Canal Indemnity Company v. Bradley et al
Filing
39
OPINION AND ORDER GRANTING Plaintiff's 25 Motion for Summary Judgment and DENYING Defendant Georgia Messenger Service, Inc.'s 26 Motion for Summary Judgment. Signed by Judge William S. Duffey, Jr on 3/28/2014. (anc) Modified on 3/28/2014 in order to update docket text (anc).
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
CANAL INDEMNITY COMPANY,
Plaintiff,
v.
1:12-cv-2206-WSD
VERNETTA BRADLEY, JOHN
WISE, and GEORGIA
MESSENGER SERVICE, INC.,
Defendants.
OPINION AND ORDER
This matter is before the Court on Plaintiff Canal Indemnity Company’s
(“Plaintiff” or “Canal”) Motion for Summary Judgment [25], and Defendant
Georgia Messenger Service, Inc.’s (“GMS”) Motion for Summary Judgment [26].
I.
BACKGROUND
This is an insurance coverage dispute in which Canal seeks a declaratory
judgment that the Commercial General Liability Insurance Policy (the “Policy”) it
issued to GMS does not provide coverage for claims asserted in a separate action
(“Underlying Action”) brought by Vernetta Bradley (“Bradley”) against John Wise
(“Wise”) and GMS for bodily injury resulting from the September 20, 2005,
alleged assault and battery of Bradley by Wise (the “Bradley-Wise Incident”).
A.
The Underlying Action
On September 20, 2005, Bradley was working as a security guard at the
Palisades Office Park, located at 5901 B Peachtree Dunwoody Road, Atlanta,
Georgia (the “Office Park”). Wise, performing courier services for GMS, parked
his delivery vehicle in a restricted area at the Office Park and Bradley asked him to
move it. Wise did not comply and entered an office building to make a delivery.
Bradley kneeled at the rear of Wise’s vehicle and began to install a vehicle “boot.”
Wise exited the office building, saw her “booting” his vehicle, and, Bradley
alleges, “viciously assault[ed] [Bradley], kicking her in the head in a violent and
repeated manner causing her body to fall to the ground at which time her head
struck the pavement.” (Compl. in Underlying Action [1] at 3-4).
On October 4, 2005, Canal and GMS executed a “Non-Waiver Agreement,”
which provides:
NON-WAIVER AGREEMENT
Reason(s) for executing this Instrument is (are) as follows:
Bodily injury claimed by Vernette [sic] Bradley may be the
result of intended actions on behalf of the Insured’s employee.
As well as any other reason or reasons which are now known or
which may become known in the future.
IT IS AGREED that any action taken heretofore by the
insurance company . . . or any of [its] representatives, signing this
agreement in ascertaining the amount of the actual case value; and the
2
amount of the loss and damages which occurred on September 20,
2005, at [the Office Park], and investigating the cause thereof, shall
not waive or invalidate any of the conditions of the policies of
insurance.
...
THE SOLE OBJECT AND INTENT of this agreement is to
provide for the determination of the amount of the actual cash value
and the amount of the loss and damage, and an investigation of the
cause thereof, without regard to the liability, if any of the said
insurance companies.
(Def’s Statement of Material Fact (“DSMF”) [26.2] ¶¶ 4-5; [28.1 at 61]).
In January 2006, Bradley filed her complaint in the Underlying Action in the
State Court of Fulton County. Bradley alleged that Wise was employed by GMS at
the time of the incident on September 20, 2005, that Wise and GMS are liable to
Bradley for damages arising from the assault and battery, and that GMS is liable to
Bradley for damages arising from its negligence in employing Wise. (DSMF ¶ 8).
GMS sent a copy of the complaint in the Underlying Action to its insurance
agent, Southeastern Specialty Underwriters, Inc. (“Southeastern”), but
Southeastern failed to forward the complaint to Canal. (Id. ¶ 9). GMS did not file
an answer, and on May 16, 2006, Bradley moved for default judgment. (Id.). On
May 17, 2006, GMS, through its attorney Jason Grech (“Grech”), moved to open
the default and filed a proposed answer. (Id. ¶ 11). GMS’s motion to open the
default was denied and GMS moved for reconsideration. At some point, Canal
3
retained the firm of Harper, Waldon & Craig to defend GMS and Prout was
substituted as counsel for GMS. (Id. ¶ 12).
