Castellanos v. Travelers Home & Marine Ins. Co.

• Decision Date: 31 July 2014
• Docket Number: No. A14A0168.,A14A0168.
• Citation: 328 Ga.App. 674,760 S.E.2d 226
• Court: Georgia Court of Appeals
• Parties: CASTELLANOS v. TRAVELERS HOME & MARINE INSURANCE COMPANY.

328 Ga.App. 674
760 S.E.2d 226

CASTELLANOS
v.
TRAVELERS HOME & MARINE INSURANCE COMPANY.

No. A14A0168.

Court of Appeals of Georgia.

July 15, 2014.
Reconsideration Denied July 31, 2014.

[760 S.E.2d 227]

Larry Eugene Stewart, Lawrenceville, for Appellant.

David Marlow Atkinson, Marian Leigh Miller, Atlanta, for Appellee.

ELLINGTON, Presiding Judge.

Luis Castellanos filed this action in the State Court of Gwinnett County against Travelers Home & Marine Insurance Company to recover uninsured motorist (UM) insurance benefits, statutory penalties for Travelers' alleged bad faith in refusing to pay benefits, and attorney fees. The trial court granted Travelers' motion for summary judgment and denied Castellanos' motion, and he appeals both rulings. For the reasons explained below, we reverse in part, as to the court's grant of summary judgment in favor of Travelers.

Under OCGA § 9–11–56(c)

[s]ummary judgment is warranted if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. We review the grant or denial of a motion for summary judgment de novo, and we view the evidence, and the reasonable inferences drawn therefrom, in a light most favorable to the nonmovant.

(Punctuation and footnotes omitted.) Assaf v. Cincinnati Ins. Co., –––Ga.App. ––––, 759 S.E.2d 557 (2014).

So viewed, the record shows the following undisputed evidence. On September 22, 2009, Castellanos was injured in a wreck caused by the negligence of another driver, Jose Santiago. At the time of the wreck, Castellanos was a named insured under a UM policy Travelers issued to Lucrecia Arias, and he was driving a covered automobile.

Castellanos filed suit against Santiago for his injuries. Santiago's liability insurance carrier, United Automobile Insurance Company, provided a defense. Castellanos also served the summons and complaint on Travelers as his UM carrier, and Travelers' counsel participated in the suit through the end of the trial. After a trial which Santiago did

[760 S.E.2d 228]

not attend, a jury returned a verdict in favor of Castellanos, and, on February 1, 2012, the trial court entered judgment against Santiago for $3,731 in compensatory damages, $3,269 in punitive damages, and $135.50 in court costs.

Castellanos demanded payment of the judgment from United as Santiago's liability carrier. After some communication between counsel, United formally denied any coverage, based on Santiago's “lack of cooperation in the defense of [Castellanos'] lawsuit and [his] failure to attend the resulting trial.” Castellanos then demanded that Travelers pay the compensatory damages under Arias' UM policy. Travelers failed to pay UM benefits within 60 days of Castellanos' demand.

Castellanos filed the instant action against Travelers, alleging, inter alia, that Travelers' refusal to pay UM benefits was made in bad faith.¹ Castellanos filed a motion for summary judgment, and Travelers filed a cross-motion. Travelers argued that there was no evidence that United's denial of coverage on the basis that Santiago failed to cooperate in the defense was a legal denial of coverage and, therefore, that Santiago was not an uninsured motorist as defined in Arias' UM policy. After a hearing, the trial court granted Travelers' motion for summary judgment and denied Castellanos' motion, finding that there was “no evidence that United reasonably requested Santiago's cooperation, that Santiago willfully and intentionally failed to cooperate, that his failure to cooperate was prejudicial to United, and that [his] justification for failing to respond was insufficient.” Based on this determination, the trial court concluded that Castellanos “failed to present evidence that there was a ‘legal denial’ of coverage by United.”

1. Castellanos contends that the trial court's ruling improperly shifted to him the burden of coming forward with evidence that supported United's denial of coverage and that the trial court erred in granting Travelers' motion for summary judgment. We agree.²

One essential element of Castellanos' action against Travelers was that Santiago was the owner or operator of an uninsured motor vehicle, as defined by Arias' UM policy and Georgia law. OCGA § 33–7–11(j).³ Under the applicable contractual ⁴ and statutory ⁵ definitions of an uninsured motor vehicle, an insured motor vehicle, such as the one Santiago was driving, could effectively become uninsured, retroactively to the date of an accident, when a driver's liability carrier denies coverage, provided that such denial is, under applicable law, legally sustainable.⁶

[760 S.E.2d 229]

When, on the other hand, a driver's liability carrier denies coverage and such denial is not legally sustainable, the injured driver's UM coverage generally will not apply, because the tortfeasor is not, technically, uninsured.⁷

