Onebeacon America Insurance Company v. The Catholic Diocese of Savannah

Filing 35

ORDER denying Defendant's 23 Motion for Summary Judgment; granting Plaintiff's 25 Motion for Summary Judgment. Signed by Judge William T. Moore, Jr on 9/2/11. (bcw)

IN THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF GEORGIA
SAVANNAH DIVISION

r1

ii

ONEBEACON AMERICA INSURANCE
COMPANY, as successor to
Commercial Union Insurance
Company,
CASE NO. CV410-118
Plaintiff,
V.

THE CATHOLIC DIOCESE OF
SAVANNAH,
Defendant.

ORDER
Before the Court are Defendant's Motion for Summary
Judgment (Doc. 23) and Plaintiff's Motion for Summary Judgment
(Doc. 25) . For the reasons that follow, Plaintiff's motion is
GRANTED and Defendant's motion is DENIED. The Clerk of Court is
DIRECTED to close this case.
BACKGROUND
Plaintiff originally filed suit in this Court on May 11,
2010, seeking a declaratory judgment to clarify its duties and
obligations under certain insurance policies issued to Defendant
many decades ago. (Doc. 1.) On May 2, 2010, Defendant timely
filed an answer and asserted a counterclaim against Plaintiff,
which alleged that Plaintiff "acted in bad faith" and "was
negligent in its claim handling." (Doc. 6 ¶11 11-12.)

Q

This insurance dispute is related to an underlying lawsuit
filed in the Court of Common Pleas of Jasper County, South
Carolina: Allan Carl Ranta v. The Roman Catholic Diocese of
Savannah. (Doc. 1 ¶ 6.) In this suit, Allan Carl Ranta
("Ranta") alleged that Wayland Yoder Brown ("Brown") sexually
molested him from 1978 to 1982 while Brown was employed by
Defendant as a priest, youth leader, and counselor. (Id. at 7.)
Defendant contends that certain insurance policies it purchased
from Commercial Union Insurance Company, numbered as: CZ-W287237, CZ-9745-001, and AZ9745004, provide coverage for Ranta's
lawsuit.

(Doc. 23, Attach. 2

1

1; Doc. 31 ¶ 1.)

Defendant moved for summary judgment on December 30, 2010,
claiming that Plaintiff has waived all coverage defenses by
failing to immediately seek declaratory relief.' (Doc. 23,
Attach. 1.) Plaintiff filed its motion for summary judgment on
the same date, arguing that Defendant failed to comply with the
policies' conditions precedent requiring notification to the
Plaintiff, that Defendant voluntarily compromised the underlying
lawsuit and is not entitled to indemnification, and that
charitable immunity would have barred any claims covered by the
policies.

(Doc.

25,

Attach.

I.)

As

to Defendant's

counterclaim, Plaintiff contends that an "insured cannot assert

Subsequent briefing included other arguments, which are
addressed below only as necessary.
2

a claim against its insurer for bad faith failure or negligent
failure to compromise in the absence of a jury verdict."
at 21.)

(Id.

The parties have filed numerous responsive briefs

opposing each other's motions and supporting their own.

(Docs.

27, 30, 33, 34.)
ANALYSIS
I. SUMMARY JUDGMENT STANDARD
According to Fed. R. Civ. P. 56(a), '[a] party may move for
summary judgment, identifying each claim or defense—or the part
of each claim or defense—on which summary judgment is sought."
Such a motion must be granted "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." Id. The "purpose of
summary judgment is to 'pierce the pleadings and to assess the
proof in order to see whether there is a genuine need for
trial.' " Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 587 (1986) (guotg Fed. R. Civ. P. 56 advisory
committee notes)
Summary judgment is appropriate when the nonmovant "fails
to make a showing sufficient to establish the existence of an
element essential to that party's case, and on which that party
will bear the burden of proof at trial."
Catrett, 477 U.S. 317, 322 (1986) .

Celotex Corp. v.

The substantive law

governing the action determines whether an element is essential.
3

DeLong Equip. Co. v. Wash. Mills Abrasive Co., 887 F.2d 1499.
1505 (11th Cir. 1989)
As the Supreme Court explained:
[A] party seeking summary judgment always bears the
initial responsibility of informing the district
court of the basis for its motion, and identifying
those portions of the pleadings, depositions,
answers to interrogatories, and admissions on file,
together with the affidavits, if any, which it
believes demonstrate the absence of a genuine issue
of material fact.
Celotex, 477 U.S. at 323. The burden then shifts to the
nonmovant to establish, by going beyond the pleadings, that
there is a genuine issue as to facts material to the nonmovant's
Clark v. Coats & Clark, Inc., 929 F.2d 604, 60

case.