On September 26, 2006, Grech asked Canal to reimburse GMS for the legal
fees it had incurred defending the Underlying Action before Canal retained defense
counsel. (Id. ¶ 13).
On December 19, 2006, Canal sent Grech a letter (the “December 19th
Letter”) “to respond to [his] letter, and to advise [him] of Canal’s position
regarding insurance coverage in this case.” (Id. ¶ 14). The December 19th Letter
states:
Based upon Canal’s investigation, it appears that GMS was served
with suit papers on or about March 6, 2006. . . . It was apparently
“discovered” sometime in May of 2006 that no answer had been filed
on behalf of GMS and that the case was in a posture of default. Your
firm filed a Motion to Open Default shortly thereafter along with a
proposed Answer. Canal, while undertaking to investigate the claim,
engaged the firm of Harper, Waldon & Craig to continue the efforts to
open the default and otherwise defend GMS in the action.
...
Pursuant to the [P]olicy . . . it was the obligation of GMS to provide
timely notice to Canal of any loss and, more particularly, of the
receipt of suit papers. . . .
Though GMS did forward the suit papers to [Southeastern],
Southeastern failed to transmit the papers to [Canal]. . . . Because
Southeastern is the agent of your insured, not of Canal [] there has
been a breach of the insurance contract, including but not limited to,
[the Policy] provisions regarding notice of suit papers.
4
Canal will continue to provide a defense to GMS at this time,
but Canal reserves its right to deny coverage for indemnity or defense
of the above-styled action.
Because we are continuing to investigate this matter and
providing a defense only through reservation of rights, Canal is not in
a position currently to reimburse your client for attorneys’ fees
incurred prior to the engagement of Harper, Walton & Craig.
(December 19th Letter [28.9 at 2-3]).
On February 27, 2007, the Fulton County State Court granted GMS’s
motion for reconsideration and opened the default. (DSMF ¶ 17). On November
19, 2007, Bradley voluntarily dismissed the Underlying Action without prejudice.
On March 3, 2008, Bradley filed in the State Court of Fulton County a
renewed complaint, reasserting the same claims for negligence against GMS, and
assault and battery against GMS and Wise, arising from the September 20, 2005,
incident.1 (Id. ¶ 19). Canal again retained Harper, Walton & Craig to defend GMS
in the Underlying Action. (Id. ¶ 20).
On February 9, 2010, GMS was granted summary judgment on Bradley’s
negligence claims. The only claims remaining in the Underlying Action are
Bradley’s claims for assault and battery against Wise and GMS.2 The Underlying
Action is stayed while this declaratory judgment action is pending.
1
No. 2008EV004203H.
The trial court denied GMS’s motion for summary judgment and GMS
appealed. The Georgia Court of Appeals reversed, granting summary judgment for
2
5
B.
The Policy and the Current Dispute
On July 18, 2005, Canal issued Commercial General Liability Policy
Number GL22280 (the “Policy”) to GMS for the policy period of July 18, 2005 to
July 18, 2006. (Pl’s Statement of Material Facts (“PSMF”) [25.2] ¶ 16). GMS is
the only named insured on the Policy. (Id. ¶ 17).
The Policy provides certain liability coverage for “occurrences,” which are
defined as “accidents.” It is undisputed that the Policy specifically disclaims
liability arising from intentional torts, which are not accidents and fall within an
express provision excluding coverage for “expected or intended” bodily injury.
The Policy’s Expected or Intended Injury Exclusion provides:
2.
Exclusions
This insurance does not apply to:
a.
Expected Or Intended Injury
“Bodily injury[”] or “property damage” expected or
intended from the standpoint of the insured.
(PSMF ¶ 21).