In this case, it is undisputed that Santiago's liability policy required him to cooperate with United's defense against Castellanos' tort action and authorized United to withdraw coverage if Santiago failed to cooperate in the defense. Such cooperation clauses are enforceable under Georgia law.⁸ Thus, “[u]nder applicable law, the tortfeasor's failure to cooperate can, under certain circumstances, form the legally sustainable basis for his liability carrier's denial of coverage.” (Citation and emphasis omitted.) Southern General Ins. Co. v. Thomas, 197 Ga.App. 196, 198, 397 S.E.2d 624 (1990). In addition, it is undisputed that Santiago failed to appear for trial in Castellanos' tort action and that, after judgment, United denied coverage on the basis that Santiago breached that contractual duty to cooperate in the defense, in part by failing to attend the trial.

Travelers contends that it was nonetheless justified in failing to pay UM benefits, and the trial court agreed, finding that Castellanos failed to come forward with evidence that United's denial of coverage was a legal denial. In casting upon Castellanos the burden of coming forward with evidence that United reasonably requested Santiago's cooperation, that Santiago willfully and unjustifiably failed to cooperate, and that his failure to cooperate was prejudicial to United, the trial court required Castellanos to discharge a burden that United would have borne as a defendant in a suit under OCGA § 33–4–6⁹ for bad faith penalties for denying coverage. See Vaughan v. ACCC Ins. Co., 314 Ga.App. 741, 742–743(2), 725 S.E.2d 855 (2012).¹⁰

[760 S.E.2d 230]

This was improper. Given the evidence that United denied coverage under Santiago's liability policy based on his alleged failure to cooperate with the defense, a legal basis that falls squarely within the terms of the policy and is authorized under Georgia law,¹¹ this is not a case where the court is asked to presume Santiago's status as an uninsured motorist.¹² See Southern General Ins. Co. v. Thomas, 197 Ga.App. at 197, 397 S.E.2d 624.¹³ Although evidence may exist that United's denial of benefits (on the basis that Santiago failed to cooperate with the defense) was not legally sustainable (for example, if United never requested his cooperation), once Castellanos met his threshold burden of showing that he was entitled to UM benefits, Travelers had the burden of presenting such evidence to justify its denial of coverage, as it would for any other affirmative defense.¹⁴ See

[760 S.E.2d 231]

Anthony v. Larios, 256 Ga.App. 248, 568 S.E.2d 135 (2002) (noting that, where the plaintiff filed suit against another driver, alleging that he was an uninsured motorist, the plaintiff's UM carrier answered in its own name, “raising the affirmative defense that [the tortfeasor] may not be uninsured”) (emphasis supplied).¹⁵ We conclude that the trial court improperly shifted to Castellanos the burden of coming forward with evidence to rebut Travelers' affirmative defense that Travelers failed to support. Because the undisputed evidence does not establish that Santiago's absence from the trial was involuntary or excused or that his failure to cooperate with United did not prejudice the defense, the trial court erred in finding that Travelers is entitled to judgment as a matter of law. ¹⁶ The trial court's order is reversed, in part, to the extent it entered summary judgment in Travelers' favor.

2. Castellanos contends that the trial court erred in denying his motion for summary judgment. Because the question of bad faith is for the jury, ¹⁷ however, this argument lacks merit.

Judgment affirmed in part and reversed in part.

PHIPPS, C.J., BARNES, P.J., and McFADDEN, J., concur.
ANDREWS, P.J., RAY and McMILLIAN, JJ., dissent.

McMILLIAN, Judge, dissenting.

I respectfully dissent to the majority's opinion in this case because I believe it ignores long-standing principles of Georgia law and the language of the insurance policy at issue to improperly shift the burden to Travelers to prove Castellanos's claim.

The primary issue raised on appeal is the legal question of whether the insured seeking UM coverage or the UM carrier bears the burden of proving that UM coverage applies in order to survive summary judgment. It is well settled, however, that Castellanos, as the insured, had “the ... burden to prove (1) the existence of a policy of liability insurance containing uninsured motorist protection, and (2) that [Santiago] was an uninsured motorist at the time of the [wreck]. The court could not presume that [Santiago] was an uninsured motorist.” (Citations and punctuation omitted.) Williams v. Safeway Ins. Co., 223 Ga.App. 93, 94, 476 S.E.2d 850 (1996).¹ See

[760 S.E.2d 232]

also Anthony v. Larios, 256 Ga.App. 248, 249, 568 S.E.2d 135 (2002); Hartford Accident & Indem. Co. v. Studebaker, 139 Ga.App. 386, 388(1), 228 S.E.2d 322 (1976). See also Frank E. Jenkins et al., Georgia Automobile Insurance Law § 37.22 (2013–2014 ed.).

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