(11th

Cir. 1991)
The Court must review the evidence and all reasonable
factual inferences arising from it in the light most favorable
to the nonmovant. Matsushita, 475 U.S. at 587-88. However, the
nonmoving party "must do more than simply show that there is
some metaphysical doubt as to the material facts." Id. at 586.
A mere

"scintilla"

of evidence,

or simply conclusory

See, e.g., Tidwell v. Carter

allegations, will not suffice.

Prods., 135 F. 3d 1422, 1425 (11th Cir. 1998). Nevertheless,
where a reasonable fact finder may "draw more than one inference
from the facts, and that inference creates a genuine issue of
material fact, then the Court should refuse to grant summary

4

judgment."

Barfield v. Brierton, 883 F.2d 923, 933-34 (11th

Cir. 1989) . Where, as in this case, there is no real dispute
concerning any facts material to the outcome of this case, the
issue is only a question of law. See United States v. Oakley,
744 F.2d 1553, 1555-56 (11th Cir. 1984) . As a result, the case
may be decided on cross-motions for summary judgment. Id.
II. CHOICE OF LAW
This Court is exercising jurisdiction based on diversity of
citizenship. Therefore, the choice of law rules of the forum
state of Georgia determine what substantive law applies to this
dispute.

U.S. Fid. & Guar. Co. v. Liberty Surplus Ins. Corp.,

550 F.3d 1031, 1033 (11th Cir. 2008) . Georgia applies the
traditional rule of lex loci contractus, Convergys Corp. v.
Keener, 276 Ga. 808, 811, 582 S.E.2d 84, 86 (2003), and an
"insurance contract is constructively made at the place where
the contract is delivered," McGow v. McCurry, 412 F. 3d 1207,
1217 (11th Cir. 2005) (quoting Fed. Ins. Co. v. Nat'l Distrib.
Co., 203 Ga. App. 763, 767, 417 S.E.2d 671, 674-75 (1992) ) . The
parties appear to agree that Georgia law governs this dispute,
as virtually all cases cited in the brief apply the law of this
state.

Accordingly, the Court will apply Georgia law to this

case.

5

III. DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
The primary argument Defendant advances in its Motion for
Summary Judgment is that Plaintiff waived all coverage defenses
by failing to immediately seek declaratory relief.

(Doc. 23,

Attach. 1 at 4.) Defendant cites the case of Richmond v. Ga.
Farm. Bureau. Ins. Co., 140 Ga. App. 215, 219, 231 S.E.2d 248,
248 (1976) , for the proposition that
[u]pon learning of facts reasonably putting it on
notice that there may be grounds for noncoverage and
where the insured refuses to consent to a defense
under a reservation of rights, the insurer must
thereupon (a) give the insured proper unilateral
notice of its reservation of rights, (b) take
necessary steps to prevent the main case from going
into default or to prevent the insured from being
otherwise prejudiced, and (c) seek immediate
declaratory relief including a stay of the main case
pending final resolution of the declaratory judgment
action.
Id. However, this case and the third part of the rule it
creates are not the end of the analysis. Subsequent cases have
significantly softened the requirement of seeking 'immediate"
declaratory relief. In S. Gen. Ins. Co. v, Buck, 202 Ga. App.
103, 105, 413 S.E.2d 481, 482-83 (1991) , the Georgia Court of
Appeals held that an insurance company had not waived its right
to seek judicial determination of policy coverage despite
waiting fourteen months following the filing of the underlying
tort suit to initiate a declaratory judgment. Even though the
court

