Admiral Ins. Co. v. Cresent Hills Apartments, 02-13155.

• Decision Date: 24 April 2003
• Docket Number: No. 02-13155.,02-13155.
• Citation: 328 F.3d 1310
• Parties: ADMIRAL INSURANCE COMPANY, Plaintiff-Counter-Defendant-Appellee, v. CRESENT HILLS APARTMENTS, Defendant-Counter-Claimant-Cross-Defendant-Cross-Claimant-Appellant, Bauer Agency, Inc., Defendant-Counter-Claimant-Cross-Claimant-Cross-Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1310

328 F.3d 1310

ADMIRAL INSURANCE COMPANY, Plaintiff-Counter-Defendant-Appellee, v. CRESENT HILLS APARTMENTS, Defendant-Counter-Claimant-Cross-Defendant-Cross-Claimant-Appellant, Bauer Agency, Inc., Defendant-Counter-Claimant-Cross-Claimant-Cross-Defendant-Appellee.

No. 02-13155.

United States Court of Appeals, Eleventh Circuit.

April 24, 2003.

David M. Lilenfeld, William K. Carmichael, Stokes, Lazarus & Carmichael, LLP, Atlanta, GA, for Cresent Hills Apartments.

Edward Alan Miller, Webb, Carlock, Copeland, Semler & Stair, Atlanta, GA, John D. Hipes, Hipes & Norton, P.C., Alpharetta, GA, for Admiral Ins. Co. and Bauer Agency, Inc.

Appeal from the United States District Court for the Northern District of Georgia.

Before ANDERSON and WILSON, Circuit Judges, and OWENS,^* District Judge.

PER CURIAM:

I. BACKGROUND

This is an appeal from the district court's grant of summary judgment in favor of Admiral Insurance Company and The Bauer Agency on Cresent Hills Apartments' $243,000 claim pursuant to a commercial insurance policy. Admiral denied the claim based on its allegation that the policy had been cancelled. The district court entered summary judgment for Admiral and Bauer finding Admiral had properly cancelled the policy.

The undisputed material facts show the following. On April 29, 2000, Admiral issued a commercial property insurance policy covering the Cresent Hills Apartments, a 252-unit apartment complex located on Cleveland Avenue in southwest Atlanta. The policy was purchased through the Bauer agency and Admiral's broker, Phoenix Special Risk, Inc. In early October 2000, Admiral decided to cancel the policy after a report in the newspaper about the apartments being in "deplorable" condition. Bonnie Smith, an underwriting assistant for Admiral, testified in her deposition that on October 5, 2000, she prepared a cancellation notice for Cresent to be sent by certified mail. The notice, which was not dated, indicated the policy would be cancelled effective November 8, 2000 for "underwriting reasons." Smith explained that she taped the envelope containing the notice to the outside of the mailbox in the lobby of Admiral's office building. On the outside of the envelope she placed a note asking the Post Office to date and sign or postmark the certified mail receipt showing the date it was picked up for delivery. Smith stated the Post Office did not do as requested; the receipt was returned to Admiral on October 6, 2002, undated and without a postmark.

The envelope containing the notice was delivered to Cresent on October 11, 2000. Margaret Liao, a Cresent employee, signed the certified mail return receipt and placed the unopened envelope on the desk of Jerome Yeh, the president and sole shareholder of the corporation that owns Cresent.

On December 27, 2000, five Cresent apartment units were destroyed by fire resulting in property damage totaling $243,121.56. The next day, Bauer submitted a claim for Cresent to Phoenix. On December 29, 2000, Phoenix notified Bauer that Admiral had cancelled the policy on November 8 and had denied the claim. Bauer contacted Yeh who then looked for and for the first time found the unopened cancellation notice on his desk.

