National Casualty Company v. Georgia School Board Association, Inc.
Filing
36
OPINION AND ORDER certifyng the following question to the Supreme Court of Georgia: When an insurance policy issued by a commercial company (i) has a provision that states that the policy is excess to the liability of another insurer overlapping cov erage and (ii) that provision conflicts with the excess coverage provision in an insurance agreement issued by an agency created under O.C.G.A § 20-2-2002, does the irreconcilable provision rule (State Farm Fire & Cas. Co. v. Holton, 205 S.E.2d 872, 874 (Ga. Ct. App. 1974)) require each insurer to pay a pro rata share of the loss? It is further ordered that the Court STAYS this action including rulings on Nationals Motion for Reconsideration 31 and Risk Funds Motion for Reconsideration 32 , pending resolution of the two questions which are certified to the Supreme Court of Georgia. Signed by Judge William S. Duffey, Jr on 1/24/18. (ddm)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
NATIONAL CASUALTY
COMPANY,
Plaintiff,
v.
1:16-cv-691-WSD
GEORGIA SCHOOL BOARDS
ASSOCIATION-RISK
MANAGEMENT FUND,
Defendant.
OPINION AND ORDER
This matter is before the Court on Plaintiff National Casualty Company’s
(“National”) Motion for Reconsideration [31] and Defendant Georgia School
Boards Association-Risk Management Fund’s (“Risk Fund”) Motion for
Reconsideration [32].
I.
BACKGROUND1
A.
Introduction
This is a dispute between an insurance company and a risk management
agency. National and Risk Fund provide overlapping liability coverage to
1
The facts, stated in this Order, are taken from the Court’s June 2, 2017,
Order [30] granting Risk Fund’s Motion for Partial Summary Judgment and
denying National’s Motion for Summary Judgment.
members of a professional association. Each party contends that the other has
primary coverage obligations for the liabilities claimed, and that its own coverage
obligations are excess.
B.
Background Facts
National is an insurance company. (Defendant’s Statement of Material Facts
[22.2] (“DSMF”) ¶ 1). The Professional Association of Georgia Educators
(“PAGE”) is a professional association of teachers and administrators. (DSMF
¶ 2). National issued insurance policies to PAGE for the July 1, 2012, to
July 1, 2013, and July 1, 2013, to July 1, 2014, periods (together, the “Policies”).
(DSMF ¶¶ 3-4). The Policies provide the following liability coverage to PAGE
members:
Coverage A—Liability Coverage
The Company will pay on behalf of the insured all sums which the
insured shall become obligated to pay by reason of liability imposed
by law or for monetary damages resulting from any CLAIM made
against the insured arising out of an OCCURRENCE in the course of
the activities of the insured in his/her professional capacity and caused
by any acts or omissions of the insured or any other person for whose
acts the insured is legally liable. The Company shall defend any suit
seeking monetary damages which are payable under the terms of the
policy, even if such suit be groundless, false or fraudulent; but the
Company may make such investigation, negotiation and settlement of
any CLAIM or suit as it may deem expedient.
(DSMF ¶¶ 5-6).
2
The Policies contain a provision limiting coverage for liabilities covered by
“other insurance” (National’s “Other Coverage Provision”):
Other Insurance
This policy is specifically excess if the insured has other insurance of
any kind whatsoever, whether primary or excess, or if the insured is
entitled to defense or indemnification from any other source
whatsoever, including by way of example only, such sources as state
statutory entitlements or provisions. Other insurance includes, but is
not limited to, insurance policies, state pools, and programs of
self-insurance, purchased or established by or on behalf of any
EDUCATIONAL UNIT, to insure against CLAIMS arising from
activities of the EDUCATIONAL UNIT or its employees, regardless
of whether or not the policy or program provides primary, excess,
umbrella or contingent coverage.
In addition, Coverage A [Liability Coverage] is specifically excess
over coverage provided by any EDUCATIONAL UNIT’S or school
board’s errors and omissions or general liability policies, purchased
by the insured’s employer or former employers, or self-insurance
program or state pools, whether collectible or not, and it is specifically
excess over coverage provided by any policy of insurance which
purports to be excess to a policy issued to the insured.
