Jsl v. Acceptance Indem. Ins. Co., A04A2138.
| Decision Date | 13 April 2005 |
| Docket Number | No. A04A2138.,No. A05A0939.,A04A2138.,A05A0939. |
| Citation | 272 Ga. App. 789,612 S.E.2d 843 |
| Parties | J. SMITH LANIER & COMPANY v. ACCEPTANCE INDEMNITY INSURANCE COMPANY, et al. Southeastern Forge, Inc. v. J. Smith Lanier & Company et al. |
| Court | Georgia Court of Appeals |
Hall, Booth, Smith & Slover, Roger S. Sumrall, Russell E. Owens, Atlanta, for J. Smith Lanier & Co. et al.
Budd, Larner, Rosenbaum, Greenberg & Sade, Gilbert M. Malm, Jennifer C. Kane, Bridgette E. Eckerson, Marby & McClelland, Rex D. Smith, Atlanta, for Acceptance Indem. Ins. Co. et al. and Southeastern Forge, Inc.
These appeals arose from the same lower court case involving insurance coverage issues and are consolidated in this opinion. In Case No. A04A2138, J. Smith Lanier & Company (JSL) appeals the grant of summary judgment against it, as a third-party plaintiff, and in favor of Acceptance Indemnity Insurance Company, as a third-party defendant. Because JSL has failed to demonstrate reversible error, we affirm. In Case No. A05A0939, Southeastern Forge, Inc. (SEF) challenges the grant of partial summary judgment against it in favor of JSL. For reasons that follow, we affirm in part and reverse in part.
Summary judgment is proper when there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law.1 We review a trial court's grant of summary judgment de novo, viewing the evidence, and all reasonable conclusions and inferences drawn from it, in the light most favorable to the nonmovant.2
Viewed in this light, the record shows that JSL, an insurance broker, contracted with SEF, a manufacturer of agricultural blades for bush-hog cutting machines, to procure a policy of excess general liability insurance in the amount of $2 million. JSL prepared and sent SEF's insurance application to an intermediate insurance broker, Leverett Insurance Group, who obtained a premium quotation of $2,000 a year from Acceptance. Acceptance then issued a policy effective October 26, 1998 to October 26, 1999.
During the policy period, in September 1999, a blade manufactured by SEF broke free from a bush-hog cutting machine, amputating the leg of a roadside worker in Texas. In the ensuing lawsuit, the injured worker and his wife named SEF as one of the defendants and made upon SEF a time-limited settlement demand for $3 million, corresponding to the $1 million policy limits of the primary insurance carrier plus the $2 million policy limits of Acceptance. SEF made a request upon the insurance companies to pay the demand. The primary insurance carrier tendered the $1 million policy limits; Acceptance tendered nothing, and the offer to settle expired.
During its investigation of the claim, Acceptance discovered that in August 1998, SEF had been notified about an August 4, 1998 incident wherein an SEF-manufactured blade broke free from a bush-hog cutting machine being operated beside a Mississippi roadway. The flying blade nearly decapitated a passing driver, who lost control of her vehicle, causing injuries to her passengers. The driver died from her injuries. It is undisputed that the incident was not listed on the application submitted to Acceptance in October 1998.
In July 2000, Acceptance filed an action in federal district court against SEF seeking to have the policy and a subsequent renewal policy declared void ab initio on the grounds that the applications therefor omitted the Mississippi incident from the loss history. The federal court granted a Rule 68 offer of judgment that 3
Meanwhile, the Texas lawsuit was settled after mediation for about $5 million, $1 million paid by SEF's primary insurance carrier and approximately $4 million paid by the blade's retailer and distributor. In a June 2001 final judgment in that case, a Texas court ordered SEF to indemnify the retailer and distributor in the combined amount of $4,457,676.68 plus post-judgment interest.
