Capital Ford Truck Sales, Inc. v. U.S. Fire Ins. Co., Inc., 72757

• Decision Date: 02 September 1986
• Docket Number: No. 72757,72757
• Citation: 349 S.E.2d 201,180 Ga.App. 413
• Parties: CAPITAL FORD TRUCK SALES, INC. v. UNITED STATES FIRE INSURANCE COMPANY, INC.
• Court: Georgia Court of Appeals

Page 201

349 S.E.2d 201

180 Ga.App. 413

CAPITAL FORD TRUCK SALES, INC. v. UNITED STATES FIRE INSURANCE COMPANY, INC.

No. 72757.

Court of Appeals of Georgia.

Sept. 2, 1986.

Rehearing Denied Sept. 25, 1986.

J. Arthur Mozley, Eric T. Johnson, Atlanta, for appellant.

W. Wray Eckl, Georgia L. Schley, Atlanta, for appellee.

DEEN, Presiding Judge.

An employee of appellant Capital Ford Truck Sales, Inc. (Capital), collided with an automobile while he was driving a company-owned wrecker on company business. A passenger in the other vehicle brought an action for personal injuries against appellant and the driver of the car in which she was riding. Capital called upon its primary insurer, Aspen Indemnity Corp. (Aspen), to defend the action, and Aspen undertook to do so, hiring attorneys to handle the case. Aspen subsequently became insolvent and went into receivership, however, and the law firm it had retained withdrew from the case. Capital thereupon called upon its secondary insurer, appellee U.S. Fire Insurance Co. (U.S. Fire), to provide a defense. Appellee denied coverage on the grounds that (1) whatever obligation it might have toward Capital as an insured extended only to amounts exceeding the $1,000,000 limit of Aspen's policy, and that (2) the obligation was not activated at all unless and until the liability exceeded $1,000,000. Capital then undertook its own defense in the personal injury action.

By leave of court, defendant/appellant Capital filed a third-party complaint against U.S. Fire, alleging breach of contract, tortious and bad-faith refusal to defend, and tortious and bad-faith denial of coverage, and seeking reimbursement for all defense costs and the amount of any adverse judgment that might be rendered, plus attorney fees and damages for bad faith. U.S. Fire moved for summary judgment on the third-party complaint, and the trial court granted the motion. On appeal, Capital enumerates several errors pertaining to the trial court's alleged misreading of the language of the policy issued to Capital by appellee U.S. Fire Insurance Co., so as to award summary judgment to appellee and absolve it of any duty to defend in the fact situation of the instant case. Held:

1. This appeal is from an award of summary judgment on the issue of whether, as excess insurer, appellee U.S. Fire had a duty to defend plaintiff/appellant Capital in a personal injury action, when the primary insurer, Aspen, after initially undertaking the defense pursuant to its insurance contract with Capital, became insolvent and abandoned the defense. At the time of the collision, appellant maintained in full force and effect a liability insurance policy with Aspen, as primary insurer, in the amount of $1,000,000. Also in full force and effect at the time was a commercial comprehensive catastrophe liability policy issued by appellee, providing additional (or "excess": the parties to this appeal are sharply divided on this point) liability coverage up to $5,000,000 per occurrence. Both policies undisputedly applied to the accident which gave rise to the underlying action. Also undisputed is the fact that appellant gave both insurers timely notice of the accident and the claims, and complied with the duties of cooperation, etc., imposed by both policies.

With respect to this appeal, the rights and duties of the parties are set forth in, and governed by, the liability insurance policy issued to Capital by U.S. Fire. See Richmond v. Ga. Farm, etc., Ins. Co., 140 Ga.App. 215, 221, 231 S.E.2d 245 (1976). The policy consists (in addition to declarations, schedules, and endorsements) of three sections: "Insuring Agreements," "Exclusions," and "Conditions." Pertinent portions of these sections are as follows:

"INSURING AGREEMENTS.

"I. Coverage. The Company [U.S. Fire] agrees to pay on behalf of the insured [Capital] the ultimate net loss in excess of the retained limit hereinafter stated [elsewhere stated as $1,000,000], which the insured may sustain by reason of the liability imposed upon the insured by law, arising out of an occurrence ..., for: (a) Personal Injury Liability, (b) Property Damage Liability, or (c) Advertising Liability ...

