Auto-Owners Ins. Co. v. Neisler

• Decision Date: 30 October 2015
• Docket Number: No. A15A0926.,A15A0926.
• Citation: 334 Ga.App. 284,779 S.E.2d 55
• Parties: AUTO–OWNERS INSURANCE CO. v. NEISLER.
• Court: Georgia Court of Appeals

334 Ga.App. 284

779 S.E.2d 55

AUTO–OWNERS INSURANCE CO.

v.NEISLER.

No. A15A0926.

Court of Appeals of Georgia.

Oct. 30, 2015.

Michael Charles Kendall, Douglasville, for Appellant.

John Hamilton Peavy Jr., Atlanta, for Appellee.

DILLARD, Judge.

Auto–Owners Insurance Company ("Auto–Owners") appeals from the trial court's denial of its motion for summary judgment and grant of summary judgment to Jason Neisler on his complaint to recover funds under a dwelling policy that he holds with Auto–Owners. Auto–Owners contends that the trial court erred in (1) ruling that Neisler's policy covered his claim for certain alleged property damage and loss of rents, and (2) refusing to hold that Neisler's claim for bad-faith penalties under OCGA § 33–4–6 fails as a matter of law. For the reasons set forth infra, we affirm in part and reverse in part.

Viewed in the light most favorable to Auto–Owners (i.e., the nonmovant),¹ the record reflects that Neisler owns a single-family home on Langston Avenue in Atlanta. The home is one of 37 residential properties that Neisler owns and uses as a rental home. He purchased the property in question on April 24, 2013, and had it insured through Auto–Owners. On May 20, 2013, before Neisler could find a tenant for the property, it was vandalized by burglars.

During the burglary, the perpetrators removed the property's water heater, the outside condensing unit, the inside air handler and furnace, and electrical wiring. It is undisputed that Neisler's policy does not cover the cost of the items that were stolen from the property, but Neisler filed a claim with Auto–Owners seeking to recover on the damage caused by the removal of these items, and Auto–Owners issued payment on what it believed was covered by Neisler's policy. Neisler refused to cash the check because he disagreed with Auto–Owners about the extent of his coverage under the policy. Specifically, Neisler took issue with Auto–Owners's refusal to pay for the labor cost associated with replacing the items stolen by the burglars, and for his alleged loss of rent.

Neisler's policy with Auto–Owners provided, in relevant part, that the dwelling was covered in the event of "[v]andalism or malicious mischief." However, the coverage for "vandalism or malicious mischief" explicitly excluded, inter alia, "loss[ ] ... by theft, burglary or larceny." Nevertheless, the policy separately provided coverage for "[d]amage by burglars to the dwelling or other structures at the described premises." However, the coverage for "damage by burglars" explicitly excluded "any property taken by burglars." Finally, the policy also provided that

[i]f a covered loss makes the described premises unfit to live in, we will pay for your loss of normal rents resulting from such covered loss while the described premises is unfit to live in. We will not pay charges and expenses which do not continue during that time. We will pay this loss of normal rents only for the shortest time needed to make the rented part fit to live in.

The parties continued to disagree as to whether, under these provisions, Neisler was entitled to recover the cost of labor to replace the fixtures that were stolen from the dwelling (though not the cost of the replacement fixtures themselves) and the cost of lost monthly rent when he had no tenant at the time of the burglary. Thus, Neisler filed suit against Auto–Owners, and both parties eventually filed motions for summary judgment. The trial court thereafter denied Auto–Owners's motion, but granted Neisler's motion for partial summary judgment, determining that the policy's provisions for coverage and exclusions related to burglary and its coverage of "normal rent" were ambiguous. But construing the provisions in Neisler's favor, it determined that Neisler was owed the cost of damage by the removal of the stolen property and the cost to replace it, and that he was owed rent for the period in which the property was uninhabitable. Nevertheless, the court determined that there was a genuine issue of material fact as to whether Auto–Owners had acted in bad faith by refusing to pay these damages. Thus, the court denied Auto–Owners's motion and granted Neisler's motion for partial summary judgment. This appeal by Auto–Owners follows.

1. Coverage under the policy.

First, Auto–Owners argues that the trial court erred in finding that Neisler could recover for the cost of labor to replace the fixtures that were stolen from the dwelling and that he could recover "normal rent" when the dwelling had no tenant at the time of the loss. Although we agree with the trial court that the relevant policy provisions are ambiguous as to coverage for vandalism (and therefore Neisler is entitled to recover for his property damage), we disagree that he is entitled to recover lost rent.