(DSMF ¶ 7).
Risk Fund is a risk management agency created under O.C.G.A. § 20-2-2001
et seq. (DSMF ¶¶ 16-17). It is an association formed by boards of education to
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share their liability risks. (O.C.G.A. § 20-2-2001(6); DSMF ¶ 17).2 Risk Fund’s
members include Columbia County Schools, Douglas County School District,
Muscogee County School District, and McIntosh County Board of Education.
(DSMF ¶¶ 20-23). Risk Fund “is not an insurance company or an insurer” under
Georgia insurance law. O.C.G.A. § 20-2-2004.
Risk Fund’s risk-sharing arrangement is set out in coverage agreements
entered into by Risk Fund and its members (the “Coverage Agreements”). (DSMF
¶ 18). Under the Coverage Agreements, Risk Fund provides liability coverage to
members and their employees, including PAGE members.3 The coverage periods
are July 1, 2012, to July 1, 2013, and July 1, 2013, to July 1, 2014. (DSMF ¶¶ 18,
20-23). Risk Fund’s coverage includes liability coverage for personal injury,
bodily injury, property damage, negligent acts, wrongful acts, and sexual abuse.
(See [5.1]-[5.4]). Risk Fund is required to “pay [amounts a] Member becomes
legally obligated to pay as damages” and to “defend . . . Member[s] against any
2
The statute provides that an interlocal risk management agency is “an
association formed by boards of education by the execution of an
intergovernmental contract for the development and administration of an interlocal
risk management program and one or more group self-insurance funds.” O.C.G.A.
§ 20-2-2001(6).
3
The Coverage Agreements define the boards of education and their
employees, acting within the scope of their employment, as “members.” (See, e.g.,
[5.2] at 14).
4
‘suit’ seeking those damages.” (See, e.g., [5.3] at 30; see generally [5.1]-[5.4]).
Risk Fund’s members are jointly and severally liable “for all legal obligations”
arising under the Coverage Agreements. (DSMF ¶¶ 18-19; O.C.G.A.
§ 20-2-2009). Unlike commercial insurance agreements, the school systems are
liable for the losses required to be paid.
The Coverage Agreements contain a provision limiting coverage where
insurance is available from another source (Risk Fund’s “Other Coverage
Provision”):
4. Insurance.
If valid and collectible insurance is available to the Member for a loss
covered by [Risk Fund] under any coverage parts within this
Coverage Document, the obligations of [Risk Fund] are excess over
the available and collectible insurance.
(DSMF ¶¶ 25, 27).4
From 2014 to 2016, several lawsuits were filed against PAGE members
covered under National’s Policies and Risk Fund’s Coverage Agreements (the
“Covered Individuals”). (See DSMF ¶¶ 28-32). In June 2014, for example, an
elementary school student filed a negligence action against his school principal, a
4
This version of Risk Fund’s Other Coverage Provision appears in the
Coverage Agreement for July 1, 2012, to July 1, 2013. The version of the Other
Coverage Provision in the Coverage Agreements for July 1, 2013, to July 1, 2014,
omits the word “parts” but otherwise is identical.
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PAGE member and employee of Columbia County School District. ([5.7]; DSMF
¶ 29). The student alleged that, as a result of the principal’s negligence, he fell
from a playground ladder and injured himself. ([5.7] ¶¶ 13, 17). In
September 2015, a high school student filed a negligence action against her
chemistry teacher, a PAGE member and employee of Douglas County School
District. ([5.8]; DSMF ¶ 28). The student alleged that, as a result of the teacher’s
negligence, she was burned during a chemistry experiment. ([5.8] ¶¶ 5-23).
Similar lawsuits have been filed against other PAGE members employed by
Risk Fund’s members, including employees of Columbia County School District,
Muscogee County School District, and McIntosh County School District. (DSMF
¶¶ 30-32).