6

disapprove [d] of such a lengthy delay and recognize [d]
that the immediacy requirement of Richmond has not
been met, we cannot, in the absence of a showing of
prejudice by appellees as movants on summary judgment,
conclude as a matter of law that Southern General
waived its right to seek a judicial determination of
its obligation for coverage under the policies of
insurance.
Id. at 105, 413 S.E.2d at 483.
Relaxation of strict compliance with this rule is a
reflection of the policy on which this requirement is founded.
The Supreme Court of Georgia explained that the rule in Richmond
"is based on principles of fairness, and, in determining whether
an insurer has met the requirements thereof, the crucial inquiry
is whether the rights of the insured have been adequately
protected," specifically mentioning fully informing the insured
and preventing the entry of default against the insured, in the
underlying litigation. Kelly v. Lloyd's of London, 255 Ga. 291,
293-94, 336 S.E.2d 772, 775 (1985) . More recent cases continue
to require that an insured demonstrate prejudice resulting from
the insurer's delay in filing a declaratory judgment action.
Danforth v. Gov't Emps. Ins. Co., 282 Ga. App. 421, 429, 638
S.E.2d 852, 860 (2006) (noting that noncompliance with Richmond
does not preclude a declaratory judgment action where insured
cannot show that any prejudice resulted from [insurer's]
conduct)

7

Therefore, Defendant must demonstrate prejudice before
Plaintiff would be stopped from contesting coverage under the
policies. The Court concludes, however, that based on the facts
of this case, Defendant is unable to satisfy that requirement.
A brief overview of the conduct of the parties and their
communications with each other evidences why this required
element of Defendant's argument is lacking.
Although the conduct resulting in the Ranta lawsuit
occurred decades ago, Ranta filed suit against Defendant in
2006. (Doe. 23, Attach. 2 J 3; Doc 31 ¶1 3.) Defendant first
made a demand for coverage, defense, and indemnification under
the policies in "January or February of 2008." (Doe. 23,
Attach. 2 ¶ 4; Doc. 31 ¶ 4.) Plaintiff first responded to this
notice of claim by letter dated October 21, 2008, in which
Plaintiff denied coverage.
¶ 7.)

(Doe. 23, Attach. 2 ¶ 7; Doe. 31

On December 8, 2008, Defendant notified Plaintiff by

letter that it contested the denial of coverage.

(Doc. 23,

Attach. 2 ¶ 8; Doe. 31 ¶ 8.) In June 2009, Plaintiff changed
its position and "undertook to participate in the defense of The
Diocese along with a second insurer, Catholic Mutual Insurance
Company" pursuant to a reservation of rights letter issued on
June 22, 2009. (Doc. 23, Attach. 2 ¶ 9-10; Doe. 31 ¶ 9-10.)
Several months later, Defendant notified Plaintiff by letters
dated September 29, 2009 and October 7, 2009 that it "did not
8

agree with the positions taken in the reservation of rights
letter and again objected to the position taken by [Plaintiff]
with regard to coverage, defense, and indemnification."

(Doc.

23, Attach. 2 ¶ 11; Doc. 31 ¶ 11.) Just a few weeks later on
October 27, 2009, the Ranta lawsuit was compromised during a
second mediation ordered by the trial court for $4.24 million.
(Doc. 23, Attach. 2 ¶ 12; Doc. 31 ¶ 12.)
Plaintiff observed that as of the time of its Reply Brief
in Support of its Motion for Summary Judgment, Defendant 'ha[d]
not made any showing of prejudice" and argued that Defendant
suffered no prejudice. (Doc. 34 at 2.) Just fifteen minutes
earlier, however, Defendant filed its Reply Brief in Support of
its Motion for Summary Judgment (Doc. 33), which was almost
entirely dedicated to the topic. Unfortunately, however,
Defendant's attempt falls short. The prejudice it complains of
appears not to be the kind that is contemplated by Georgia
cases. For example, Defendant contends that it was prejudiced
by its compromise of the lawsuit, Plaintiff's contribution of

1

-less that [sic] 5 0 of the total," Defendant's payment of
"$2,315,000 of its own money in order to bring the Ranta matter
to a close," Plaintiff's "deliberate[] with [olding] " of
decisions on disputed coverage issues, and Plaintiff's failure
to seek

the appropriate declaratory resolution of these issues
during the pendency of the Ranta claim, so as to leave
the Diocese in a position where it would be faced with
the necessity of paying its own money to resolve the
Ranta claim when OneBeacon refused to commit more than
a nominal sum toward the settlement.
(Doc. 33.)
The -prejudice" that Defendant complains of, however, goes
only toward its disagreement with Defendant's decisions about
the coverage under the policies..

Defendant never went into

default in the underlying Ranta lawsuit.

Indeed, its defense

was well underway much prior to the time that Plaintiff ever
received notice of the civil action. Further, Plaintiff had
been providing a defense under a reservation of rights to
Defendant for three months before Defendant sent a notice
objecting to the reservation of rights.