GMS on Bradley’s negligence claims and remanding the assault and battery claims
with direction to consider certain deposition transcripts, relied on in the parties’
trial briefs but which were not filed with the trial court before it entered its order,
to determine whether Wise was an employee of GMS, and if so, whether he was
acting within the scope of his employment at the time of the September 20, 2005,
incident. See 690 S.E.2d 888 (Ga. Ct. App. 2010).
On remand, the trial court again denied GMS’s motion for summary
judgment, finding that genuine issues of material fact exist regarding whether Wise
was an employee of GMS such that GMS could be held liable for Bradley’s
injuries. The Georgia Court of Appeals affirmed on July 12, 2011, and denied
reconsideration on July 27, 2011. 715 S.E.2d 699. On January 9, 2012, the
Georgia Supreme Court denied certiorari.
6
On June 26, 2012, Canal filed its Complaint in this action [1.4] seeking a
declaratory judgment that the Policy does not provide coverage for the allegations
in the Underlying Action, including based on the Expected or Intended Injury
Exclusion.
On August 30, 2013, the Court granted Canal’s motion for default judgment
against Bradley and Wise. (Order of Aug. 30, 2013 [37]).
On March 29, 2013, Canal and GMS filed cross-motions for summary
judgment. Canal argues that the claims asserted by Bradley as a result of the
Bradley-Wise Incident are intentional acts excluded from coverage by the Policy.
GMS argues that Canal waived its right to deny coverage for the conduct alleged in
the Bradley-Wise Incident.
II.
DISCUSSION
A.
Legal Standard
A court “shall grant summary judgment 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.” Fed. R. Civ. P. 56(a). Parties “asserting that a fact cannot be or is
genuinely disputed must support that assertion by . . . citing to particular parts of
materials in the record, including depositions, documents, electronically stored
information, affidavits or declarations, stipulations (including those made for
purposes of the motion only), admissions, interrogatory answers, or other
7
materials.” Fed. R. Civ. P. 56(c)(1).
The party seeking summary judgment bears the burden of demonstrating the
absence of a genuine dispute as to any material fact. Herzog v. Castle Rock
Entm’t, 193 F.3d 1241, 1246 (11th Cir. 1999). Once the moving party has met this
burden, the non-movant must demonstrate that summary judgment is inappropriate
by designating specific facts showing a genuine issue for trial. Graham v. State
Farm Mut. Ins. Co., 193 F.3d 1274, 1282 (11th Cir. 1999). Non-moving parties
“need not present evidence in a form necessary for admission at trial; however,
[they] may not merely rest on [their] pleadings.” Id.
The Court must view all evidence in the light most favorable to the party
opposing the motion and must draw all inferences in favor of the non-movant, but
only “to the extent supportable by the record.” Garczynski v. Bradshaw, 573 F.3d
1158, 1165 (11th Cir. 2009) (quoting Scott v. Harris, 550 U.S. 372, 381 n.8
(2007)). “[C]redibility determinations, the weighing of evidence, and the drawing
of inferences from the facts are the function of the jury . . . .” Graham, 193 F.3d at
1282. “If the record presents factual issues, the court must not decide them; it must
deny the motion and proceed to trial.” Herzog, 193 F.3d at 1246. But, “[w]here
the record taken as a whole could not lead a rational trier of fact to find for the
non-moving party,” summary judgment for the moving party is proper. Matsushita
Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
8
B.
Analysis
1.
Whether Canal waived its right to deny coverage
Under Georgia law, “risks not covered by the terms of an insurance policy,
or risks excluded therefrom, while normally not subject to the doctrine of waiver
and estoppel, may be subject to the doctrine where the insurer, without reserving
its rights, assumes the defense of an action or continues such defense with
knowledge, actual or constructive, of noncoverage.” World Harvest Church, Inc.
v. GuideOne Mut. Ins. Co., 695 S.E.2d 6, 9 (Ga. 2010) (citations omitted). “The
insurer can avoid estoppel by giving timely notice of its reservation of rights which
fairly informs the insured of the insurer’s position.” Id. “At a minimum, the
reservation of rights must fairly inform ‘the insured that, notwithstanding [the
insurer’s] defense of the action, it disclaims liability and does not waive the
defenses available to it against the insured.’” Id. at 10 (quoting State Farm Mut.
