance
company
“may
be
liable
for
damages
for
failing to settle for the policy limits ‘if, but only if, such
ordinarily prudent insurer would consider that choosing to try
the
case
[rather
than
accept
an
offer
to
settle
within
the
policy limits] would be taking an unreasonable risk [that the
insured would be subjected to a judgment in excess of the policy
limits].’”
Baker v. Huff, 747 S.E.2d 1, 6 (Ga. Ct. App. 2013)
(alterations in original) (quoting
U.S. Fid. & Guar. Co. v.
Evans, 156 S.E.2d 809, 811, aff’d, 158 S.E.2d 243 (1967)).
The determination of whether an insurer acted reasonably in
response
to
a
time-limited
settlement
demand
“require[s]
consideration of all the relevant circumstances including the
insurer’s knowledge of facts relevant to liability and damages
on the claim; the insurer’s diligence in conducting a reasonable
investigation to discover the relevant facts; and the terms of
the settlement offer and any response by the insurer.”
747 S.E.2d at 6.
These matters are typically disputed.
Baker,
To find
that an insurer acted unreasonably as a matter of law, as the
Trustee argues GEICO did, the evidence would have to be such
that
no
reasonable
juror
could
conclude
that
prudent insurer would have declined the offer.
an
ordinarily
On the other
580 S.E.2d at 521; id. at 521-22 (finding that the Georgia Supreme
Court could not resolve, as a matter of law, that the insurer acted
“reasonably and like the ordinarily prudent insurer in declining to
tender its policy limits”). The Court applies the standard set forth
in Brightman.
11
hand, to find that an insurer acted reasonably as a matter of
law, as GEICO argues it did, the evidence would have to be such
that no reasonable juror could conclude that the insurer acted
unreasonably in responding to the settlement demand.
The Court finds that a jury question exists on this issue.
A reasonable jury could conclude that GEICO acted reasonably in
responding to Guthrie’s settlement offer of $30,000.
Based on
the information GEICO received with Guthrie’s settlement demand,
a reasonable insurer could determine that his claim was worth
less than $30,000 because Guthrie’s diagnostic tests revealed no
acute
findings;
his
hospital
treatment
of
only
Neosporin,
Lortab, and Motrin did not suggest that he suffered a serious
injury;
Guthrie’s
medical
bills
were
slightly
less
than
one
third of the policy limits; Guthrie did not assert a claim for
lost wages; and Guthrie’s attorney did not respond to GEICO’s
request for a recorded statement from Guthrie.
also
sufficient
conclude
because
that
evidence
GEICO
Guthrie’s
did
medical
from
not
which
act
bills
a
But there is
reasonable
reasonably
totaled
in
nearly
jury
its
could
response
$10,000
and
Guthrie’s lawyer told GEICO that Guthrie continued to experience
pain and needed follow-up medical treatment.
resolve this fact dispute.
A jury needs to
Accordingly, summary judgment is not
appropriate on this ground.
12
II.
Is There a Genuine Fact Dispute on Whether GEICO’s Alleged
Breach of Duty Proximately Caused Damages to Winslett?
GEICO argues that even if a jury could conclude that it
acted negligently or in bad faith in failing to settle Guthrie’s
claim, the Trustee cannot, as a matter of law, prevail because
Winslett did not give GEICO notice of Guthrie’s lawsuit against
her and did not cooperate with GEICO with regard to Guthrie’s
lawsuit.
It
is
true
that
in
general,
if
an
insured
is
contractually required to provide notice of a loss or a lawsuit
and fails to do so, then there is no coverage under the policy.
See,
e.g.,
OneBeacon
Am.
Ins.
Co.
v.
Catholic
Diocese
of
Savannah, 477 F. App’x 665, 673 (11th Cir. 2012) (per curiam);
Burkett v. Liberty Mut. Fire Ins. Co., 629 S.E.2d 558, 560 (Ga.
Ct. App. 2006); Berryhill v. State Farm Fire & Cas. Co., 329
S.E.2d 189, 190 (Ga. Ct. App. 1985).