(Doc. 23, Attach. 2

¶ 9-11; Doc. 31 ¶ 9-11.) Under Georgia law, this alone provides
an independent ground for denial of Defendant's motion. Ever]
the Richmond case on which Defendant heavily relies qualifies
its holding, limiting applicability to situations in where the
insured did not give 'express or implied consent."
140 Ga. App. at 219, 231 S.E.2d at 251.

Richmond,

The Georgia Court of

Appeals subsequently held, "[b]y not objecting to the
reservation of rights letter and by permitting [the insurer] to
go forward with its defense of the suit, [the insured] is deemed
to have consented to the letter's terms." Kay-Lex Co. v. Essex

10

Ins. Co., 286 Ga. App. 484, 491, 649 S.E.2d 602, 609 (2007).
While Plaintiff was still providing this defense, but less than
a month after Defendant objected to the reservation of rights,
Defendant compromised the claim. (Doc. 23, Attach. 2 ¶ 12; Doc.
31 ¶ 12.) Accordingly, the Court concludes that Defendant has
failed to show prejudice as a matter of law.
But even if Defendant had been able to show prejudice, the
relevant policies are not rewritten and coverage is not expanded
in scope. The Supreme Court of Georgia has observed that an
insurer's decision to deny coverage is not always final and that
it can permissibly change its position, even by later issuing a
reservation of rights. See Drawdy v. Direct Gen. Ins. Co., 277
Ga. 107, 109, 586 S.E.2d 228, 230 (2003) ("[A]n insurer is not
estopped from changing its position after an initial denial of
coverage and is allowed to seek declaratory judgment in those
situations where the insurer has both indicated its willingness
to reconsider its insured's claim and has positively
demonstrated that it considers the question of coverage to still
be in issue, e.g., by undertaking a defense of its insured under
a reservation of rights."); see also Danforth, 282 Ga. App. at
424, 638 S.E.2d at 856 (2006) (" [T]he mere fact that an insurer
initially denies a claim does not always preclude that insurer
from re-evaluating its position.

Where, as here, an insurer

initially denies a claim, but subsequently opts to defend the
11

insured under a reservation of rights letter, that insurer is
not precluded from seeking a declaratory judgment to ascertain
its rights.") Further, even it Plaintiff did breach its duty
to defend, which this Court does not decide in this analysis,
the impact of such a finding would still not entitle Defendant
to the relief it seeks, namely a finding that Plaintiff has
waived all coverage defenses. In a recent case, the Georgia
Court of Appeals discussed the limited consequences of an
insurer's failure to defend by stating that
Georgia law is clear that by refusing to defend its
insured in litigation, an insurer loses all
opportunity to contest the negligence of the insured
or the injured person's right to recover, and exposes
itself to a charge of and penalty for breach of
contract. By electing not to defend its insured,
however, an insurer does not waive [] either its right
or its opportunity to contest entitlement to a
recovery under its polic [ies] covering [the insured]
because the question of whether the polic[ies]
provide[] coverage for the claim[s] is separate from
the legal consequences of an insurer's refusal to
indemnify or defend. As the Supreme Court of Georgia
has explained, when an insurer breaches the contract
by wrongfully refusing to provide a defense, the
insured is entitled to receive only what it is owed
under the contract—the cost of defense. The breach of
the duty to defend, however, should not enlarge
indemnity coverage beyond the parties' contract. This
rule . . . recognizes that the duty to defend and the
duty to pay are independent obligations.
McGre g or v. Columbia Nat. Ins. Co., 298 Ga. App. 491, 494, 680
S.E.2d 559, 562 (2009) (internal citations and quotations
omitted) (second emphasis added). Simply by refusing to defend,
an insurer does not waive its right to contest an insured's
12

claim that a policy provides coverage. S. Guar. Ins. Co. v.
Dowse, 278 Ga. 674, 676, 605 S.E.2d 27, 29 (2004) ("Obviously,
if the underlying claim is outside the policy's scope of
coverage, then [the insurer's] refusal to indemnify or defend
was justified and it is not liable to make payment within the
policy's limits." (emphasis added)). Accordingly, Plaintiff is
neither precluded from filing the instant action nor advancing
any defenses it has to Defendant's assertion of coverage. For
all the reasons set forth above, Defendant's motion is DENIED.
III. PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT
Plaintiff has moved for summary judgment on its own claim
for declaratory judgment on the grounds that Defendant failed to
comply with notice provisions that are conditions precedent to
coverage (Doc. 25, Attach. 1 at 6-13), that Defendant
voluntarily compromised the underlying lawsuit (id. at 13-18),
and that charitable immunity would have barred any claims
against Defendant covered under the policies (id. at 18-20)
Plaintiff has also moved for summary judgment on Defendant's
counterclaim. (Id. at 21-22.) The Court has addressed the
dispositive portion of those arguments and additional relevant
law as follows.
A.