Auto. Ins. Co. v. Anderson, 123 S.E.2d 191 (Ga. Ct. App. 1961)). The reservation
of rights “should also inform the insured of the specific basis for the insurer’s
reservations about coverage,” id., but an insurer “is not required to ‘list each and
every basis for contesting coverage in the reservation-of-rights letter before [it can]
raise such in the declaratory judgment action,’” Kay-Lex Co. v. Essex Ins. Co.,
649 S.E.2d 602, 608 (Ga. Ct. App. 2007) (quoting Gov’t Emp. Ins. Co. v.
Progressive Cas. Ins. Co., 622 S.E.2d 92, 96 (Ga. Ct. App. 2005)).
9
The undisputed evidence shows that, on October 4, 2005, GMS and Canal
executed the Non-Waiver Agreement, which provides:
NON-WAIVER AGREEMENT
Reason(s) for executing this Instrument is (are) as follows:
Bodily injury claimed by Vernette [sic] Bradley may be the result of
intended actions on behalf of the Insured’s employee.
As well as any other reason or reasons which are now known or
which may become known in the future.
IT IS AGREED that any action taken heretofore by the
insurance company . . . or any of [its] representatives . . . in
ascertaining the amount of the actual case value; and the amount of
the loss and damages which occurred on September 20, 2005, at [the
Office Park], and investigating the cause thereof, shall not waive or
invalidate any of the conditions of the policies of insurance.
...
THE SOLE OBJECT AND INTENT of this agreement is to
provide for the determination of the amount of the actual cash value
and the amount of the loss and damage, and an investigation of the
cause thereof, without regard to the liability, if any of the said
insurance companies.
(Non-Waiver Agreement [28.1 at 61]).
The Non-Waiver Agreement states that the “object and intent” of the
agreement is to provide for an investigation of the Bradley-Wise Incident, without
regard to Canal’s liability, if any, and that one of the reasons for executing the
Non-Waiver Agreement is because Bradley’s injuries “may be the result of
intended actions on behalf of [GMS’s] employee.” (Id.) (emphasis added). It is
10
undisputed that the Policy specifically precludes coverage for an “expected or
intended injury.” The “Non-Waiver Agreement” thus fairly informs GMS that
Canal, in determining “the amount of the actual case value,” “the amount of the
loss and damage,” and “investigating the cause thereof,” “shall not waive or
invalidate any of the conditions of the policies of insurance.” The reason for
executing the Non-Waiver Agreement—that the “[b]odily injury claimed by
Vernett[a] Bradley may be the result of intended actions on behalf of the Insured’s
employee”—incorporates terms and language used in the Expected or Intended
Injury Exclusion in the Policy.3
Several weeks after Grech demanded Canal reimburse GMS for the legal
fees GMS incurred before Canal assigned counsel to represent GMS in the
Underlying Action, Canal sent its December 19th Letter stating that Canal
specifically reserved its right to deny coverage under the Policy notwithstanding its
3
That the vice-president and operations manager of GMS both thought that
Prout had been retained by Canal to represent GMS at the time he presented the
Non-Waiver Agreement for their signatures, discredits GMS’s assertion that the
Non-Waiver Agreement is not valid because it was executed before Canal assumed
GMS’s defense. GMS appears to argue that Canal was required to execute a
second waiver or reservation of its rights immediately before providing a defense
to its GMS, despite a bilateral agreement executed days after the alleged incident
and which specifically references a potential policy exclusion to coverage for that
incident. GMS fails to cite any authority for its position, and the Court finds that
the Non-Waiver Agreement fairly and timely informed GMS that Canal was not
waiving the defenses available to it, including that “[b]odily injury claimed by
Vernette [sic] Bradley may be the result of intended actions on behalf of [GMS’s]
employee.”