And, an insurance company
cannot be considered to have acted negligently or in bad faith
in failing to settle a claim if it had reasonable grounds to
contest the claim—such as if there was undisputedly no coverage
for the claim at the time the settlement demand was made.4
4
But
The Court reviewed the “bad faith” cases GEICO cited on this point
and notes that they are all O.C.G.A. § 33-4-6 actions for bad faith
failure to pay a covered insurance claim according to the terms of the
policy, not claims against an insurance company for breach of its duty
to act reasonably in deciding whether to accept or decline a policy
limits settlement demand. See, e.g., Langdale Co. v. Nat’l Union Fire
Ins. Co. of Pittsburgh, 609 F. App’x 578, 585 (11th Cir. 2015) (per
curiam)
(affirming
grant
of
summary
judgment
on
insured’s
O.C.G.A. § 33-4-6 bad faith claim because a policy exclusion barred
coverage).
13
here, there was no coverage dispute at the time GEICO rejected
Guthrie’s pre-suit policy limits demand.
It is undisputed that
as of that time GEICO had received timely notice of the claim
and was well aware of the policy limits demand.
Nevertheless,
GEICO
contends
that
Winslett’s
failure
to
notify GEICO of a lawsuit that was filed after GEICO rejected
Guthrie’s policy limits settlement demand bars her claim based
on GEICO’s handling of that settlement demand.
heavily on
OneBeacon, Burkett, and
Berryhill.
GEICO relies
All three of
those cases involved breach of contract claims arising from an
insurance company’s refusal to pay a claim under the relevant
policy; none involved a claim sounding in tort arising from an
insurance company’s failure to accept a liability policy limits
settlement demand.5
In all three cases, the key question was
“whether an insurance company, absent any notice of a lawsuit
5
In OneBeacon, the insured sought coverage for a tort claim against it
but did not notify the insurer of the suit (or of the loss) until
nearly two years after the suit was filed.
The delay was not
justified, so the insured’s failure to comply with the notice
condition precedent precluded coverage.
OneBeacon, 477 F. App’x at
672.
In Burkett, the passenger injured in a wreck did not notify
uninsured motorist carriers of the wreck or of a declaratory judgment
action regarding coverage under the liability policy; the insurer did
not receive notice of the declaratory judgment action until several
months after a court determined that both of the drivers in the wreck
were uninsured. The court concluded that insured’s failure to comply
with the notice condition precedent precluded coverage since the
insured’s delay was unreasonable.
Burkett, 629 S.E.2d at 560.
Finally, in Berryhill, the person who was injured by the insured
brought suit alleging that the insurer was obligated to pay the
judgment incurred by its insured even though the insurer was not
notified of the suit until after a default judgment was entered. The
court found that the failure to comply with the policy’s notice of
suit provision barred coverage. Berryhill, 329 S.E.2d at 191.
14
against its insured either from the insured or from any other
person, can be held liable for a judgment obtained against the
insured” when the applicable policies required notice of a suit
and
stated
that
coverage.
such
notice
Berryhill,
329
was
a
S.E.2d
condition
at
precedent
190.
The
to
critical
distinction between those cases and this action is that nothing
in Berryhill, Burkett, or OneBeacon suggests that any of the
insurers declined an opportunity to settle the injured person’s
claims within policy limits before the lawsuit was filed.6
Cf.
Delancy, 947 F.2d at 1545–46 (distinguishing an action for an
insurer’s failure to pay a covered claim from a tort claim based
on an insurer’s duty not to injure the insured by negligently or
in bad faith refusing to settle a claim).
GEICO did not cite, and the Court did not find, a failure
to
settle
case
where
coverage
existed
at
the
time
a
policy
limits settlement demand was made and rejected but where the
insured subsequently failed to provide the insurer with notice
of
a
lawsuit
rejected
the
that
was
settlement
filed
after
offer.
6
the
The
insurer
Court
unreasonably
finds
that
the
GEICO’s argument that O.C.G.A. § 33-7-15 applies to foreclose
coverage under the circumstances of this case is likewise misplaced.
That statue simply requires insurance contracts to contain a notice of
suit provision and states that if an insured fails to comply with that
required provision and the insurer is prejudiced by the failure, then
the insurer is relieved of its obligation to pay a judgment on behalf
of the insured. The statute does not address an insurer’s duty to act
reasonably in deciding whether to accept or reject a policy limits
settlement demand.
15
subsequent
failure
of
an
insured
to
comply
with
the
policy
conditions does not automatically excuse an insurer’s breach of
its independent duty to act reasonably and in good faith in
evaluating a liability policy limits demand that is made prior
to the insured’s alleged noncompliance with policy conditions.
