Heflin v. State Farm Mut. Auto. Ins. Co., Civ. A. No. C81-2168.
| Decision Date | 21 June 1982 |
| Docket Number | Civ. A. No. C81-2168. |
| Citation | 547 F. Supp. 247 |
| Parties | Jessie W. HEFLIN v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY. |
| Court | U.S. District Court — Northern District of Georgia |
David E. Allman, Allman, Lanner & Sikes, Atlanta, Ga., for plaintiff.
Mark Dickerson, Asst. Atty. Gen., Atlanta, Ga., for plaintiff/intervenor.
Thomas Harper, Eugene G. Partain, Robert M. Travis, Powell, Goldstein, Frazer & Murphy, Richard G. Greer, Greer, Klosik & Daugherty, Atlanta, Ga., for defendant.
Plaintiff Heflin brought this action in the State Court of DeKalb County, seeking insurance benefits beyond those already paid by Defendant State Farm Mutual Automobile Insurance Co. ("State Farm") in connection with a 1977 auto accident. State Farm counterclaimed for declaratory relief and removed the action to this Court. The case is before the Court on several motions, including State Farm's Motion for Summary Judgment. The Court heard oral argument on this motion on May 26, 1982.
The Court finds the following material facts to be undisputed: sometime prior to March 1, 1975, Plaintiff and her husband Levi Heflin purchased State Farm automobile insurance policy no. 6220 443-F15-11A. This policy named both Heflins as insureds.
Early in 1974, the Georgia legislature enacted the Motor Vehicle Accident Reparations Act, Ga. Code Ann. § 56-3401b et seq. ("the Act"). The Act, which was to become effective on March 1, 1975, required insurers to provide certain minimum no-fault coverage to all insureds, and to offer them higher optional levels of coverage as well.
After the enactment of the Act but before its effective date, State Farm conducted two mass mailings to its existing policyholders. Each mailing consisted of two documents. See Exhibits A & B to Affidavit of Homer Sandifer dated December 14, 1981 ("Sandifer Affidavit"). The first document was a brochure that explained the Act, and described the procedure whereby the policyholders could obtain the optional coverages; it instructed them to mark, sign and return the second document, a card entitled "Statement of Coverages as of March 1, 1975" (the "Coverages Card"). The brochure asked that policyholders who were satisfied with their present coverage merely sign and return the Coverages Card. Failure to return the Coverages Card, according to the brochure, would result in automatic purchase of the maximum optional coverage level of $50,000 unless the Act was amended before March 1, 1975. The exact language of the brochure is set out below.
State Farm addressed the November mailing to all policyholders in Georgia at the addresses those policyholders had provided to State Farm. Sandifer Affidavit at ¶ 5. The identical December mailing went to those Georgia policyholders who did not respond to the November mailing. Id. at ¶ 7. State Farm then compiled a list of those policyholders who failed to respond to either mailing, and instructed their agents to contact these policyholders to obtain their signatures on Coverages Cards. Id. at ¶ 8. Included on this list of unresponsive policyholders were "Heflin, Levi Hillard & Plaintiff Jessie Worthey," as holders of policy no. "6220 443." Exhibit B to Defendant's Second Reply Brief in Support of Motion for Summary Judgment. In mid-January, 1975, State Farm received a Coverages Card signed by Levi Heflin, dated January 15, 1975, electing optional no-fault coverage of $10,000. Exhibit A to Answer and Counterclaim. Levi Heflin has testified by affidavit that he did not sign the Coverages Card, nor did he authorize anyone to sign it for him. Affidavit of Levi H. Heflin dated January 7, 1982 at ¶ 4. The Court finds the authenticity of the signature to be a disputed issue of fact; the primary question discussed below is whether this issue of fact is material.
In reliance on the Coverages Card, State Farm added $10,000 no-fault coverage to the Heflins' policy effective March 1, 1975. The Heflins renewed their policy twice a year thereafter, purchasing $10,000 no-fault coverage in each case.
On August 5, 1977, Plaintiff suffered injuries in an automobile accident. Her expenses covered by no-fault exceeded the $10,000 no-fault coverage provided in the Heflins' policy. State Farm paid her $10,000.
Four years later, the Georgia courts decided Jones v. State Farm Mutual Automobile Co., 156 Ga.App. 230, 274 S.E.2d 623 (1980), cert. dismissed as improvidently granted, 248 Ga. 46, 280 S.E.2d 837 (1981). By letter from Plaintiff's attorney to State Farm dated September 16, 1981, Plaintiff attempted to accept the "statutory continuing offer of optional benefits discussed in Jones v. State Farm," and requested the maximum optional no-fault coverage. Exhibit C to Answer and Counterclaim. When State Farm refused to provide such retroactive coverage and to pay additional benefits, Plaintiff brought this lawsuit.