National refused to defend or indemnify these Covered Individuals until
Risk Fund’s coverage, under the Coverage Agreements, was exhausted. (See
DSMF ¶¶ 33-38). National claims the Other Coverage Provision in the Policies
requires National to pay amounts in excess of Risk Fund’s obligations. Risk Fund
contends that National is the primary insurer, and that Risk Fund provides only
excess coverage. Because National refused to provide primary coverage or defend,
Risk Fund defended the Covered Individuals, indemnified and paid settlement
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amounts on behalf of the Covered Individuals pending resolution of this action.
(See DSMF ¶¶ 33-38).
C.
Procedural History
On September 16, 2016, National filed its Motion for Summary Judgment
on its claim for declaratory relief and on Risk Fund’s counterclaim for declaratory
relief. Risk Fund also filed its Motion for Partial Summary Judgment, requesting a
declaration that (1) “coverage owed to jointly covered persons under
[National’s Policies] is primary to coverage provided under” Risk Fund’s
Coverage Agreements, or (2) the parties “must share coverage owed to jointly
covered individuals on a pro rata basis.” ([22] at 1-2).
On June 2, 2017, the Court issued its order denying National’s Motion for
Summary Judgment and granting Risk Fund’s Motion for Partial Summary
Judgment [30] (the “June 2, 2017, Order”). The Court determined, interpreting
Georgia law, that each party’s coverage fell within the other party’s Other
Coverage Provision such that the two provisions were irreconcilable. Consistent
with Georgia and Eleventh Circuit case law, the Court held that when such excess
provisions are irreconcilable, the clauses “cancel each other out, and the liability is
to be divided equally between them.” State Farm Fire & Cas. Co. v. Holton, 205
S.E.2d 872, 874 (Ga. Ct. App. 1974). The Court found that Risk Fund and
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National “must share defense and indemnity coverage on a pro rata basis.” ([22.1]
at 23). Risk Fund’s Motion for Partial Summary Judgment was granted, and
National’s Motion for Summary Judgment was denied.
On June 22, 2017, National filed its Motion for Reconsideration under Rule
59 of the Federal Rules of Civil Procedure. National asks that the Court certify the
judgment as final and appealable under Fed. R. Civ. P. 54(b) and stay the effects of
the order pursuant to Fed. R. Civ. P. 62 while the appeal is pending.
On June 27, 2017, Risk Fund filed its Motion for Reconsideration. Risk
Fund argues that the public policy of the State of Georgia to protect the public
purse preempts application of the irreconcilable provisions rule.
II.
DISCUSSION
A.
The Motions for Reconsideration
A district court has discretion to revise or reconsider interlocutory orders at
any time before final judgment has been entered. See Fed. R. Civ. P. 54(b); see
also Toole v. Baxter Healthcare Corp., 235 F.3d 1307, 1315 (11th Cir. 2000). A
motion for reconsideration is generally appropriate only where there is: (1) newly
discovered evidence; (2) an intervening development or change in controlling law;
or (3) a need to correct a clear error of law or fact. See Jersawitz v. People TV,
71 F. Supp. 2d 1330, 1344 (N.D. Ga. 1999); Pres. Endangered Areas of Cobb’s
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History, Inc. v. U.S. Army Corps of Eng’rs, 916 F. Supp. 1557, 1560 (N.D. Ga.
1995), aff’d, 87 F.3d 1242 (11th Cir. 1996).
Risk Fund moves for reconsideration of the June 2, 2017, Order because it
argues the Court did not consider that Risk Fund’s resources used to pay losses and
defend the Covered Individuals are public funds. Risk Fund argues that the cases
the Court relied upon in finding the excess coverage provisions irreconcilable do
not apply where one of the coverage providers is not an insurance company but
instead an agency that pays claims and defense costs with funds provided by public
school systems. Risk Fund contends that Georgia’s policy protecting the public
purse requires the Court to interpret the Coverage Agreements as a waiver of the
State’s sovereign immunity to provide only excess coverage. ([32.1] at 3). That is,
Risk Fund appears to argue that the irreconcilable provisions rule only applies
where private insurance carrier funds are at issue, and, where public funds are used
to cover losses, the public policy of Georgia does, or should, preclude the
application of the rule.