11
agreement to defend GMS in relation to the Bradley-Wise Incident. The December
19th Letter states that “there has been a breach of the insurance contract, including
but not limited to the [Policy] provisions regarding notice of suit papers,” that
“Canal will continue to provide a defense to GMS at this time, but Canal reserves
its right to deny coverage for indemnity or defense of the above-styled action,” and
that, “[b]ecause we are continuing to investigate this matter and providing a
defense only through reservation of rights, Canal is not in a position currently to
reimburse [GMS] for attorneys’ fees incurred prior to the engagement of Harper,
Walton & Craig.” (December 19th Letter [28.9 at 2-3]). The December 19th
Letter fairly informs GMS that Canal denies coverage for the Bradley-Wise
Incident, including because GMS failed to give timely notice as required by the
Policy, and that “Canal reserves its right to deny coverage for indemnity or
defense.” 4
4
It seems reasonable that an insurer first would want to investigate an
incident to determine if it would assume the defense or defend under a reservation
of rights. To the extent GMS argues that the December 19th Letter is untimely
because it was sent after Canal started defending GMS, Canal’s limited
participation between receiving notice of the Underlying Action and sending the
December 19th Letter is not sufficient to waive Canal’s rights to assert
noncoverage. See Prescott’s Altama Datsun, Inc. v. Monarch Ins. Co. of Ohio,
319 S.E.2d 445 (Ga. 1984) (insurer’s notice of appearance as counsel for insured in
underlying lawsuit was not a waiver of, and did not estop insurer from asserting
defense of noncoverage where insurer did not answer suit on behalf of insured,
entered an appearance only to protect its rights, and gave notice to insured of its
reservation when discovery was commenced in action); Preferred Risk Mut. Ins.
12
GMS may also argue that Canal has waived defenses not listed in the
December 19th Letter. The Court notes, however, that an insurer “is not required
to ‘list each and every basis for contesting coverage in the reservation-of-rights
letter before [it can] raise such in the declaratory judgment action.’” Kay-Lex, 649
S.E.2d at 608 (quoting Gov’t Emp. Ins. Co., 622 S.E.2d at 96). The Court notes
further that, “[b]y not objecting to the reservation of rights letter and by permitting
[Canal] to go forward with its defense of the suit, [GMS] is deemed to have
consented to the letter’s terms.” Id. (quoting Jacore Sys. v. Cent. Mut. Ins. Co.,
390 S.E.2d 876 (Ga. Ct. App. 1990)).5
Co. v. Southern Guar. Ins. Co. of Georgia, 353 S.E.2d 590 (Ga. Ct. App. 1987)
(filing an answer to avoid default is not a sufficient “defense” to create waiver or
estoppel) judgment rev’d on other grounds, 359 S.E.2d 665 (Ga. 1987); compare
VFH Captive Ins. Co. v. Cielinski, 581 S.E.2d 335 (Ga. Ct. App. 2003) (jury
authorized to find insurer was estopped from denying coverage where evidence
showed insurer “assumed control of” defenses to the action, including settlement
discussions, but failed to inform insured until time of trial that representation was
with a reservation of rights); World Harvest, 695 S.E.2d 6 (where an insurer
assumes and conducts an initial defense without effectively notifying the insured
that it is doing so with a reservation of rights, insurer is estopped from asserting
defense of noncoverage).
5
GMS relies on Hoover v. Maxum Indem. Co., 730 S.E.2d 413 (Ga. 2012), to
support that a letter containing boilerplate language reserving “the right to disclaim
coverage on any other basis that may become apparent as this matter progresses” is
not a sufficient reservation of rights. In Hoover, the Georgia Supreme Court found
that an insurer’s denial letter was not an effective reservation of rights including
because an insurer cannot deny a claim and refuse to provide a defense, and at the
same time reserve the right to assert a different defense to the claim in the future.
Id. at 416. The court explained that “a reservation of rights is only available to an
insurer who undertakes a defense while questions remain about the validity of the
13
The Court finds that the Non-Waiver Agreement and the December 19th
Letter fairly informed GMS that, notwithstanding its investigation of the BradleyWise Incident and its defense of GMS, Canal disclaims coverage and has not
waived the defenses available to it against GMS.6, 7
coverage.” Id. The court also stated that, even if the insurer could deny coverage
and reserve its right to assert a different difference, the letter reserving “the right to
disclaim coverage on any other basis that may become apparent as this matter
progresses” was ambiguous because “[o]nce the claim ha[d] been denied, the
matter would not progress and [the insurer] would have no need to obtain
additional information.” Id. at 417. Here, Canal has not denied coverage and has
continued to provide a defense to GMS under a timely, and sufficiently specific,
reservation of rights. Hoover does not apply.
