Georgia Insurance Coverage Decisions

National Service Industries, Inc. v. Georgia Power Company, Case No.

A08A1487, 2008 Ga. App. LEXIS 1177 (Oct. 31, 2008):

Georgia Power

Company (“GP") hired National Service Industries (“NSI") as a contractor

for the purpose of removing asbestos from several of GP’s facilities. During

the time of the work, the parties entered into two contracts that contained in

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demnity provisions which provided that NSI would indemnify GP for dam

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ages “in any way attributable to the performance…of the work herein con

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tracted for" so long as the liability did not arise as a result of the “sole negli

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gence" of the GP.

The widow of an NSI employee filed a wrongful death lawsuit against the GP

and others alleging that her husband died as a result of asbestos exposure at

GP’s facility as well as exposure through other defendants. GP demanded

that NSI defend and indemnify it from the claims pursuant to the indemnity

provisions in their contracts. NSI refused, claiming that the indemnity provi

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sion did not apply in part because GP was solely at fault for the man’s death.

In ruling that the indemnity provision was applicable and that NSI was not

entitled to summary judgment on its claim that the indemnity provision did

not apply, the court noted that the evidence in the record showed that the de

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ceased employee worked at GP’s facilities while he was employed by NSI

and that there was no evidence in the record that the deceased employee was

ever at GP’s facility in any other capacity. The court also noted that the

widow’s lawsuit alleged that both the plaintiff and defendant were liable for

the employee’s death based on their failure to warn him of the dangerous

characteristics of the asbestos-containing products. The deceased sole pur

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pose for being at the GP facility was to undertake his work as an employee of

NSI and as such, the plain language of the contracts required NSI to defend

and indemnify GP.

Coleman v. B-H Transfer Co., Case Nos. S08G1293, S08G1294, 2008 Ga.

LEXIS 857 (Ga. Nov. 3, 2003):

The dispute involved a collision between

three tractor-trailers under contract to B-H Transfer Co. (“B-H") and operated

by independent contractors. One of the vehicles was owned and operated by

the plaintiff, Jerry Lee Coleman (“Coleman"). Coleman was injured in the

accident and brought suit against B-H and B-H’s insurer, Discover Property

and Casualty Ins. Co (“Discover"). The contract between Coleman and B-H

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COURT DECISIONS

Georgia Decisions

The Georgia Court of Appeals

upholds the application of a con

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tractual indemnity provision

.

The Court held that the indemnity

provision in a contract between the

plaintiff and the defendant was en

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forceable because the claimed injury

was not due to the sole negligence of

the plaintiff.

Under Georgia law, insurer benefits

from insured's indemnity agreement

with independent contractor.

Georgia Supreme Court held that a

waiver of liability contained in a contract

applied to an injured driver who was an

independent contractor of a motor

common carrier, relieving the motor

common carrier's insurer of any liability.

Recent Cases Of Interest

Around the Country

Equitable contribution between in

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surers is alive and well in Illinois.

Insurer accepts assignment of rights

from its insured and wins judgment

against other insurer for 50% of de

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fense expenditures in advertising injury

case.

Insured fails in attempt to convert

Scheduled Policy to Blanket Limit

Policy.

In a case of first impression under Mis

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sissippi law, the Court finds the Sched

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uled Limit language of an excess policy

to be unambiguous and refuses to

permit an insured to use the Ordinance

or Law coverage to increase the limits

recoverable under the excess.

Complex Insurance Litigation

and Liability Defense

contained a release and indemnity provision which applied to liability for “damage to persons or property resulting from the

collision of the two vehicles, both of which are under contract to B-H". Coleman argued that the indemnity provision was

contrary to federal regulations and public policy.

B-H successfully moved the trial court for summary judgment on the release and indemnity agreement, but the trial court

denied Discover’s motion for summary judgment on the release and indemnity agreement. The Georgia Court of Appeals

reversed the denial of Discover’s motion for summary judgment, and affirmed the summary judgment granted to B-H, both

holdings were then affirmed by the Georgia Supreme Court.

In reaching its holding, the Georgia Supreme Court held that federal regulations regarding insurance coverage requirements

for motor common carriers do not apply to employees of the insured motor carrier. The court, recognizing a split amongst the

federal circuit courts on this issue, stated that in accordance with Eleventh Circuit precedent, the owner and driver of a truck

leased by a motor common carrier are not the intended beneficiaries of the federal regulations. The court concluded that the

application of the release and indemnity provision to Coleman was not prohibited by federal regulations. The court also

found that the similar provision under Georgia law did not prohibit the application of the release and indemnity provision to

Coleman because Georgia case law demonstrated that the plaintiff is not a member of the public for whom the law was en

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acted. Because the release and indemnity provision applied as between Coleman and B-H, the provision also applied to the

insurer of the defendant motor common carrier, as an insurer could not be held liable where judgment could not be recovered

against the insured motor common carrier.