DEFENDANT'S DELAY IN PROVIDING NOTICE TO PLAINTIFF

Plaintiff argues that the Ranta action is not covered under
the policies because Defendant did not comply with several
13

notice provisions that were a condition precedent to coverage.
(Id. at 6-13.) For the reasons that follow, this Court agrees.
Under Georgia law,
a notice provision expressly made a condition
precedent to coverage is valid and must be complied
with, absent a showing of justification. Where an
insured has not demonstrated justification for failure
to give notice according to the terms of the
policy, . . . then the insurer is not obligated to
provide either a defense or coverage.
Kay-Lex Co., 286 Ga. App, at 488, 649 S.E.2d at 606 (citations
and quotations omitted) (emphasis added) (quoting Federated Mut.
Ins, Co. v. Ownbey Enters., 278 Ga. App. 1, 3, 627 S.E.2d 917,
919 (2006)) . Conditions precedent to an insurance contract
"must be complied with, absent a showing of justification."
Richmond, 140 Ga. App. at 221, 231 S.E.2d at 250.
The parties do not dispute that the relevant policy
language in this dispute states, under a section titled,
"INSURED'S DUTIES IN THE EVENT OF OCCURRENCE, CLAIM OR SUIT,"
that "[ii f claim is made or suit is brought against the insured,
the insured shall immediately forward to the Company every
demand, notice, summons, or other process received by him or his
representative.

(Doc. 26, Attach. 6 ¶ 16; Doc. 27, Attach, 4

¶ 16.) Subsequent terms of the policy explicitly state that,
11 [n]o action shall lie against the Company unless, as a
condition precedent thereto, there shall have been full
compliance with all of the terms of this policy .
14

. ." (Doc.

26, Attach. 6

J

16 (emphasis added); Doc. 27, Attach. 4 ¶ 16.)

Defendants have not argued that this language is anything other
than a condition precedent, and several Georgia courts have
found similar and identical notice provisions to be a condition
precedent to coverage.

See Trinity Universal Ins. Co. v. Ga.

Cas. & Sur. Co., 2009 U.S. fist. LEXIS 36433, at *8*9 (N.D. Ga.
Apr. 28, 2009) (unpublished)
In Georgia, the general rule is that questions going to the
adequacy or timeliness of notice and any justification offered
by the insured for failure to give notice are issues of fact for
determination by a jury. Alea London Ltd. v. Howard, 2008 WL
693799, at *6 (M.D. Ga. Mar. 12, 2008) (unpublished) (citing
Allstate Ins. Co. v. Walker, 254 Ga. App. 315, 316, 562 S.E.2d
267, 268 (2002)) . However, that general rule is not without an
important exception, as numerous Georgia cases have been able to
decide these issues without a jury because '[a]n unexcused
significant delay in notifying an insurer about an incident or
lawsuit, however, may be unreasonable as a matter of law." Id.
(quoting Walker, 254 Ga. App. at 316, 562 S.E.2d at 268).
A review of the facts of this case and the relevant case
law indicates that the consequences of events preceding the
filing of this lawsuit can be determined as a matter of law.
The Ranta lawsuit was filed on April 6, 2006.
6 ¶ 1; Doc. 27, Attach. 4 ¶ 1.)
15

(Doc. 25, Attach.

Defendant filed an answer to

(Doe. 25, Attach. 6 ¶ 4; Doc.

the Ranta lawsuit in May 2006.