Admiral filed a declaratory judgment action seeking a declaration that it had effectively cancelled the policy and was not obligated to pay Cresent's claim. Cresent contends the notice failed to comply with O.C.G.A. § 33-24-44(b) because there is no evidence other than Bonnie Smith's deposition testimony that the notice was mailed within 30 days of the purported cancellation. Cresent also contends Admiral's failure to notify the lienholder voided the cancellation. Finally, Cresent contends Bauer had constructive notice of the purported cancellation because of an unearned premium that was directly deposited into Bauer's account. Cresent contends it was a breach of Bauer's fiduciary duty when Bauer failed to notify Cresent of the cancellation. Cresent argued that Bauer also had a duty to obtain replacement insurance in the event Admiral's cancellation was effective. Bauer filed a counterclaim against Admiral and a cross-claim against Cresent seeking a declaration that it did not receive notice of the purported cancellation before December 2000 and that it had no duty to obtain replacement insurance for Cresent. After a voluntary dismissal of certain claims by and against Bauer, the issues before the district court were Admiral's and Cresent's claims against each other and Cresent's cross-claim against Bauer. All parties moved for summary judgment. The district court granted summary judgment for Bauer and Admiral.

II. LEGAL ANALYSIS

Standard of Review

"We review the district court's grant of summary judgment de novo, applying the same legal standards used by the district court." Parks v. City of Warner Robins, Ga., 43 F.3d 609, 612-13 (11th Cir.1995) (citation omitted). "Additionally, we note that we may affirm the district court's decision on any adequate ground, even if it is other than the one on which the court actually relied." Id. The parties do not dispute that Georgia law applies in this case. See Broyles v. Bayless, 878 F.2d 1400, 1402 (11th Cir.1989) (citation omitted).

Agency Question

The district court found that Bauer had no duty to notify Cresent of Admiral's attempted cancellation and that Bauer had no duty to procure a replacement policy. The case relied upon by Cresent for its claim that Bauer had a duty to obtain replacement insurance is distinguishable from the case at bar. See England v. Georgia-Florida Co., 198 Ga.App. 704, 402 S.E.2d 783 (1991). In England, the Georgia Court of Appeals found an insurance agent was liable for losses sustained by the insured when the agent was hired specifically to procure a replacement insurance policy with the same coverage provided under the old policy. The replacement policy did not cover everything the old policy covered and the court found the agent liable for the difference. The district court correctly found that England does not establish a duty on Bauer's part to obtain replacement insurance for Cresent since Bauer was only hired to procure the original policy.

Cresent as Admiral contends had a duty to read the cancellation notice that was in its possession for more than two months prior to the fire and failed to do so. See Brooks Brown Ins. Agency, Inc. v. Harden, 236 Ga.App. 781, 513 S.E.2d 755 (1999). There an insured's policy was cancelled for nonpayment of premiums but she claimed she never received the cancellation notices. Harden, the insured, claimed her agent was liable for her losses because the agent negligently submitted to the premium finance company an incorrect address for Harden. The agent was found not liable because the cancellation was not proximately caused by any negligence on the agent's part. Harden received a copy of the policy months before the fire and the certificate of insurance included a request that the insured read the certificate and return it to the company if it was incorrect in any way. Harden failed to read the certificate and return a corrected copy. It was "Harden's duty to read the policy and to notify the insurer if it was incorrect." Id. at 784, 757, 513 S.E.2d 755. "Harden's own failure to read her policy and correct her address was the proximate cause of her failure to receive" the cancellation notices. Id. Brooks Brown established that an insured has a duty to take certain steps for its own protection such as reading their policies, certificates of insurance or any cancellation notices in their possession.

There are no facts in the record establishing any express or implied agreement between Bauer and Cresent for Bauer to acquire replacement coverage upon cancellation of any policy. Bauer thus had no continuing duty to acquire additional insurance for Cresent upon the purported cancellation of the original policy and satisfied its only duty when it procured the original policy. The district court did not err in finding Bauer had no duty to procure replacement insurance and that it had no duty to notify Cresent of the purported cancellation.

Notification to Lienholder

O.C.G.A. § 33-24-44(b) provides that the insurer must notify "the insured and... any lienholder, where applicable" of cancellation of the insured's policy. See O.C.G.A. § 33-24-44(b). Cresent also contends that Admiral's notice was ineffective because First Savings Bank, as lienholder, did not receive notice of the cancellation. The district court did not dispositively address this issue. Rather, the district court stated in a footnote that the matter was not properly before it because the...