Here, when Guthrie made a policy limits settlement demand
to GEICO, there was no coverage dispute; GEICO acknowledged that
it was responsible for the accident and told Winslett that it
would
handle
attorney.
Guthrie’s
claim
for
injuries
directly
with
his
Therefore, GEICO had a duty at that time and under
those circumstances to act reasonably in responding to Guthrie’s
settlement demand.
And, if it breached that duty, then GEICO
can be held liable in tort for any damages that were proximately
caused by the breach.
See Delancy, 947 F.2d at 1545–47 (“[T]he
insured may sue the insurer for failure to settle only when the
insurer had a duty to settle the case, breached that duty, and
its breach proximately caused damage to the insured beyond the
damages, if any, contemplated by the insurance contract.”).
Winslett’s failure to notify GEICO of Guthrie’s lawsuit,
however, may be relevant to whether GEICO’s breach proximately
caused
her
damages,
and
if
so,
the
amount.
Typically,
the
amount of damages in a failure to settle case is the amount of
the
excess
verdict
plus
other
damages
that
were
proximately
caused by the entry of a judgment on the excess verdict.
16
McCall
v. Allstate Ins. Co., 310 S.E.2d 513, 514–15 (Ga. 1984); accord
Cotton States Mut. Ins. Co. v. Brightman, 568 S.E.2d 498, 502
(Ga. Ct. App. 2002) (noting that damages in an excess verdict
are typically “the amount by which the judgment exceeds policy
coverage”), aff’d, 580 S.E.2d 519 (Ga. 2003).
the typical case.
But this is not
Here Winslett’s failure to notify GEICO of
Guthrie’s lawsuit before the default judgment denied GEICO the
opportunity to “defend the suit, cross-examine the witnesses,
and present evidence on its insured’s liability and the damages
incurred.”
Champion v. S. Gen. Ins. Co., 401 S.E.2d 36, 39 (Ga.
Ct. App. 1990).7
A reasonable juror could conclude that the
excess judgment was the result of Winslett’s failure to provide
GEICO
with
notice
of
Guthrie’s
lawsuit
and
that
a
judgment
against Winslett would have been less than $2.9 million had some
defense been made on her behalf to avoid the default judgment.
The Court thus finds that a fact question exists on the amount
of damages that were proximately caused by GEICO’s failure to
7
In Champion, the insurer did not learn of the injured party’s lawsuit
against the insured until after a default judgment was entered against
the insured. The insurer argued that it was prejudiced as a matter of
law based on the insured’s failure to provide notice of suit as
required under the policy and was thus not liable under the policy
pursuant to O.C.G.A. § 33-7-15(b), which states that if an insured
does not comply with a notice of suit provision in the policy and the
insurer is prejudiced as a result, then the insurer has no obligation
to pay a judgment on behalf of the insured.
The Georgia Court of
Appeals found a fact question on whether the prejudice the insurer
experienced as a result of the insured’s failure to provide the notice
was eliminated when the injured party offered to open the default
judgment. Champion, 401 S.E.2d at 39.
17
settle Guthrie’s claim for the policy limits when it had an
opportunity to do so.
The
Winslett
Court
was
recognizes
not
that
required
to
the
Trustee
provide
maintains
GEICO
with
that
notice
of
Guthrie’s suit and that GEICO waived any right it had to receive
notice from Winslett.8
If that were the case, then Winslett’s
failure to notify GEICO could not be an intervening cause of any
damages
she
suffered.
The
Court
finds
this
argument
unpersuasive.
The
against
policy
an
states
that
insured”—which
if
a
“claim
includes
or
Winslett
suit
as
a
is
brought
permissive
driver—“you” (defined as the named policyholder) are required to
send GEICO “a copy of every summons or other process relating to
the
coverage
under
this
policy”
unless
summons or other process by another means.
36-3
at
9.
policyholder)
The
“fail
policy
to
further
comply
states
with
this
GEICO
receives
the
Policy 6, ECF No.
that
if
“you”
provision,
it
(the
will
constitute a breach of the insurance contract and if prejudicial
to us, shall relieve us of our obligation to defend you [the
8
Winslett also argues that GEICO is estopped from denying coverage
based on its conduct in hiring an attorney to represent her after it
was notified of the default. Again, this is not a breach of contract
case based on a denial of coverage.