Plaintiff is one of many State Farm policyholders seeking retroactive insurance coverage in the wake of Jones. In another Jones-theory case, the Court has already decided that the Georgia courts would apply Jones prospectively only. State Farm Fire and Casualty Co. v. Sweat, F.Supp. No. C81-2056 (N.D. Ga. March 11, 1982). Plaintiff argues that her case differs from Sweat, however, because her policy predates the effective date of the Act. In Jones, the Georgia Court of Appeals interpreted the Act to provide a "continuing offer" penalty for insurer's violations of Ga. Code Ann. § 56-3404b(b), which requires certain separate signatures on applications for new policies after March 1, 1975. In Sweat, this Court held that the Georgia courts would apply this "continuing offer" penalty for violations of section 56-3404b(b) prospectively only. Plaintiff suggests, however, that despite her demand letter to State Farm she is not traveling under the Jones theory; because her policy predates the Act, she does not seek to invoke the penalty for a violation of section 56-3404b(b), but rather seeks coverage to which she is entitled under section 56-3404b(a) and the 1974 Georgia insurance regulations for State Farm's failure to obtain a written rejection of the optional coverages from her as the holder of a policy existing on March 1, 1975.
To fully understand this argument, it is necessary to consider the sequence in which the Georgia legislature and Insurance Commissioner turned various pieces of no-fault theory into law in 1974 and 1975. As enacted early in 1974, section 56-3404b of the Act, which created the optional coverage sought by Plaintiff here, consisted of only two subsections. Section 56-3404b(a) required that "each insurer shall make available on an optional basis the following coverage: (1) an aggregate limit of benefits payable without regard to fault of $50,000 per person which may be rejected, or reduced ... by written consent of the policyholder." Section 56-3404b(b) provided the mechanism through which the insurer had to offer these optional coverages to applicants for new insurance policies; this mechanism was the "separate spaces" requirement made famous in Jones. The legislature neglected, however, to designate any procedure whereby the insurance companies would offer the optional coverages to holders of existing policies.
The Insurance Commissioner attempted to fill this gap by issuing transitional regulations on October 1, 1974. The regulations, which are Exhibit A to Plaintiff's Memorandum filed March 15, 1982, provided as follows:
Prior to January 1, 1975, each insurer shall send their existing policyholders affected by the Act and this Regulation a mandatory offer of the optional additional coverages required to be offered by the Act and this Regulation, and an explanatory letter the same as or substantially similar to the letter contained in Exhibit B.
Ga. Code of Rules and Regulations § 120-2-28-.07(1)(a). The regulations did not further specify the manner in which the insurer had to make the offer to its existing insureds, or the effect of a policyholder's failure to respond. However, the model "letter contained in Exhibit B" included the following passage:
IMPORTANT NOTICE: IF YOU DO NOT DESIRE TO PURCHASE THESE ADDITIONAL OPTIONAL COVERAGES REQUIRED TO BE OFFERED TO YOU BY LAW, YOU MUST REJECT THESE COVERAGES IN WRITING IN THE APPROPRIATE SPACES INDICATED ON THE ENCLOSED "OFFER TO PURCHASE ADDITIONAL COVERAGE" OR THESE COVERAGES WILL BE ADDED TO YOUR POLICY AS OF MARCH 1, 1975 AND YOU WILL BE BILLED FOR AN ADDITIONAL PREMIUM.
Ga. Code Ann. § 56-3404b(a) and (b), plus this insurance regulation, comprised the entire relevant law regarding optional no-fault coverages in late 1974. It was in attempting to comply with these statutes and regulations that State Farm twice mailed Plaintiff brochures containing language "substantially similar" to the Insurance Commissioner's model letter; the State Farm brochure provided:
Plaintiff argues that the alleged failure of Plaintiff or her husband to return the Coverages Card resulted in the provision by operation of law of the maximum optional coverage of $50,000. The Act itself, Plaintiff notes, required that the optional benefits be "made available" and could be rejected or reduced only by "written consent of the policyholder." The insurance regulation in substance required a notice to the holders of existing policies that the maximum optional coverage would be added to their policies if they did nothing. State Farm itself informed its policyholders that they would receive the maximum optional coverages, "unless the present law is amended,"...
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