27, Attach. 4 ¶ 4.) Defendant did not notify Plaintiff, as the
successor to Commercial Union, or Resolute Management, as the
third-party administrator for Plaintiff, until January 23, 2008.
(Doc. 25, Attach. 6 11 4-5; Doe. 27, Attach. 4 TJ 4-5.) This
period of approximately twenty-one months far exceeds delays in
other Georgia cases where the delay has been found unreasonable
as a matter of law. "[W]here no valid excuse exists, failure to
give written notice for periods in the range of four to eight
months is unreasonable as a matter of law. Cotton States Hut.
Ins. Co. v. Intl Surplus Lines Ins. Co., 652 F. Supp. 851, 856
(N.D. Ga. 1986) (citing Dillard v. Allstate Ins. Co., 145 Ga.
App. 755, 245 S.E.2d 30 (1978); Stonewall Ins. Co. v. Farone,
129 Ga. App. 471, 199 S.E.2d 852 (1973)); see also Walker, 254
Ga. App. at 316, 562 S.E.2d at 268 (deciding that the insurer
was entitled to summary judgment where the insureds did not
provide notification for almost a year); Se. Exp. Sys., Inc. v.
S. Guar, Ins. Co. of Ga., 224 Ga. App. 697, 701, 482 S.E.2d 433,
436 (1997) ("[T]he delay in providing notice of an existing
lawsuit and the failure to deliver the suit papers after service
for nearly eighteen months was unreasonable as a matter of law
absent a reasonable excuse for the delay."); EVI Equip., Inc. v.
N. Ins. Co. of N.Y., 188 Ga. App. 818, 819, 374 S..2d 788, 790
(1988)

(eleventh month delay precluded recovery); Snow v.
16

Atlanta Int'l Ins. Co.,

182 Ga. App. 1, 1, 354 S.E.2d 644, 645

(1987) (holding delay unexcused and unreasonable as a matter of
law where insurer was not notified of filing of lawsuit for six
months).
In opposition to Plaintiff's motion, Defendant argues that
the delay was excused because it 'provided notice of the claim
and a copy of the lawsuit immediately upon the discovery of
coverage, noting that the policies were between twenty-six to
thirty-three years old at the time the Ranta matter was filed
and they were not immediately located
7.)

."

(Doc. 27 at 6-

Apparently, Defendant's prior insurance agent discovered

information on the policies in January of 2008.

(Id. at 7

(emphasis added).) The sole case that Defendant cites in
support of this argument is easily distinguishable because, in
that case, the plaintiff's mother, as the insured, indicated
that she was specifically and repeatedly told by the insurer's
agent that the policy would not cover that specific accident.
Sands v. Grain Dealers Mut. Ins. Co., 154 Ga. App. 720, 721, 270
S.E.2d at 9 (1980) . The Court of Appeals expressly referenced
the conflicting evidence in holding that summary judgment was
inappropriate, even where eleven months passed between the
accident and notification to the insurer.
S.E.2d at 8-9.

Id. at 721, 270

Indeed, being unaware that a policy covers a

particular loss, especially due to "fraud or overreaching on the
17

part of [the insurer] or its agents," is a different question.
Walker, 254 Ga. App. at 316, 562 S.E.2d at 268.
Very recently, the Georgia Court of Appeals cited Walker
with approval, noting that "ignorance of [the] right to submit a
claim under the policy did not provide an excuse for the delay."
Lankford v. State Farm Hut. Auto. Ins. Co., 307 Ga. App. 12, 16,
703 S.E.2d 436, 440 (2010) (emphasis added) (ci ting Walker, 254
Ga. App. at 315, 562 S.E.2d at 267). Earlier cases also support
the rule that being unaware that a policy covers a loss does not
excuse performance of the conditions precedent to coverage. See
Snow, 182 Ga. App. at 2, 354 S.E.2d at 645 (finding that six
month delay between lawsuit filing and notifying insurer was
unexcused and unreasonable as a matter of law where insured
trucker knew that policies with separate companies existed to
cover the accident but did not notify any insurers and was
unaware of which insurance company provided coverage). Notice
provisions in insurance policies are typically made a condition
precedent to coverage "so that insurers can be certain that they
are given the opportunity to investigate the facts surrounding
an incident promptly and to prepare a defense or settlement
while the facts are still fresh and witnesses are still
available." Trinity Universal, 2009 U.S. Dist. LEXIS 36433, at
*8. Simply put, "[t] he law requires more than just ignorance,

18

or even misplaced confidence, to avoid the terms of a valid
contract." Walker, 254 Ga. App. at 316, 562 S.E.2d at 268.
As a final argument to avoid the entry of summary judgment,
Defendant argues that an insurer in Georgia must demonstrate
prejudice resulting from an insured's delay in notifying the
insurer of suit.