"II. Defense Settlement. With respect to any occurrence not covered, as warranted, by the underlying policies listed in Schedule A hereof [the sole policy listed is that with Aspen] or not covered by any other underlying insurance collectible by the insured, but covered by the terms and conditions of this policy except for the amount of retained limit specified in Item 4(c) of the declarations [zero], the company shall: (a) defend any suit against the insured alleging such injury or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent; ... (c) Pay all expenses incurred by the company, all costs taxed against the insured in any such suit and all interest accruing after entry of judgment until the company has paid or tendered or deposited in court such part of such judgment as does not exceed the limit of the company's liability thereon; (d) reimburse the insured for all reasonable expenses, other than loss of earnings, incurred at the company's request; (e) reimburse the insured for actual loss of earnings ...; and the amounts so incurred, except settlements of claims and suits are payable by the company in addition to the applicable limit of liability of this policy ...;

"III. Definitions ... 7. 'Occurrence.' With respect to Coverage 1 (a) and 1(b) 'occurrence' means either an accident or happening or event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally causes injury to persons ... during the policy period ...

"V. Retained Limit--Limit of Liability. With respect to Coverage 1(a), 1(b) or 1(c), or any combination thereof, the company's liability shall be only for the ultimate net loss in excess of the insured's retained limit defined as the greater of: (a) the total of the applicable limits of the underlying policies listed in Schedule A hereof [the Aspen policy], and the applicable limits of any other insurance collectible by the insured; or (b) an amount as stated in Item 4(C) of the declarations [zero] as the result of any one occurrence not covered by the said policies or [sic ] insurance; and then up to an amount not exceeding the amount as stated in Item 4(A) [$5,000,000] of the declarations as the result of any one occurrence. ... In the event of the reduction or exhaustion of the aggregate limits of liability of the underlying policies listed in Schedule A by reason of losses paid thereunder, this policy, subject to the above limitations, (1) in the event of reduction, shall pay the excess of the reduced underlying limits; or (2) in the event of exhaustion, shall continue in force as underlying insurance.

"EXCLUSIONS. [None applicable to the case at bar].

"CONDITIONS ... G. Loss payable. Liability of the company with respect to any one occurrence shall not attach unless and until the insured, the company in behalf of the insured, or the insured's underlying insurer, has paid the amount of retained limit ...

"H. Bankruptcy or insolvency. Bankruptcy or insolvency of the insured shall not relieve the company of any of its obligations hereunder.

"I. Other insurance. If other collectible insurance including other insurance with this company is available to the insured covering a loss also covered hereunder ... the insurance hereunder shall be in excess of and not contribute with, such other insurance.

"J. Underlying insurance. If underlying insurance is exhausted by any occurrence [see "Definitions," supra], the company shall be obligated to assume charge of the settlement or defense of any claim or proceeding against the insured resulting from the same occurrence, but only where [as in the instant case] this policy applies immediately in excess of such underlying insurance, without the intervention of excess insurance of another carrier.

"K. Subrogation. The company shall be subrogated to the extent of any payment hereunder to all the insured's rights of recovery therefor. ...

"O. Maintenance of underlying insurance. It is warranted by the insured that the underlying policies listed in Schedule A [i.e., the Aspen policy] ... shall be maintained in force during the currency of this policy, except for any reduction of the aggregate limits contained therein solely by payment of claims in respect of occurrences happening during this policy period. In the event of failure by the insured to so maintain such policies in force or to meet all conditions and warranties subsequent to loss under such policies, the insurance afforded by this policy shall apply in the same manner it would have applied had such policies been so maintained in force. Notice of exhaustion of underlying insurance shall be given the company within 30 days of such exhaustion."

Georgia law, like that of a number of other jurisdictions, holds that an insurer's duty to pay and his duty to defend are separate and independent obligations. Richmond v. Ga. Farm, etc., Ins. Co., supra; Home Indem. Co. v. Godley, 122 Ga.App. 356, 177 S.E.2d 105 (1970); Loftin v. U.S. Fire Ins. Co., 106 Ga.App. 287, 127 S.E.2d 53 (1962); National Surety Corp. v. Dunaway, 100 Ga.App. 842, 112 S.E.2d 331 (1959). See also Palmer v. Pacific Indem. Co., 74 Mich.App. 259, 254 N.W.2d 52 (1977); Ladner & Co. v. Southern Guar. Ins. Co., 347 So.2d 100 (Ala.1977); Sloan Constr. Co. v. Central Nat. Ins. Co., 269 S.C. 183, 236 S.E.2d 818 (1977).

Although most of the cases dealing with the respective duties of the primary and the excess insurer ¹ concern either disputes between insurers of two different vehicles or two different drivers (or between the driver's insurer and the insurer of the owner of the vehicle) or disputes as to whether a certain item of property is covered, the principle is the same: if the facts bring the occurrence wholly, partially, or...