Fortson v. Cotton States Mut. Ins. Co.
| Decision Date | 07 September 1983 |
| Docket Number | Nos. 66134,66312,s. 66134 |
| Citation | 308 S.E.2d 382,168 Ga.App. 155 |
| Parties | FORTSON v. COTTON STATES MUTUAL INSURANCE COMPANY. COTTON STATES MUTUAL INSURANCE COMPANY v. FORTSON. |
| Court | Georgia Court of Appeals |
Robert E. Andrews, Gainesville, for appellant.
Clayton H. Farnham, Atlanta, for appellee.
Fortson filed a two-count complaint against Cotton States Mutual Insurance Company after it refused to pay a claim for fire damages to his home and contents. On the first count, the jury awarded Fortson $75,800, plus $18,950 for a bad faith penalty and $8,500 attorney fees. The second count alleged that the insurance company paid off the mortgages on the property and took assignments of the underlying security instruments to harass and intimidate him and to destroy his credit. The insurance company filed a motion for partial summary judgment which went to the allegations contained in the second count, and the court below granted the motion. Fortson appeals from this order in case number 66134, and in case number 66312 the insurance company appeals from that portion of the judgment awarding damages for bad faith and attorney fees.
The trial court did not err in granting Cotton State's motion for partial summary judgment because the assignment of the security interests was made pursuant to and in accordance with the clauses in the policy which set forth the mortgagee's interests and obligations. The relevant provision provides: "If the company shall claim that no liability existed as to the mortgagor or owner, it shall, to the extent of the payment of loss to the mortgagee, be subrogated to the mortgagee's rights of recovery, but without impairing mortgagee's right to sue, or it may pay off the mortgage debt and require an assignment thereof and of the mortgage."
The standard mortgagee clause creates a separate contractual relationship between the insurer and the mortgagee and the mortgagee cannot be affected by any act or default of the mortgagor. Pacific Ins. Co. v. R.L. Kimsey Cotton Co., 114 Ga.App. 411, 412, 151 S.E.2d 541 (1966). The mortgagee can enforce its right of recovery regardless of the defenses that the insurer may raise against the insured. Aetna Life & Cas. Co. v. Charles S. Martin Distributing Co., 120 Ga.App. 133, 169 S.E.2d 695 (1969). As indicated by the quoted portion of the policy, Cotton States is entitled to take an assignment of the mortgage when it denies liability under the policy, and when it pays off the mortgage the company's interest is protected to the extent of the value remaining in the property. The mortgagor is benefited by this arrangement because he is no longer required to make payments to the mortgagee while the dispute exists over whether or not the insurance company accepts liability for the loss that has been incurred. If the dispute is resolved in favor of the insured, the insurance company would have to cancel the debt because it would be liable for the claim. See American Ins. Co. v. Hattaway, 194 Ga. 15, 20 S.E.2d 406 (1942); Gainesville Nat. Bank v. Martin, 187 Ga. 559, 1 S.E.2d 636 (1939).
In the instant case, Cotton States had an obligation to pay the mortgagees when it took an assignment of his interests. By taking the assignment, it was simply doing what it was entitled to do under the contract of insurance.
1. Cotton States asserts error in the trial court's denial of its motion for a directed verdict as to the bad faith penalty and attorney fees. The evidence showed that at all stages of the litigation the insurance company asserted arson as a defense, that it reasonably relied on this defense, and, on appeal, contends there was no evidence to support the jury verdict.
The insurance company presented an expert arson witness, an engineer, who testified that his investigation revealed the presence of burn patterns in the area where the fire originated that were consistent with an intense liquid fuel burn pattern, and that the fire did not originate in the electrical circuit box as contended by the appellee. The appellee, in turn, presented two expert witnesses. The first testified that he was one of the first firefighters at the scene and that he did not see any evidence of arson. He thought that the fire started in the electrical circuit boxes and did not notice evidence of flammable liquids being poured on the floor in the area near the circuit boxes, although there were a number of flammable materials such as paint cans in the area. On cross-examination, he testified that a great deal of electrical arcing had taken place at the circuit box while they were fighting the fire, but it was impossible for him to determine whether the arcing had caused the fire or if it just occurred during the fire. He did not know if an engineer could determine the matter. He admitted that the burn patterns on the porch, as shown in the photographs supplied for his examination, could be caused by the run-down of flammable liquids. The second witness, the assistant fire chief and former Hall County arson investigator, testified that there was nothing at the scene to arouse suspicion of arson, but that he did not conduct a subsequent investigation and would not dispute the findings of a qualified person who did conduct a close, in-depth investigation of the fire.
The insurance company claimed that Fortson had a motive for arson and presented evidence of his precarious financial condition. Certain aspects of his financial condition were stipulated and showed that he had $257,244.99 in outstanding debts; $56,620 in pending suits on accounts; two unsatisfied judgments against him totaling $12,209.33; $1,537.88 in unpaid property taxes; and $2,444.25 in unpaid ad valorem taxes. The insurance company introduced the testimony of a certified public accountant who testified that he believed appellee's financial condition was "rather desperate," based upon information supplied by appellee's bookkeeper and obtained by subpoena. This material showed that Fortson failed to file income tax returns in 1979 and 1980, that there was no outside information as to income after 1980, that various business and personal bank accounts were closed or inactive in 1979 and 1980. Payments on two small lines of credit were past due, mortgage payments on his house were seven months in arrears, and interest payments on a second mortgage payment were three...
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