Downer v. Georgia Farm Bureau Mut. Ins. Co., 70810

• Decision Date: 30 October 1985
• Docket Number: No. 70810,70810
• Citation: 337 S.E.2d 422,176 Ga.App. 641
• Parties: DOWNER, et al. v. GEORGIA FARM BUREAU MUTUAL INSURANCE COMPANY.
• Court: Georgia Court of Appeals

Page 422

337 S.E.2d 422

176 Ga.App. 641

DOWNER, et al. v. GEORGIA FARM BUREAU MUTUAL INSURANCE COMPANY.

No. 70810.

Court of Appeals of Georgia.

Oct. 30, 1985.

Albert C. Palmour, Jr., Summerville, for appellants.

Dennis D. Watson, Lafayette, for appellee.

BEASLEY, Judge.

In August 1980 Mr. and Mrs. Downer filed a claim with Georgia Farm Bureau under Mr. Downer's auto insurance policy. Insurer paid the basic no-fault benefits due but refused to pay the optional no-fault benefits demanded by claimants for failure to comply with former OCGA § 33-34-5(b). On October 26, 1982 claimants filed suit to recover the optional benefits, statutory penalties, punitive damages and attorney fees. On September 8, 1983 a request for continuance, signed by both parties, was granted removing the case from the pre-trial calendar pending the Supreme Court's disposition of Tolison v. Ga. Farm Bureau Mut. Ins. Co., 253 Ga. 97, 317 S.E.2d 185 (1984). The parties stipulated that they acknowledged there was a question of law as to whether the insurance application complied with the statute's requirements. Claimants moved for summary judgment on September 9 on the issue of insurer's compliance with former OCGA § 33-34-5(b). The case was again continued at the request of both parties. On June 12, 1984 the Supreme Court issued its decision in Tolison concluding that the application form used by Ga. Farm Bureau, the identical form at issue in the case at bar, was defective under former OCGA § 33-34-5(b), and on June 29 the court denied the motion for rehearing. Two weeks later insurer paid the optional personal injury benefits then due and subsequently paid the balance.

Insurer moved for summary judgment on the issues of statutory penalties, punitive damages and attorney fees contending that it acted in good faith as a matter of law in refusing to pay the claim until after the Supreme Court decided Tolison, because prior to this time the law was unsettled as to whether insurer's application met the requirements of former OCGA § 33-34-5(b). However, once Tolison was issued, and the application's noncompliance became resolved in law, insurer promptly paid the benefits in question. Claimants countered that there was a genuine issue of material fact as to whether insurer acted in good faith in refusing to pay the optional benefits prior to July 13, 1984.

The trial court granted insurer's motion for summary judgment and claimants appeal.

Our courts have held that insurance companies which did not pay Jones' claims while Flewellen v. Atlanta Cas. Co., 250 Ga. 709, 300 S.E.2d 673 (1983), was pending "should not be penalized with bad faith penalties and damages," under the rationale that such penalties are not authorized where the insurance company has reasonable ground to contest the claims. Montgomery v. Ga. Farm Bureau Mut. Ins. Co., 253 Ga. 169, 171(3), 317 S.E.2d 837 (1984); Ga. Farm Bureau Mut. Ins. Co. v. Caldwell, 172 Ga.App. 560, 561, 323 S.E.2d 865 (1984); Cotton States Mut. Ins. Co. v. McFather, 251 Ga. 739, 309 S.E.2d 799 (1983). Accord. Fortson v. Cotton States Mut. Ins. Co., 168 Ga.App. 155, 158(1), 308 S.E.2d 382 (1983). Under this same rationale, insurer should not be penalized for awaiting the Tolison decision.

There remained a question of whether insurer's application complied with former OCGA § 33-34-5(b) even after Flewellen was issued. The Court of Appeals found insurer's application form defective in Tolison v. Ga. Farm Bureau Mut. Ins. Co., 168 Ga.App. 187, 308 S.E.2d 386 (1983), but the Supreme Court granted certiorari to review this decision. Both parties here agreed to continuances pending the Supreme Court's decision in Tolison. It was only upon the Supreme Court's deciding Tolison that it became clear insurer's application form did not meet statutory requirements. The form's compliance was then being tested at the highest appellate level; thus, the insurance company could reasonably have believed that the form met the statutory requirements.

Claimants contend that here insurer is subject to bad faith penalties, as distinguished from Montgomery, supra, Ga. Farm Bureau Mut. Ins. Co., supra, and Cotton...