Recent Cases Of Interest Around The Country

Cincinnati Insurance Co. v. American Hardware Manufacturers Association, 2008 Ill. App. LEXIS 1080 (Ill. App.

Nov. 12, 2008)

:

American Hardware Manufacturers Association and its executives (“AHMA") sued Reed Elsevier, Inc. and

other entities (“Reed") concerning a dispute over competing national hardware trading shows. In January of 2005, Reed filed

a counterclaim against AHMA asserting claims of defamation

per se

, libel

per se

, breach of contract, and violations of the

Uniform Deceptive Trade Practices Act, Illinois Consumer Fraud and Deceptive Practices Act, and the Lanham Act for al

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leged misconduct in publishing and advertising a competing trade show.

Cincinnati Insurance Company (“Cincinnati") had issued two primary occurrence based policies providing coverage to

AHMA for personal and advertising injury liability from September 30, 2000 through September 30, 2003. Federal Insur

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ance Company (“Federal") issued a claims made not-for-profit organization liability insurance policy to AHMA for the effec

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tive policy period of September 30, 2004 through September 30, 2005. AHMA submitted claims to its two insurers, Cincin

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nati and Federal seeking a defense and indemnity from the counterclaim. Federal agreed to advance defense expenses to

AHMA pursuant to a reservation of rights. Cincinnati filed a declaratory judgment action and then issued a denial of cover

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age to AHMA.

A year after receiving Cincinnati’s denial, AHMA entered an assignment with Federal assigning all rights of action it may

have against Cincinnati to Federal in exchange for Federal’s agreement to reimburse AHMA for all of its past and future ex

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penses related to the defense of the counterclaim and to indemnify AHMA in the Cincinnati declaratory judgment action.

Thereafter, Federal sought to have itself added as a party to the dec action as a third-party defendant and it filed a counter

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claim and third-party complaint against Cincinnati. Both carriers filed cross-motions for summary judgment. Federal sought

a ruling that under the “other insurance" clauses of their respective policies, it was entitled to recover 50% of the defense

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costs from Cincinnati because both policies provided coverage to AHMA for the advertising injury allegations in the com

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plaint. Cincinnati countered that the complaint did not allege any fortuitous loss, the trademark infringement claims were not

covered and there was no coverage under its policy for any economic loss such as that sought by the breach of contract claim.

The underlying court found for Federal on all counts and awarded Federal the right to recover 50% of the defense expenses.

Cincinnati appealed.

In its appeal Cincinnati argued that the assignment of rights Federal had obtained was invalid because it lacked consideration,

was a partial assignment under Illinois law and because it violated the anti-assignment clause in the policy. Furthermore,

Cincinnati argued that under the fortuity doctrine it had no obligation to defend AHMA and that Federal had no right to re

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cover under equitable contribution because their policies did not insure the same risks.

As regards the assignment, the court found that (1) Federal’s agreement to pay AHMA’s defense costs was sufficient consid

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eration, (2) the assignment was not a partial assignment under Illinois law even though it only addressed defense costs and

not indemnity, and (3) the assignment did not violate the anti-assignment clause because it occurred after the loss. Cincinnati

further contended that the defamation and libel counts did not assert fortuitous loss and that it had no duty to defend such

intentional torts. The court found Cincinnati’s fortuity argument unavailing based on Illinois precedent, which held that “al

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legations of recklessness may bring a defamation claim within the potential coverage of a policy which covers defamation but

excludes knowing falsehoods."

St. Paul Ins. Co. of Ill. V. Landau, Omahana & Kopka, Ltd.

,

246 Ill. App. 3d 852, 859 (1993).

The court also pointed to other Illinois precedent which supported its finding that Cincinnati had a duty to defend the underly

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ing action. Specifically, the court found that the Cincinnati policy was ambiguous in that its definition of “occurrence" lim

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ited coverage to only unintentional acts while the policy expressly granted coverage for intentional tort claims such as defa

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mation. As the defamation counts were potentially covered, Cincinnati had an obligation to defend the entire action. Finally,

as regards the equitable contribution argument, the court stated that the key question was “whether the policies establish a

sufficient commonality of risks to support an equitable contribution claim." Regardless of the fact that one policy was occur

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rence based and the other was claims made, the policies both covered the same risks as plead in the counterclaim such that

the policies shared “significant, fundamental commonalities of risk" and as such, equitable contribution was applicable.