6
GMS’s reliance on Richmond v. Georgia Farm Bureau Mut. Ins. Co.,
231 S.E.2d 245 (Ga. Ct. App. 1976), to support that Canal waived its policy
defenses by delaying in bringing this declaratory judgment action, also is
misplaced. Richmond “set forth a procedure by which an insurer could challenge
policy coverage through a declaratory judgment where the insured refused to
consent to a defense under a reservation of rights; this procedure included the
requirement that the insurer seek immediate declaratory relief.” Boatright v. Old
Dominion Ins. Co., 695 S.E.2d 408, 413 (Ga. Ct. App. 2010) (citation and
punctuation omitted). Here, Canal has defended GMS pursuant to a reservation of
rights and there is no evidence to support that GMS objected to the reservation.
The Court notes further that “the amount of time that ha[s] passed and the stage of
litigation reached in the [U]nderlying [Action [are] not relevant to [Canal’s] ability
to challenge policy coverage, because [Canal] ‘was not required to file a
declaratory judgment action within any particular time period, or at all, to avoid
estoppel.’” See Sims v. First Acceptance Ins. Co. of Georgia, Inc., 745 S.E.2d
306, 309 (Ga. Ct. App. 2013) (quoting Boatright, 695 S.E.2d at 413).
7
If GMS argues that Canal is estopped from relying on the Non-Waiver
Agreement and December 19th Letter because Canal failed to mention them in its
Complaint, the Court observes that estoppel to deny coverage is an affirmative
defense and Canal was not required to raise it. See State Farm Mut. Auto. Ins. Co.
v. Wheeler, 287 S.E.2d 281 (Ga. Ct. App. 1981).
14
2.
Coverage under the Policy
Canal asserts that it is not required to provide coverage for the assault and
battery claims alleged in the Underlying Action because the Policy expressly
disclaims coverage for bodily injury “expected or intended from the standpoint of
the Insured.” In its Response, GMS does not address this basis for noncoverage
and the Court deems Canal’s motion for summary judgment on this ground
unopposed. See Welch v. Delta Air Lines, Inc., 978 F.Supp. 1133, 1137 (N.D. Ga.
1997) (non-movant’s failure to respond to movant’s argument alone entitles
movant to summary judgment on these claims); see also LR 7.1(B), NDGa.
(“Failure to file a response shall indicate that there is no opposition to the
motion.”).
The renewed complaint in the Underlying Action asserts a claim against
Wise and GMS for assault and battery, in violation of O.C.G.A. § 16-5-23.1.
(Renewed Compl. [1] at 4). O.C.G.A. § 16-5-23.1 provides that a “person
commits the offense of battery when he or she intentionally causes substantial
physical harm or visible bodily harm to another.” (emphasis added); see also
O’Dell v. St. Paul Fire & Marine Ins. Co., 478 S.E.2d 418, 420 (Ga. Ct. App.
1996) (holding that assault and battery “are by their nature intentional”). Because
assault and battery are intentional acts, the Policy’s Expected or Intended Injury
15
Exception precludes coverage for the assault and battery claims asserted in the
Underlying Action. Canal’s Motion for Summary Judgment is therefore granted.8
III.
CONCLUSION
For the foregoing reasons,
IT IS HEREBY ORDERED that Plaintiff Canal Indemnity Company’s
Motion for Summary Judgment [25] is GRANTED.
IT IS FURTHER ORDERED that Defendant Georgia Messenger Service,
Inc.’s Motion for Summary Judgment [26] is DENIED.
SO ORDERED this 28th day of March, 2014.
8
Having found that GMS is not entitled to coverage under the Policy for the
assault and battery claims asserted in the Underlying Action, the Court does not
consider Canal’s remaining grounds for noncoverage.
16
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