(Doc. 27 at 8-10.)

This statement, however,

is not the law. Instead, "under Georgia common law, []
prejudice is irrelevant to an insurer's assertion of notice as a
coverage defense because failure to give timely notice is a
failure of a condition p recedent to coveraqe which alone voids
coverage." Travelers Indem. Co. V. Douglasville Dev., LLC, 2008
U.S. Dist. LEXIS 71956, at *17_*18 (N.D.

Ga. Sept. 19, 2008)

(unpublished) (citations omitted) . For all the reasons above,
Plaintiff's Motion for Summary Judgment (Doc. 25) is GRANTED IN
PART and Plaintiff is entitled to declaratory judgment.
B. COUNTERCLAIM FOR BAD FAITH AND NEGLIGENCE
The Court has interpreted this claim as one arising out of
O.C.G.A. § 33-4-6. Under that statute, if an insurer refuses in
bad faith to pay a loss within an allotted time after demand has
been made by the insured, the insurer becomes potentially liable
for the loss, an additional percentage as a penalty, and
attorney's fees. Id. § 33-4-6(a). As the Supreme Court of
Georgia has held, a voluntary payment by an insured, such as one
reached in settlement, does not constitute a legal obligation
19

under the applicable insurance policy. Trinity Outdoor, LLC v.
Cent. Mut. Ins. Co., 285 Ga. 583, 585, 679 S.E.2d 10, 12 (2009).
This Court also found, under a similar policy of insurance, that
the insured did not have an action against the insurer for bad
faith in the absence of a jury verdict. Id. at 587, 679 S.E.2d
at 13.
Further, Georgia law holds that "[i]f there is any
reasonable grounds for an insurer to contest the claim, there is
no bad faith." Progressive Cas. Ins. Co. v. Avery, 165 Ga. App.
703, 706, 302 S.E.2d 605, 607 (1983). This is a corollary of
the Georgia definition of bad faith by an insurer, which
requires "a frivolous and unfounded denial of liability." John
Hancock Mut. Life Ins. Co. v. Poss, 154 Ga. App. 272, 278, 267
S.E.2d 877, 883 (1980).

Based on this Court's conclusions

above, Plaintiff not only reasonably contested liability, but
also was correct in doing so.

As a result, Defendant's

counterclaim for bad faith fails.
As for Defendant's counterclaim based on Plaintiff's
alleged negligence, Georgia does not appear to recognize such a
claim based solely on the facts of this case. The Georgia Court
of Appeals has effectively foreclosed this theory of recovery
absent extraordinary circumstances by stating that "a mere
breach of a valid contract amounting to no more than a failure
to perform in accordance with its terms does not constitute a
OR

tort or authorize the aggrieved party to elect whether he will
proceed ex contractu or ex delicto." Tate v. Aetna Cas. & Sur.
Co., 149 Ga. App. 123, 124, 253 S.E.2d 775, 777 (1979); see also
Great Sw. Express Co. v. Great Am. Ins. Co., 292 Ga. App. 757,
761 n.3, 665 S.E.2d 878, 881 n.3 (2008) ("[A]bsent some special
relationship beyond the relation of insurer and insured,
O.C.G.A. § 33-4-6 provides the exclusive remedy."). Unless the
law imposes a special duty arising in tort, 'the damages sought
to be recovered by the plaintiff are limited to the bad faith'
provisions" of Georgia's statutory law. Id. at 125. Plaintiff
has not alleged the existence of any special duty or
extraordinary circumstances in this case.
For these reasons, Defendant cannot maintain an action for
bad faith against Plaintiff, and other Georgia decisions hold
that the action for bad faith is the exclusive remedy for the
harm Defendant alleged in its counterclaim. Accordingly,
Plaintiff's Motion for Summary Judgment (Doc. 25, Attach. 1 at
21-22) is also GRANTED as to the entirety of Defendant's
counterclaim.
CONCLUSION
For the reasons above, Plaintiff's Motion for Summary
Judgment (Doc. 25) is GRANTED as to both Plaintiff's complaint
for

declaratory

judgment

and Defendant's

21

counterclaim.

Similarly, Defendant's Motion for Summary Judgment (Doc. 27) is
DENIED. The Clerk of Court is DIRECTED to close this case.
SO ORDERED this 2-::v> dayof September 2011.

WILLIAM T. MOORE, JR."
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF GEORGIA