Moreover, the Court is not
convinced that estoppel would apply in a case like this, where the
insured received actual notice that her attorney was hired to
represent her under a reservation of rights before the lawyer took any
action in her defense and where the insured did not object to the
defense under a reservation of rights.
18
policyholder] and any other insureds under this policy and of
any
liability
to
pay
any
judgment
or
other
policyholder’s] or any other insureds behalf.”
sum
Id.
on
[the
The policy
also requires that the “insured” will “cooperate and assist”
GEICO
in
“the
investigation
of
the
occurrence,”
“making
settlements,” “the conduct of suits,” and “securing and giving
evidence” if such cooperation and assistance is requested.
Id.
The Trustee argues that these provisions clearly indicate
that GEICO waived its right to receive notice of the suit from
an insured who is not a policyholder and that since Winslett was
not expressly required or requested to provide GEICO with notice
of the suit, her failure to do so cannot be held against her.
An
insurance
reasonable
policy’s
person
in
terms
the
must
be
position
understand the words to mean.”
construed
of
the
as
“what
insured
a
would
King-Morrow v. Am. Family Ins.
Co., 780 S.E.2d 451, 452 (Ga. Ct. App. 2015).
The Trustee
argues that this case is indistinguishable from King-Morrow.
In
King-Morrow, a notice provision in an insurance policy required
“you”
(the
policyholder)
to
notify
the
insurance
“you” (the policyholder) had an accident or loss.
Court
of
Appeals
concluded
that
the
notice
company
if
The Georgia
provision
was
susceptible to two reasonable constructions: a reasonable person
could understand that it (1) only applied to policy holders or
(2) implicitly applied to any person claiming coverage under the
19
policy.
The
Georgia
insurance
company
did
Court
not
of
Appeals
explicitly
held
require
that
since
anyone
the
claiming
coverage to notify it of an accident, a permissive driver could
reasonably conclude that the notice provision did not apply to
her.
Id. at 454.
The notice of suit provision in this case is different than
the
one
in
King-Morrow.
The
policy
here
does
require
the
policyholder (and no one else) to send GEICO a copy of the
summons
and
complaint
unless
it
is
GEICO.
“otherwise
Policy 6, ECF No. 36-3 at 9.
received”
by
But it also explicitly
states that if the policyholder fails to do so and if GEICO does
not receive notice of the suit by other means, then that failure
relieves GEICO of its obligation to defend the policyholder “and
any other insureds under this policy and of any liability to pay
any judgment or other sum on [the policyholder’s] or any other
insureds behalf.”
Id.
There is no ambiguity here.
GEICO
does
not
receive
a
copy
of
The policy states that if
the
summons
and
complaint
relating to coverage from the policyholder or otherwise, then
GEICO has no liability to pay any judgment on behalf of any
insured.
The Court thus rejects the Trustee’s arguments that
GEICO waived its right to receive notice of suit from Winslett
and that Winslett had no duty to send GEICO notice of the suit.
20
Accordingly, the jury may consider whether Winslett’s failure to
notify GEICO of Guthrie’s suit caused any of her damages.
The Court observes that had GEICO never received a policy
limits demand in this case, then it would likely be entitled to
judgment as a matter of law that it had no obligation to pay any
judgment.
the
only
The reason:
basis
for
without a rejected time limit demand,
liability
would
be
for
breach
of
the
insurance contract, and there could be no breach if the insured
failed to comply with the policy conditions.
this case.
But that is not
Here, GEICO had a duty sounding in tort to act as a
reasonably prudent insurer when presented with the policy limits
demand.
If it breached that duty, it may be liable to its
insured for damages proximately caused by the breach.
genuine
factual
disputes
exist
as
to
whether
that
Because
duty
was
breached and whether that breach proximately caused damages to
Winslett, summary judgment is not appropriate.
While some may
consider this to be a fine distinction, it must be made here
given that Georgia law distinguishes between a claim for breach
of an insurance contract and a tort claim for bad faith failure
to settle.
CONCLUSION
As discussed above, genuine fact disputes preclude summary
judgment in this case.
GEICO’s summary judgment motion (ECF No.
36) is denied, as is the Trustee’s partial summary judgment
21
motion (ECF No. 37).
The Court will try this action during its
March 2018 trial term.
IT IS SO ORDERED, this 12th day of December, 2017.
S/Clay D. Land
CLAY D. LAND
CHIEF U.S. DISTRICT COURT JUDGE
MIDDLE DISTRICT OF GEORGIA
22
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