Risk Fund emphasizes that National is a for-profit, commercial insurer that
charges premiums for the policies at issue. In contrast, Risk Fund is an interlocal
risk management agency created by statute. Georgia law provides that Risk Fund
“is not an insurance company or an insurer under” Georgia’s insurance code, and
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each of its Coverage Agreements states: “This Coverage Document is not an
insurance contract.” O.C.G.A. § 20-2-2004; ([5.1] [5.4]). Risk Fund does not
charge a premium for the coverage provided and does not generate a profit from
the members’ participation in the fund. (Notice of Stipulated Facts ¶ 15). The
member boards of education are required to make supplemental contributions
using public funds, even if they have not submitted claims or if liabilities outstrip
annual contributions. The members are jointly and severally liable for all liabilities
covered by the coverage documents. O.C.G.A. § 20-2-2009. Furthermore, the
authorizing statute provides:
The exercise by a board of education or school system of the authority
provided in this article shall not constitute the provision of liability
insurance protection under Article I, Section II, Paragraph IX of the
Constitution of the State of Georgia. The participation by a board of
education or school system as a member of an agency authorized by
this chapter shall not constitute the obtaining of liability insurance and
no sovereign immunity of a board of education or school system shall
be waived on account of such participation.
O.C.G.A. § 20-2-2020.
In light of Risk Fund’s argument, the Court reviewed again those cases
addressing irreconcilable excess coverage provisions insuring against the same
risks. Upon review, all of the cases addressing irreconcilable, overlapping
provisions appeared in contracts issued by traditional insurance companies. See
State Farm Fire & Cas. Co. v. Holton, 205 S.E.2d 872 (Ga. Ct. App.1974); S.
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Home Ins. Co. v. Willoughby, 182 S.E.2d 910 (Ga. Ct. App. 1971); Home v. Great
Am. Ins. Co., 134 S.E.2d 865 (Ga. Ct. App. 1964); see also Am. Cas. Co. of
Reading v. MAG Mut. Ins. Co., 185 F. App’x 921 (11th Cir. 2006).
The Court thus finds that the irreconcilable provisions rule has developed
only in cases involving conflicts between commercial insurance policy provisions.
Whether that rule applies to coverage provided by an entity entrusted with public
funds implicates Georgia public policy and the interpretation of Georgia law. This
Court determines that the question should be certified to the Supreme Court of
Georgia, pursuant to Ga. Const. art. VI, § 6, ¶ 4; O.C.G.A. § 15-2-9(a); Ga. Sup.
Ct. R. 46-48. See Wheatley v. Moe’s Southwest Grill, LLC, 580 F. Supp. 2d 1324,
(N.D. Ga. 2008).5
III.
CONCLUSION
For the foregoing reasons,
IT IS HEREBY ORDERED that the Court Certifies the following question
to the Supreme Court of Georgia:
When an insurance policy issued by a commercial company (i) has a
provision that states that the policy is excess to the liability of another
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The Court’s certification of questions is not meant to limit the scope of
inquiry by the Supreme Court of Georgia. Kitchen v. CSX Transp., Inc., 19 F.3d
601, 604 (11th Cir. 1994).
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insurer overlapping coverage and (ii) that provision conflicts with the
excess coverage provision in an insurance agreement issued by an
agency created under O.C.G.A § 20-2-2002, does the irreconcilable
provision rule (State Farm Fire & Cas. Co. v. Holton, 205 S.E.2d 872,
874 (Ga. Ct. App. 1974)) require each insurer to pay a pro rata share
of the loss?
The entire record in this case, including copies of the briefs of both parties,
is transmitted herewith.
IT IS FURTHER ORDERED that the Court STAYS this action including
rulings on National’s Motion for Reconsideration [31] and Risk Fund’s Motion for
Reconsideration [32], pending resolution of the two questions which are certified
to the Supreme Court of Georgia.
SO ORDERED this 24th day of January, 2018.
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