Atl. Specialty Ins. Co. v. Lewis, A17A0190

• Decision Date: 20 June 2017
• Docket Number: A17A0190
• Citation: 802 S.E.2d 844
• Parties: ATLANTIC SPECIALTY INSURANCE COMPANY v. LEWIS et al.
• Court: Georgia Court of Appeals

341 Ga.App. 838

802 S.E.2d 844

ATLANTIC SPECIALTY INSURANCE COMPANY

v.LEWIS et al.

A17A0190

Court of Appeals of Georgia.

June 20, 2017

Seth Michael Friedman, Christopher Cody Meeks, Atlanta, for Appellant.

Richard Wayne Hendrix, Atlanta, for Appellee.

Barnes, Presiding Judge.

Nancy Lewis, individually and on behalf of her minor daughter, filed a personal injury suit against the City of Cartersville, Georgia, alleging that the City was liable for injuries her daughter sustained in an automobile collision, and that the City had waived its sovereign immunity by operation of law and through the purchase of municipal liability insurance from Atlantic Specialty Insurance Company. While the personal injury suit was pending, Lewis filed the present declaratory judgment action against the City and Atlantic, seeking a determination that the City had available $5 million in insurance coverage to cover the claims in the personal injury suit and had waived its sovereign immunity up to that amount. Atlantic filed a motion to dismiss in the declaratory judgment action, contending that Lewis lacked standing to seek declaratory relief and that the action was not ripe for judicial review because Lewis had not yet obtained a judgment against the City in the underlying personal injury suit. The trial court denied Atlantic's motion to dismiss, and later, on cross-motions for summary judgment filed by Lewis and Atlantic, the court determined that there was $5 million in insurance coverage available to cover the claims in the underlying personal injury suit and that the City had waived its sovereign immunity up to the full policy limit. Atlantic appeals these rulings by the trial court in the declaratory judgment action.

For the reasons discussed below, we conclude that Lewis did not have standing to bring this declaratory judgment action in the absence of an unsatisfied judgment against the City in the underlying personal injury suit. Consequently, we vacate the trial court's order on the parties' cross-motions for summary judgment reaching the merits of the parties' dispute over insurance coverage and sovereign immunity, reverse the trial court's denial of Atlantic's motion to dismiss, and remand with direction that Lewis' declaratory judgment action be dismissed for lack of standing.

The Insurance Policy. The facts relevant to the present appeal are largely undisputed. In 2013, the City purchased an insurance policy from Atlantic that included several different types of liability coverage, including business auto coverage with a $1 million policy limit and umbrella liability coverage with a $4 million policy limit, for a total policy limit of $5 million. The coverage provided by the policy remained in effect on the date of the automobile collision out of which this litigation arose.

The business auto coverage and excess liability coverage parts of the policy both contained an endorsement entitled "Georgia Changes—Protection of Immunity." The policy endorsement stated that Atlantic had no duty to pay out any damages on behalf of the City "unless the defenses of sovereign and governmental immunity are inapplicable to [the City]." The endorsement further stated that the "policy and any coverages associated therewith [did] not constitute, nor reflect an intent by [the City], to waive or forego any defenses of sovereign immunity and governmental immunity available to [the City]" pursuant to any statute or the common law.

The Personal Injury Suit. In March 2014, a City police officer was driving her patrol car through an intersection when she collided with another vehicle in which Lewis' four-year-old daughter was a passenger. Lewis' daughter was severely injured as a result of the collision.

In August 2015, Lewis, individually and as next friend and guardian of her minor daughter, filed a personal injury suit for damages against the City in the Superior Court of Bartow County, alleging that the police officer's negligent driving had proximately caused her daughter's injuries and that the City was vicariously liable for the officer's negligence. Lewis also alleged that the insurance policy purchased by the City from Atlantic covered the automobile collision and that the City had waived its sovereign immunity to the full extent of the coverage purchased.

The City answered, denying any liability for the automobile collision and asserting sovereign immunity as a defense. With respect to sovereign immunity, the City denied that its immunity had been waived to the full extent of the liability insurance it had purchased (i.e., $5 million), but admitted that it had automatically waived its immunity in a lesser amount by operation of law. The City also filed a notice of non-party fault as to the driver of the vehicle in which Lewis' daughter had been a passenger, alleging that the driver was wholly or partially responsible for the injuries sustained by the daughter in the automobile collision.

