Kay-Lex Co. v. Essex Ins. Co.

• Decision Date: 10 July 2007
• Docket Number: No. A07A0792.,No. A07A0791.,A07A0791.,A07A0792.
• Citation: 649 S.E.2d 602,286 Ga. App. 484
• Parties: KAY-LEX COMPANY v. ESSEX INSURANCE COMPANY et al. Sysco Food Services of Atlanta, LLC v. Essex Insurance Company et al.
• Court: Georgia Court of Appeals

286 Ga. App. 484

649 S.E.2d 602

KAY-LEX COMPANY v. ESSEX INSURANCE COMPANY et al.

Sysco Food Services of Atlanta, LLC v. Essex Insurance Company et al.

No. A07A0791.

No. A07A0792.

Court of Appeals of Georgia.

July 10, 2007.

Kevin J. Bahr, Atlanta, for appellant (case no. A07A0791).

Shapiro, Fussell, Wedge & Martin, Robert B. Wedge, Atlanta, Jason A. Cooper, for appellant (case no. A07A0792).

Alston & Bird, Gerald L. Mize, Jr., Stephen L. Bracy, Carlock, Copeland, Semler & Stair, Frederick M. Valz III, Ambadas B. Joshi, Cochran, Cherry, Givens, Smith & Sistrunk, Hezekiah Sistrunk, Jr., Kenneth R. Lester, Atlanta, for appellees.

ADAMS, Judge.

Two insurance carriers filed a declaratory judgment action to determine their responsibilities in connection with a lawsuit arising out of a forklift accident. The trial court granted summary judgment in favor of the carriers. The two parties seeking coverage filed separate appeals. Those appeals have been consolidated for our review.

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. OCGA § 9-11-56(c). We review a grant or denial of summary judgment de novo and construe the evidence in the light most favorable to the nonmovant. Home Builders Assn. of Savannah v. Chatham County, 276 Ga. 243, 245(1), 577 S.E.2d 564 (2003).

Construed in favor of the nonmovants, the facts are as follows: To keep him out of trouble during the summer and teach him responsibility, Greg Jones hired his tall and strong teenage stepson, Antonio Benson, to work as a laborer for Kay-Lex Company unloading trucks at a food service warehouse. These laborers were known as "lumpers," and Kay-Lex has purchased workers' compensation insurance for them since 1998. It is undisputed that Kay-Lex employed Benson during the summers of 2001 and 2002. And Jones, who was the "sole supervisor for Kay-Lex's operations" at the warehouse and who had authority to hire and fire laborers, brought Benson — then age 15 — back to work at the beginning of the summer of 2003. But that year, Jones's boss, Johnny Bunton — the sole proprietor of Kay-Lex, changed his mind about Benson; and when he saw Benson on the premises two or three times that summer, he expressly forbade Jones from employing Benson because he was too young. Nevertheless, Benson continued to come to work, and Jones concealed from Kay-Lex the compensation he paid to Benson for his work, part of which Jones paid in cash and part of which he paid by personally cashing a check improperly made out to a former employee. Unlike the earlier years, Benson did not receive a tax form showing compensation for 2003. In all other aspects, however, Benson functioned as a lumper or part-time lumper. At the time of the accident, he was wearing an orange Kay-Lex safety vest and in his pocket he had a purchase order, which tells what truck he had unloaded.

On June 19, 2003, Benson came to work with his stepfather as he had three or four days a week for two to three weeks that summer. He unloaded one or two trucks for Kay-Lex that morning. Jones did not allow Benson to operate a forklift; Jones testified, "He wasn't allowed on a forklift, except for that day." That day, Jones gave in to Benson's repeated requests to drive one; he explained, "I don't know why I agreed because I would not — before when he asked me, I would say no. So I don't know why." When asked if he anticipated Benson using a forklift later that summer as a part of his duties, Jones replied,

I really didn't. I didn't think about it like that. I just thought about him getting the knowledge of the forklift. And then maybe if he worked later again next year, he would have that under his belt. But that wasn't the training that he needed to do that. He was just familiarizing himself with the forklift.

Jones agreed to allow another Kay-Lex employee to oversee his stepson operating a stand-up forklift. Only about an hour later, while practicing moving and stacking empty pallets, Benson lost control of the forklift and accidentally backed it out of a loading dock door. He was killed when the forklift fell on him pinning him to the ground. On September 10, 2004, Benson's mother, Frieda Benson-Jones, filed a wrongful death action against Johnny L. Bunton, Jr., d/b/a Kay-Lex Company, and Sysco Food Services of Atlanta, LLC. Sysco owns the food service warehouse where the accident occurred, as well as the forklift.