Gulfport-Brittany, LLC v. RSUI Indemnity Company, 2008 U.S. LEXIS 91264 (Nov. 7, 2008):

Gulfport-Brittany, LLC

(“G-B") was part owner of the Brittany Apartment complex in Gulfport, Mississippi that was damaged in Hurricane Katrina.

The Brittany Apartments, among many other properties, were insured under three layers of commercial property coverage

purchased by G-B. The primary policy issued by Aspen Insurance UK Ltd had a limit of $5,000,000 per occurrence. The

first layer excess policy issued by Lloyd’s provided an additional $5,000,000 in coverage and the second layer excess policy

issued by RSUI had a per occurrence limit of $140,000,000.

The primary and first layer excess policies paid their full limits of coverage for the damages to the Brittany Apartments and

the only dispute at issue in the case concerned the limits available for the Brittany Apartments under RSUI’s second layer

excess policy. The insured contended that it had the entire limits of $140,000,000 available to pay for its claim of physical

property damage, loss of business income and ordinance or law costs associated with the demolition and rebuild. RSUI con

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tended that the excess policy limits were subject to scheduled limits and as such, G-B was only required to pay the scheduled

sub-limit listed for the Brittany Apartments, which was $2,458,014 as per the Statement of Values on file with RSUI.

As this was a case of first impression under Mississippi law, the court looked to other cases around the country for guidance.

G-B specifically argued that certain other provisions of the RSUI policy were in con.ict with the Scheduled Limit of Liability

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Endorsement. G-B asserted that when the “Insuring Clause" and the “Limit Clause" of the coverage form were read together

they were in direct con.ict with the Scheduled Limit endorsement. Applying Mississippi’s rule of interpretation for insur

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ance policies and following the guidance provided by cases from other jurisdictions, the court determined that the Scheduled

Limit of Liability Endorsement when read in conjunction with the other policy provisions did not create con.ict or ambiguity.

In fact, the Insuring Clause of the coverage form contained language which made those policy provisions “subject to the limi

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tations, terms and conditions contained in this Policy or added hereto…" Therefore, the court found that RSUI had unambi

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guously limited its liability for the Brittany Apartments to the $2,458,014 listed in

the latest “Statement of Values". The insured then attempted to expand the avail

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able limits by arguing that RSUI owed it additional monies as a result of its adop

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tion of the Ordinance or Law coverage provided by endorsement under the primary

policy, which provided $2,500,000 in coverage. While it was not clear whether G-

B was arguing that the $2,500,000 was in addition to the $140,000,000 limits, the

court found it did not need to resolve that issue. The court looked to the 4

th

Cir

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cuit’s decision in

First Centrum Corp. v. Landmark

, 237 Fed. Appx. 799 (4

th

Cir.

2007) for guidance. In that case the 4

th

Circuit held that “where the limit of liability

for a particular property is scheduled, but the insured seeks additional insurance

pursuant to an Ordinance or Law endorsement sub-limit of the overall policy limits,

the insured inappropriately attempts to ‘transform[] the policy from a scheduled

policy to a blanket policy." As G-B was making a similar argument here and the

court had already determined that the policy was a scheduled one, it too held that

the insured could not obtain additional limits through the Ordinance or Law en

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dorsement. The court noted that even though the Ordinance or Law endorsement

did not include language stating that it was subject to the overall limit of liability of

the policy, the absence of that language was not material. Furthermore, the in

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sured’s argument based upon the “Maintenance of Primary Insurance" clause could

not carry the day as, while that clause adopted the terms and conditions of the pri

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mary policy, it expressly stated that it was also subject to the amount and limits of

liability contained in the RSUI policy.

Best regards,

THE JOHNSON FIRM, LLC

FIRM ATTORNEYS

Stay in touch, we are here to be

of service to you.

C. Michael Johnson

404-442-8836

mjohnson@thejohnsonfirm.com

Laurie Dugoniths

404-442-8837

ldugoniths@thejohnsonfirm.com

Thomas Wingfield

404-442-8838

twingfield@thejohnsonfirm.com

ADMINISTRATOR

Tatum Fairbank

404-442-8856

tfairbank@thejohnsonfirm.com

Firm No.:

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