Two days after entry of the federal court ruling, SEF filed suit against JSL under theories of negligent failure to procure insurance coverage, breach of contract to procure insurance, and breach of fiduciary duties. It sought to recover "an amount no less than $4.75 million plus interest and costs" that it claimed it had incurred in the Texas case. SEF alleged that it had notified JSL of the Mississippi incident; that JSL had sent notice of the occurrence only to SEF's primary insurance carrier; that in October 1998, JSL prepared an application to obtain $2 million excess liability insurance for SEF; that JSL omitted the Mississippi incident from the applications it forwarded to the intermediate broker to obtain quotations from carriers; that Acceptance issued a policy and a renewal for $2 million based on applications that omitted the Mississippi incident; and that JSL's omission precluded SEF from recovering under the Acceptance policy.
JSL admitted that it had told only the primary insurance carrier about the Mississippi incident, but claimed, among other things, that the omission from SEF's application was not material. JSL also filed a third-party action against Acceptance,4 alleging that Acceptance had wrongfully denied coverage based on a nonmaterial omission from the application and claiming potential entitlement to contribution or indemnification. Acceptance filed a motion for summary judgment against JSL, and JSL filed a "motion for partial summary judgment on damages" against SEF.
In granting Acceptance's motion for summary judgment, the trial court reasoned that Alternatively, the court reasoned, "[i]f the jury finds the omission to be material, the subject excess insurance policy was void as a matter of law pursuant to OCGA § 33-24-7; therefore, there could be no claim or recovery sustained against Acceptance whatsoever."
Seeking to limit SEF's recovery against it, JSL sought rulings that SEF's damages cannot exceed $1.975 million and that, as a matter of law, SEF cannot obtain from it more than the policy limits of $2 million. The court entered an order to that effect and ruled further that SEF's claims alleging breach of fiduciary duties failed as a matter of law.
JSL contends that granting summary judgment to Acceptance was error.
Pursuant to OCGA § 9-11-14(a), a defendant may sue as a third-party defendant one "who is or may be liable to [it] for all or part of the [original] plaintiff's claim against [it]."5 Further, one who undertakes to procure insurance for another and is guilty of fraud or negligence in that undertaking may be liable for loss or damages.6 And contribution and indemnification are valid theories upon which third-party liability may be based. 7
1. JSL contends that if the omission is determined not to be material, then Acceptance could be held liable to it for denying coverage based on a nonmaterial omission.
(a) At the outset, Acceptance argues that JSL is collaterally estopped from asserting that the omission is not material, citing the declaratory judgment by the federal court. We cannot agree.
"In Georgia, the collateral estoppel doctrine precludes the re-adjudication of an issue that has previously been litigated and adjudicated on the merits in another action between the same parties or their privies."8 JSL was not a party to the federal action. The record shows that JSL sought to intervene to object to Acceptance's acceptance of a Rule 68 offer of judgment made jointly by SEF, the retailer (and its insurer), and the distributor (and its insurer), specifically asserting that the offer of judgment improperly concluded that the policy was void ab initio due to the omission of the Mississippi incident. Although the federal court recognized that "JSL's only interest in this litigation arises from the possibility that [SEF] may seek indemnification from JSL in a later suit based upon JSL's alleged failure to secure the insurance coverage in question,"9 it dismissed JSL from that action, determining that:
in order for final judgment to be entered in this case pursuant to the offer of judgment all of the parties must agree to it or any objecting party must be dismissed from the case prior to the entry of the final judgment ... The Court further finds that allowing JSL to remain as a permissive intervenor will unduly delay and prejudice the adjudication of the rights of the original parties, and therefore, the Court finds that JSL should now be dismissed as a party to this lawsuit without prejudice.10
Furthermore, it cannot be said that any privy of JSL was a party to the federal action. A privy is 11 "[B]efore privity can be established, the interests of the party must fully represent the interests of the privy and be fully congruent with those interests."12 Plainly, no party remaining in the federal action had an identity of interest with JSL; instead, each such entity claimed that JSL had caused SEF's damages—a position incongruent with JSL's interest. Moreover, the federal court announced in its judgment: "any decision and judgment in this action would have no res judicata or collateral estoppel effect on JSL's future rights."13 Thus, in accordance with Georgia law and consistent with the express ruling of the ...
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