At the time of the accident, Kay-Lex was insured pursuant to a commercial general liability policy issued by Essex Insurance Company and pursuant to an "Excess Third Party Liability Policy" issued by United National Insurance Company. In response to the lawsuit, Kay-Lex demanded that Essex defend it in the suit, and Essex agreed to do so subject to a reservation of rights. Sysco sought coverage under the Kay-Lex policy pursuant to its contractual relationship with Kay-Lex, and Essex issued a reservation of rights in that regard as well. United National also issued a reservation of rights.

Generally speaking, a commercial general liability policy covers certain business losses and "situations in which a business is liable to a third party for personal injury or property damage." Black's Law Dictionary (8th ed.2004), "insurance policy." Following the general form, the Essex policy, which was in effect at all times relevant to this matter, excludes coverage for injuries to employees and relatives of employees of the insured that are connected to the employment or the employee's business duties:

This insurance does not apply to any claim, suit, cost or expense arising out of "bodily injury" to:

(1) any employee of [Kay-Lex] arising out of and in the course of employment or while performing duties related to the conduct of [Kay-Lex's] business; or

(2) the spouse, child, parent, brother, sister or relative of that employee as a consequence of (1).

The policy continues, "Wherever the word `employee' appears. . ., it shall also mean any member, associate, leased worker, temporary worker or any person or persons loaned to or volunteering services to [Kay-Lex]." In its brief, Kay-Lex well summarizes the general operation of clause no. 1 as follows:

The plain meaning of such language is that if you work for a company and you get hurt on the job, then this policy will not provide coverage, and you shall take the issue up with your employer's worker's compensation insurer.

United National's policy — an excess policy — includes a provision that states that its policy is subject to the same definitions, terms, conditions, exclusions and limitations as the Essex policy.

Essex and United National sought full summary judgment on three separate grounds: (1) Benson was an employee of Kay-Lex as defined in the policies and his injuries arose out of and in the course of his employment or while he was performing duties related to Kay-Lex's business; (2) Benson was a child or relative of Kay-Lex employee Greg Jones, and Benson's injuries arose out of and in the course of Jones's employment or while performing duties related to the conduct of Kay-Lex's business; and (3) Kay-Lex failed to provide notice of the incident "as soon as practicable" as required by the policy. The trial court granted summary judgment in favor of the insurers without indicating the basis for its decision.

"In Georgia, the insurer bears the burden of showing that a fact situation falls within an exclusionary clause of an insurance policy. And when construction of a policy is required, exclusions must be construed against the insurer and in favor of the insured." (Citations omitted.) Connell v. Guarantee Trust Life Ins. Co., 246 Ga.App. 467, 470(1), 541 S.E.2d 403 (2000). "Where an insurance contract provision is clear and unambiguous, its interpretation is a matter for the court. [Cits.]" Southern v. Sphere-Drake Ins. Co., 226 Ga.App. 450, 451, 486 S.E.2d 674 (1997). "[I]f the policy exclusions are unambiguous they must be given effect even if beneficial to the insurer and detrimental to the insured. We will not strain to extend coverage where none was contracted or intended." (Punctuation and footnote omitted.) Pilz v. Monticello Ins. Co., 267 Ga.App. 370, 372, 599 S.E.2d 220 (2004).

1. (a) Kay-Lex and Sysco contend the trial court erred because there is, at a minimum, an issue of fact as to whether the insurers received timely notice of an occurrence under the two policies. When Bunton was asked what notice he — on behalf of Kay-Lex — gave to Essex that Benson had been in an accident, Bunton replied, "I notified Ray Griffin, my insurance agent[,] the day of the accident." (Emphasis supplied.) All that he recalled saying was that there had been an accident, that Benson was injured, and that he was on the way to the hospital. He specifically denied personally notifying either Essex or United National of the accident. In the conversation with Griffin, Griffin said, not replying to anything in particular, that he "would take care of it. Don't worry about it. Go be with the family. . . ." The accident occurred on June 19, 2003. The first notice Essex and United National received of the accident was on June 18, 2004 in the form of a demand letter from Benson-Jones's attorney in the underlying suit, one year after the accident.

Absent some justification, failure to provide timely notice of an occurrence can defeat coverage under such a policy:

It is well established that a notice provision expressly made a condition precedent to coverage is valid and must be complied with, absent a showing of justification. Where an insured has not demonstrated justification for failure to give notice according to the terms of the policy, ... then the insurer is not obligated to provide either a defense or coverage.

(Citations and footnote omitted.) Federated Mut. Ins. Co. v. Ownbey Enterprises, 278 Ga.App. 1, 3, 627 S.E.2d 917 (2006).

The pertinent notice provision in...