Trinity Outdoor v. Central Mut. Ins.

• Decision Date: 01 June 2009
• Docket Number: No. S09Q0605.,S09Q0605.
• Citation: 679 S.E.2d 10,285 Ga. 583
• Parties: TRINITY OUTDOOR, LLC v. CENTRAL MUTUAL INSURANCE COMPANY.
• Court: Georgia Supreme Court

679 S.E.2d 10

285 Ga. 583

TRINITY OUTDOOR, LLC v. CENTRAL MUTUAL INSURANCE COMPANY.

No. S09Q0605.

Supreme Court of Georgia.

June 1, 2009.

Reconsideration Denied June 29, 2009.

Baker, Donelson, Bearman, Caldwell & Berkowitz, John Hinton IV, Kevin A. Stine, Job J. Milfort, Atlanta, for appellant.

Carlock, Copeland & Stair, David F. Root, Cheryl H. Shaw, Atlanta, for appellee.

MELTON, Justice.

The United States District Court for the Northern District of Georgia has certified two questions of Georgia law to this Court pursuant to Georgia constitutional and statutory authorization and the rules of this Court. Ga. Const. of 1983, Art. VI, Sec. VI, Par. IV; OCGA § 15-2-9(a); Rule 46 of the Supreme Court of Georgia. The questions arise in a suit brought against an insurance provider for negligent or bad faith failure to settle a claim. The first certified question asks whether an action for negligent or bad faith failure to settle a case requires that a judgment be entered against an insured in excess of the policy limits before the action can be asserted. The second certified question then queries, if a judgment in excess of policy limits is not required, what must a plaintiff show to prove negligent or bad faith failure to settle, and what damages are recoverable. Based on the facts of this case, we answer the first question in the affirmative, and, as a result, we do not reach the second question.

The facts of record show that, on August 1, 2002, a billboard owned by Trinity Outdoor, LLC fell while it was being installed on Trinity's property, killing Anthony Fowler and Joshua Fowler.¹ The billboard had been manufactured by Phoenix Outdoor, LLC, which carried a $20 million policy with Great American Alliance Insurance Company.² Trinity reported the accident and injuries to Central Mutual Insurance Company, with whom Trinity had a $2 million general liability policy. Central thereafter hired separate counsel for both itself and Trinity. Both sets of counsel determined that Phoenix improperly installed a bolt on the billboard apparatus that apparently broke before the accident. Trinity later filed suit against Phoenix regarding a number of defective billboards which it had purchased from them. Phoenix did not oppose the claims, and Trinity received a judgment of $724,543.

On March 19, 2004, the Fowler family sued Phoenix and Trinity, and Trinity cross-claimed against Phoenix for contribution and indemnification. Phoenix conceded liability. Both sets of outside counsel for Central and Trinity opined that they believed that Trinity was not liable to the Fowlers; however, Trinity's outside counsel believed that the Fowlers possibly could have a viable premises liability claim because Trinity owned the property on which the billboard fell. On September 22, 2005, the Fowlers made a limited time demand on Central to settle the case for $2 million, the face value of its policy with Trinity. Trinity's counsel demanded that Central accept the settlement because she believed that trial could expose Trinity to a verdict over policy limits. Instead of settling at that time, however, Central filed a motion for summary judgment on Trinity's behalf, believing that there were valid and strong arguments that Trinity was not responsible for the accident. In response, the trial court ordered the parties to mediation. On the second day of mediation, the Fowlers demanded a gross amount of $14 million from all defendants. Great American offered $10 million on behalf of Phoenix, and Central offered $200,000 on behalf of Trinity, although the Fowlers demanded $1.37 million from Trinity at that time. The litigation ultimately settled for $12 million. Of that amount, Trinity, without Central's approval, agreed to contribute $954,530, comprised of the $200,000 offered by Central and $754,530 from Great American in satisfaction of Trinity's earlier judgment against Phoenix.

Central deemed Trinity's payment of the additional $754,530 to be a voluntary payment which Central was not required to pay based on clauses in the insurance contract which state: (1) Central will pay only those sums that the insured is legally obligated to pay; (2) Central has the right to defend any suit and settle any claim; (3) no insured shall make a voluntary payment without Central's prior consent; (4) an insured may only sue to "recover on an agreed settlement or on a final judgment against an insured obtained after an actual trial"; and (5) an insured may not maintain a suit against Central unless all of the terms of the policy have been followed. On October 9, 2007, Trinity brought suit against Central in state court, claiming Central breached the insurance agreement and refused to settle with the Fowlers in bad faith, thereby violating OCGA § 33-4-6. Trinity also asserted claims for negligent failure to settle and punitive damages. On November 7, 2008, Central removed the action to federal district court and filed the pending motion for summary judgment on August 29, 2008.

1. In cases such as this, our inquiry must begin with the language of the insurance contract.

Under Georgia law, insurance companies are generally free to set the terms of their policies as they see fit so long as they do not violate the law or judicially cognizable public policy. Thus, a carrier may agree to insure against certain risks while declining to insure against others. In construing an insurance policy, we begin, as with any contract, with the text of the contract itself. Where the contractual language unambiguously governs the factual scenario before the court, the court's job is simply to apply the terms of the contract as written, regardless of whether doing so benefits the carrier or the insured.

(Footnotes omitted.) Reed v. Auto-Owners Ins. Co., 284 Ga. 286, 287(2), 667 S.E.2d 90 (2008).

With regard to the settlement of claims, the policy states that Central

will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury".... We will have the right and duty to defend the insured against any "suit" seeking those damages.... We may at our discretion investigate any "occurrence" and settle any claim...