Canal Indem. Co. v. Chastain

• Decision Date: 26 August 1997
• Docket Number: No. A97A1396,A97A1396
• Citation: 491 S.E.2d 474,228 Ga.App. 255
• Parties: , 97 FCDR 3248 CANAL INDEMNITY COMPANY v. CHASTAIN.
• Court: Georgia Court of Appeals

Page 474

491 S.E.2d 474

228 Ga.App. 255, 97 FCDR 3248

CANAL INDEMNITY COMPANY v. CHASTAIN.

No. A97A1396.

Court of Appeals of Georgia.

Aug. 26, 1997.

Crim & Bassler, Terence D. Williams, Atlanta, for appellant.

Brack & Westee, Philip L. Westee, Kennesaw, for appellee.

HAROLD R. BANKE, Senior Appellate Judge.

Leslie Chastain sustained injuries in an automobile collision with a pick-up truck driven by Garrett Francis McLaughlin. Chastain initially sued McLaughlin, alleging that McLaughlin's employer, Gibbo Enterprises, Inc. d/b/a Northside Used Cars ("Gibbo"), owned the truck and had given him express permission to use it. In this suit, Chastain did not name Gibbo or its insurer, Canal Indemnity Company ("Canal") as parties. ¹ Although Chastain sent Canal a copy of the complaint by certified mail, McLaughlin never sought Canal's assistance in his defense. See OCGA § 33-7-15(c). After McLaughlin failed to answer the complaint, Chastain obtained a default judgment in the amount of $13,266.17, which included $794.17 in medical expenses, $2,382 for pain and suffering and $10,000 in punitive damages.

Chastain then commenced the instant case solely against Canal, alleging that because all her allegations against McLaughlin were admitted by default, Canal was obligated to satisfy the judgment. Both Chastain and Canal moved for summary judgment. Chastain characterized her claim as a direct action against a tortfeasor's liability insurer to collect a judgment. See Bacon v. Liberty Mut. Ins. Co., 198 Ga.App. 436, 401 S.E.2d 625 (1991). Canal claimed that because its policyholder, Gibbo, sold the vehicle to McLaughlin three days before the accident, McLaughlin was not covered under the policy. It presented a bill of sale of the truck to McLaughlin dated three days before the collision and deposition testimony about the sale from Gibbo's former vice president. Chastain then presented McLaughlin's affidavit, attesting that the bill of sale and accompanying paperwork were forgeries and he never bought the truck at issue, but was driving it with express permission.

The trial court granted Chastain's motion for summary judgment and denied Canal's, finding that Chastain's judgment against McLaughlin estopped Canal from raising the coverage issue. The trial court further held Canal's failure to defend McLaughlin in the prior action foreclosed it from asserting any defenses in the instant case. Canal's sole enumeration of error challenges the order granting summary judgment. Held:

An insurer's duty to defend turns on the language of the insurance contract and the allegations in the complaint asserted against the insured. Bates v. Guaranty Nat. Ins. Co., 223 Ga.App. 11, 14(2), 476 S.E.2d 797 (1996); Loftin v. United States Fire Ins. Co., 106 Ga.App. 287, 302, 127 S.E.2d 53 (1962) (duty to defend does not extend to suits outside coverage). Because the policy at issue is not a part of the record below, the trial court could not consider its terms, conditions, and coverage. Inasmuch as Chastain sought coverage under that policy, she bore the burden of including it in the record. OCGA § 24-4-1. In the absence of evidentiary support for its conclusion that Canal had a duty to defend McLaughlin, the trial court lacked a basis for granting summary judgment. Gentile v. Bower, 222 Ga.App. 736, 477 S.E.2d 130 (1996) (summary judgments are reviewed de novo).

In disposing of this case, the trial court assumed without benefit of the contract that Canal's policy covered McLaughlin. Compare Georgia Farm, etc., Co. v. Martin, 209 Ga.App. 237, 240(4), 433 S.E.2d 315 (1993), rev'd on other grounds, 264 Ga. 347, 444 S.E.2d 739 (1994). In reaching this conclusion, the trial court apparently relied heavily on Canal's failure to file a declaratory judgment action after commencement of the action against McLaughlin. However, we question whether the issue was ripe for judicial determination at that point when the complaint failed to mention insurance, the policyholder was not a named party, no demand for payment under Gibbo's policy was made, and Canal had not denied the claim. Adams v. Atlanta Cas. Co., 225 Ga.App. 482, 485(1), 484 S.E.2d 302 (1997); see Atlanta Cas. Co. v. Fountain, 262 Ga. 16, 18, 413 S.E.2d 450 (1992).

Nor can the issue of whether Canal was barred from litigating its defenses to coverage be determined from the record before us. "The longstanding general rule is that neither waiver nor estoppel can be used to create liability not created by an insurance contract and not assumed by the insurer under the terms of the policy." Andrews v. Ga. Farm, etc., Ins. Co., 226 Ga.App. 316, 317, 487 S.E.2d 3 (1997); see Annot., "Doctrine of Estoppel or Waiver as Available to Bring Within Coverage of Insurance Policy Risks Not Covered by its Terms," 1 ALR3d 1139, 1144, § 2. Undoubtedly, the entry of the default judgment against McLaughlin would operate as an admission to the definite and certain allegations in the complaint, if Canal was McLaughlin's privy. American States Ins. Co. v. Walker, 223 Ga.App. 194, 195(1)(a), (b), 477 S.E.2d 360 (1996); see Public Nat. Ins. Co. v. Wheat, 100 Ga.App. 695, 701(5), 112 S.E.2d 194 (1959) (insurer that elects not to defend its insured is bound in subsequent action by all issues previously litigated). But in the absence of a copy of the policy, we cannot determine whether there was privity of contract between McLaughlin and Canal or whether McLaughlin fit within the parameters of coverage. Davis v. Nat. Indemnity Co., 135 Ga.App. 793, 795(2), 219 S.E.2d 32 (1975); see Walker, 223 Ga.App. at 195(1), 477 S.E.2d 360(b) (insurer has privity).

Further, in order to preclude relitigation, an "issue must also have been essential to the prior judgment." (Emphasis in original) Walker, 223 at 195(1)(c), 477 S.E.2d 360; see Jenkins & Miller, Ga. Auto. Ins. Law (1994 ed.), § 14-2(2) (insurer's denial of coverage and refusal to defend leaves policy defenses open for future litigation). From the face of the pleadings, it appears that the only allegations essential to the previous action were...