At the outset, we note that insurance in Georgia is a matter of contract, and this Court has long held that such contract disputes are "well suited for adjudication by summary judgment because construction of a contract is ordinarily a matter of law for the court."² And in construing a contract, we must first decide "whether the language is clear and unambiguous."³ Of course, under Georgia law, an insurance company is "free to fix the terms of its policies as it sees fit, so long as they are not contrary to the law, and it may insure against certain risks while excluding others."⁴ And as is true with all contracts, "unambiguous terms in an insurance policy require no construction, and their plain meaning will be given full effect, regardless of whether they might be of benefit to the insurer, or be of detriment to an insured."⁵ Thus, if the language is unambiguous, the court "simply enforces the contract according to its clear terms; the contract alone is looked to for its meaning."⁶

But if a contract is ambiguous, "the court must apply the rules of contract construction to resolve the ambiguity."⁷ And contractual provisions are ambiguous when they are "susceptible to more than one meaning, even if each meaning is logical and reasonable."⁸ Indeed, a contract is ambiguous if the words "leave the intent of the parties in question—i.e., the intent is uncertain, unclear, or is open to various interpretations."⁹

In cases of ambiguity, there are three well-known rules of contract construction that apply: (1) ambiguities are strictly construed against the insurer as the drafter; (2) exclusions from coverage the insurer seeks to invoke are strictly construed; and (3) the contract is to be read in accordance with the reasonable expectations of the insured when possible.¹⁰ Indeed, when a term of a policy of insurance is susceptible to two or more constructions, even when such multiple constructions are all logical and reasonable, "such term is ambiguous and will be strictly construed against the insurer as the drafter and in favor of the insured."¹¹ Furthermore, exceptions and exclusions to coverage must be "narrowly and strictly construed against the insurer and [forgivingly] construed in favor of the insured to afford coverage."¹²

Finally, only if the contract is still ambiguous after applying the rules of construction, "the issue of what the ambiguous language means and what the parties intended must be resolved by the jury."¹³ With these guiding principles in mind, we turn now to the policy provisions at issue in the case sub judice.

a. Coverage for damages related to burglary.

As set forth infra, the "vandalism and malicious mischief" provision excludes from coverage losses from, inter alia, theft and burglary. Nevertheless, the policy separately covers "damage by burglars to the dwelling or other structures," though not any property actually taken by burglars. And, importantly, this latter provision does not limit the coverage to damage caused when burglars enter or exit the building.¹⁴ Thus, the relevant terms of the insurance policy are rendered ambiguous by conflicting coverage and exclusions, i.e., a provision that excludes coverage of losses by burglary and a provision that includes coverage for damage to the dwelling or other structures caused by burglars.¹⁵

After strictly construing the ambiguous exclusion and coverage provisions in Neisler's favor, and against Auto–Owners, we agree with the trial court that Auto–Owners is liable for the cost of repairing the damage to the dwelling caused during commission of the burglary.¹⁶ This includes the cost of labor and material to repair that damage through the replacement of the items that were removed (though not the cost of the items themselves).¹⁷ Thus, the trial court did not err in granting summary judgment to Neisler on this issue.

b. Coverage for recovery of "normal rents. "

As previously noted, the policy at issue also provided that

[i]f a covered loss makes the described premises unfit to live in, we will pay for your loss of normal rents resulting from such covered loss while the described premises is unfit to live in. We will not pay charges and expenses which do not continue during that time. We will pay this loss of normal rents only for the shortest time needed to make the rented part fit to live in.

Unlike the provisions referencing vandalism and burglary, the provision as to "normal rent," though unclear as to what constitutes "normal rent," unambiguously requires that the property actually have a tenant at the time of loss. Indeed, the final sentence in this provision makes clear that Auto–Owners will pay the insured's loss of normal rents "only for the shortest time needed to make the rented part fit to live in."¹⁸ And because the lost-rent provision unambiguously provides for the recovery of lost rent only for property that is being rented out at the time a covered loss occurs, the trial court erred in granting summary judgment to Neisler on this issue. Accordingly, we reverse the trial court's determination in this regard.

2. Bad faith under OCGA § 33–4–6.

Finally, Auto–Owners argues that the trial court erred in denying its motion for...