Government Emp. Ins. Co. v. Gingold
| Decision Date | 10 March 1982 |
| Docket Number | No. 37980,37980 |
| Parties | GOVERNMENT EMPLOYEES INSURANCE COMPANY v. GINGOLD. |
| Court | Georgia Supreme Court |
Joseph H. Chambless, John Burke Harris, III, Macon, for Government Emp. Ins. Co.
Tom Pye, Atlanta, for Ira Gingold.
We granted GEICO's application for certiorari in order to review the Court of Appeals' holding in Gingold v. Government Employees Ins. Co., 150 Ga.App. 410, 283 S.E.2d 614 (1981), that genuine issues of material fact exist in respondent Gingold's excess liability action. The trial court had reached a contrary conclusion.
The record establishes that on April 15, 1974, the insured, James Stephen Johnston, was in an automobile accident with Kay Woody, who sustained substantial injuries. See Johnston v. Woody, 148 Ga.App. 152, 250 S.E.2d 873 (1978). Suit was filed three weeks later and attorneys were employed by GEICO to defend the action. The insured had only $10,000 of liability coverage, and by the autumn of 1974 settlement negotiations were underway. Although GEICO was willing to pay the policy limits in exchange for a release, Ms. Woody's attorney advised against her executing one, since Ford Motor Company was going to be sued and the attorney believed a release would preclude such an action. The attorney offered a covenant not to sue in exchange for the policy limits. Attorneys for GEICO and Johnson, however, rejected this offer because a covenant not to sue would not protect the insured if he were held liable for contribution or indemnity in the event a recovery was had against Ford. The attorneys indicated that they would be willing to accept a covenant not to sue containing an indemnity clause. This offer was rejected by Ms. Woody's attorney, ostensibly because the proposed indemnity clause included an attorney fees provision. No further proposals were made by either side. GEICO was informed by Ms. Woody's attorney that, if Ford were added as a party in the suit against Johnston (rather than being sued in a separate action), all possibility of settlement was over because jurisdiction over Ford would thereby be lost. On February 19, 1975, Ford was added as a defendant in the suit against Johnston.
Throughout this period, Johnston's attorneys repeatedly requested that Johnston get in touch with them to discuss the pending action, but he failed to do so. As he states in his affidavit: "After the lawsuit was served upon me, I received numerous letters and telephone call messages from the law firm of Dunaway, Haas & Broome requesting that I contact them about this lawsuit, but I did not see fit to respond to the letters or return the telephone calls." In December, 1974, as serious negotiations were just underway, Johnston went AWOL from the Marine Corps. Thereafter, he spoke with his attorney "for the first time on or about June 9, 1975."
Ultimately, Ford was found not liable and Johnston was found liable in the amount of $121,000. Thus, in hindsight, acceptance of the covenant not to sue that did not include an indemnity clause would have served the interests of the insured just as well as a covenant containing such a clause. It is this fact which resulted in the present lawsuit.
Respondent, however, is not the insured but his trustee in bankruptcy. (The bankrupt estate is shown as having assets of $100 and liabilities equal to the amount of the judgment obtained against the insured, $121,000.) The trustee is represented in this action by the law firm of the attorney who previously had represented Ms. Woody in her damage suit. The ultimate objective, it is clear, is to obtain assets for the bankrupt estate by which the judgment against Johnston may be satisfied. For reasons which follow, this effort cannot succeed, and the judgment of the Court of Appeals must be reversed.
1. "Occasionally, the facts [in an excess liability case] have presented an issue as to whether or not the insurer actually had an opportunity to make an effective compromise." 44 Am.Jur.2d Insurance, § 153, p. 410; see Young v. American Casualty Co., 416 F.2d 906 (2d Cir. 1969) cert. dismissed, 396 U.S. 997, 90 S.Ct. 580, 24 L.Ed.2d 490 (1970); Hadenfeldt v. State Farm Mutual Auto. Ins. Co., 195 Neb. 578, 239 N.W.2d 499 (1976). This is such a case.
As indicated above, the evidence shows that settlement negotiations began in earnest in December, 1974. By mid-February, 1975, the possibility of settlement had ended due to actions taken by Ms. Woody's attorney. It was understood by all parties concerned that any settlement would require the consent of the insured.
We thus turn to a determinative question: was the insured capable of being located? If he was not, GEICO, of course, cannot be liable for any failure to reach a settlement. Respondent argues that there is conflicting evidence on this question because of the following statements contained in a letter sent from attorneys for GEICO and Johnston to Ms. Woody's attorney: "... I am returning the original covenant not to sue ... and a [counterproposal] ... I believe the covenant [containing an indemnity clause] is in keeping with the...
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