The Declaratory Judgment Action. While the personal injury suit against the City was pending, Lewis separately filed the present declaratory judgment action against the City and Atlantic in the Superior Court of Bartow County. Lewis sought a declaration from the court that the insurance policy purchased by the City from Atlantic provided up to $5 million in coverage for the claims in the underlying personal injury suit and that the City had waived its sovereign immunity up to that amount.

Atlantic answered, denying that the City had waived its sovereign immunity up to the full policy limit of $5 million. Additionally,

Atlantic asserted, among other defenses, that Lewis was not in privity of contract with Atlantic and that the doctrine of sovereign immunity limited the coverage afforded by the insurance policy. Atlantic also filed a motion to dismiss the complaint, arguing that Lewis lacked standing and that her declaratory judgment suit was premature because she had not yet obtained a judgment against the City in the underlying personal injury suit. The trial court denied Atlantic's motion to dismiss, concluding that Lewis could proceed with her claim for declaratory relief while the personal injury suit was pending.¹

The declaratory judgment action proceeded forward, and Lewis and Atlantic filed cross-motions for summary judgment concerning the maximum amount of insurance coverage available to the City in the personal injury suit based on the language of the insurance policy and Georgia's relevant sovereign immunity statutes, OCGA § 33-24-51 and § 36-92-2.² Atlantic argued that the maximum coverage available under the policy was $500,000 based on the interplay between the language of the policy endorsement and Georgia's sovereign immunity statutes, while Lewis argued that the full $5 million in coverage was available. The trial court agreed with Lewis and concluded that, as a matter of law, $5 million in insurance coverage was available to cover Lewis' claims in the personal injury suit. This appeal by Atlantic followed.

1. Atlantic contends that the trial court erred in denying its motion to dismiss Lewis' complaint in the declaratory judgment action for lack of standing. According to Atlantic, Lewis was not in privity of contract with either the City or Atlantic under the insurance policy and thus did not have standing to file an action for declaratory relief directly against Atlantic, unless and until Lewis had an unsatisfied judgment against the City in the underlying personal injury suit. We agree with Atlantic that Lewis lacked standing to seek declaratory relief.

As a general rule, a plaintiff does not having standing to bring a direct action against a defendant's insurance company unless the plaintiff has obtained a judgment against the defendant that remains unsatisfied. See Arnold v. Walton , 205 Ga. 606, 612 (2), 54 S.E.2d 424 (1949) ; Capitol Indem. Corp. v. Fraley , 266 Ga. App. 561, 563 (1), 597 S.E.2d 601 (2004) ; Richards v. State Farm Mut. Automobile Ins. Co. , 252 Ga. App. 45, 45, 555 S.E.2d 506 (2001) ; Caudill v. Strickland , 230 Ga. App. 644, 644 (1), 498 S.E.2d 81 (1998). The rationale for this rule is that the plaintiff is not in privity of contract with either the defendant or the defendant's insurance company under the liability insurance policy and is not considered a third party beneficiary of the policy. See Googe v. Florida Intl. Indem. Co. , 262 Ga. 546, 548 (1), 422 S.E.2d 552 (1992) ; Fraley , 266 Ga. App. at 563 (1), 597 S.E.2d 601. It is only once a judgment has been obtained against the defendant insured that the plaintiff "is no longer a stranger to the insurance policy but instead ‘stands in the shoes' of the insured" and can sue the defendant's insurer directly when the judgment is unsatisfied. (Citation and punctuation omitted.) McCoy v. Ga. Dept. of Admin. Sv c s. , 326 Ga. App. 853, 858 (c), 755 S.E.2d 362 (2014).

There are a limited number of exceptions to the general rule that a plaintiff must have an unsatisfied judgment against the defendant before filing suit against the defendant's insurance company. A plaintiff may bring a direct action against a defendant's insurer if the legislature has specifically authorized a direct action against the insurer or a provision of the insurance policy at issue authorizes direct action. See Arnold , 205 Ga. at 612 (2), 54 S.E.2d 424 ; Richards , 252 Ga. App. at 45, 555 S.E.2d 506 ; Caudill , 230 Ga. App. at 644 (1), 498 S.E.2d 81. Additionally, where liability insurance is mandated by the legislature, a plaintiff may bring an action directly against the defendant's insurance company for equitable reformation of the insurance policy or for declaratory relief. Richards , 252 Ga. App. at 46, 555 S.E.2d 506. See Googe , 262 Ga. at 548-549 (1), 422 S.E.2d 552.

Lewis, however, does not have an unsatisfied judgment against the City; the underlying personal injury suit she commenced against the City remains pending. Nor has Lewis pointed to any statutes or provisions of the insurance policy...