KHD Deutz of America Corp. v. Utica Mut. Ins. Co., Inc.
| Decision Date | 13 February 1996 |
| Docket Number | No. A95A2177,A95A2177 |
| Citation | 220 Ga.App. 194,469 S.E.2d 336 |
| Parties | KHD DEUTZ OF AMERICA CORPORATION v. UTICA MUTUAL INSURANCE COMPANY, INC. |
| Court | Georgia Court of Appeals |
Jones, Day, Reavis & Pogue, Dorothy Y. Kirkley, Robert M. Martin, Atlanta, for appellant.
Harman, Owen, Saunders & Sweeney, Michael W. McElroy, Charles J. Cole, Atlanta, for appellee.
KHD Deutz of America Corporation appeals from the grant of summary judgment to Utica Mutual Insurance Company, Inc. in a declaratory judgment action. We must determine whether the trial court properly concluded as a matter of law that Utica's insured under an errors and omissions policy was not entitled to coverage under the policy for failing to procure insurance for KHD.
The record reveals that under the terms of a security agreement executed in connection with a multimillion dollar loan from KHD to Prime Commercial Corporation, Prime Commercial was required to purchase insurance coverage from Lloyd's and to add KHD as an additional insured. International Risk, an insurance agency, and its agent, John Duke, agreed to procure such insurance for Prime Commercial; at the loan closing, it provided a certificate showing such coverage. Coverage was later discovered by KHD never to have existed, and KHD brought suit against International Risk and others on December 4, 1992, alleging fraudulent failure to procure insurance coverage.
International Risk was covered for errors and omissions under a policy of insurance issued by Utica. As a condition precedent to coverage, the policy specifically required International Risk to notify the insurer in detail "as soon as practicable" of any claim or any "fact or circumstance which may give rise to a claim," to "[i]mmediately forward ... any demand, notice, summons, or other process or correspondence received by an insured," and to cooperate with the insurer in the conduct of suits. International Risk did not notify Utica that suit had been filed against it and did not forward the complaint and summons to Utica.
On January 22, 1993, Duke mailed Utica a letter informing it that an incident had occurred that "may give rise to a claim under the ... policy." The letter did not identify the incident or the party having a possible claim against International Risk. Despite the recitation in the letter that Duke would contact Utica's claims department to follow up this matter "in detail," neither Duke nor any other representative of International Risk initiated any further contact with Utica.
In late February 1993, in connection with its lawsuit against International Risk, KHD served Utica with a subpoena for the production of any policy issued to International Risk. After that, Utica's attorney conversed with Duke, who assured Utica's attorney that the litigation would be resolved "within days." Representatives of Utica thereafter made numerous unsuccessful efforts to contact Duke, both for the purpose of executing a non-waiver agreement and to assist in investigating the claim. With one exception, Duke did not return telephone calls or accept mail. He did agree to meet with Utica's investigator for the purpose of executing a non-waiver agreement, but he failed to keep that appointment and subsequently would not return that investigator's telephone calls. On August 13, 1993, Utica filed this declaratory judgment action to determine whether coverage existed.
On June 27, 1994, Duke telephoned Utica and informed it that a motion for summary judgment was pending in the lawsuit filed by KHD. He then met with Utica's attorney to execute the non-waiver agreement, and counsel was assigned by Utica to defend International Risk in that lawsuit the following day. 1
Utica's motion for summary judgment in the declaratory judgment action as to the claims of KHD was granted on the ground that no coverage existed. The trial court concluded no coverage existed both because International Risk failed to notify Utica of the claim and because it failed to cooperate, both of which were conditions precedent to coverage.
1. KHD contends the trial court erred in granting summary judgment to Utica because the issue of the reasonableness of International Risk's cooperation is "inherently factual." We do not agree.
"In the case of a condition precedent, the condition must be performed before the contract becomes absolute and obligatory upon the other party." (Citations and punctuation omitted.) Glass v. Stewart Title Guaranty Co., 181 Ga.App. 804, 805(1), 354 S.E.2d 187 (1987). Although the issue of whether or not conditions precedent to coverage requiring the insured to cooperate have been met is generally a question of fact for a jury, an unexcused significant delay in notifying an insurer may be unreasonable as a matter of law. Townsend v. Nat. Union Fire Ins. Co., 196 Ga.App. 789, 397 S.E.2d 61 (1990). " Caldwell v. State Farm Fire, etc., Ins. Co., 192 Ga.App. 419, 420-421, 385 S.E.2d 97 (1989). Moreover, an insurer need not show it was prejudiced by this failure to comply with the policy conditions. Id. at 421, 385 S.E.2d 97.
The policy in issue here plainly required International Risk to forward the suit papers "immediately" after being served, as a condition precedent to coverage. Over a month after being served with a lawsuit, International Risk informed Utica only that an unspecified incident (which was the subject of that lawsuit) "may give rise to a claim" about which it would provide further details shortly. International Risk then made itself unavailable to Utica for more than 17 months. We agree with the trial court that under these circumstances, a jury question was not presented; International Risk's failure to notify Utica promptly of the lawsuit and its failure to respond to Utica's efforts to communicate were simply unreasonable. This was an "unexcused significant delay" that was "unreasonable as a matter of law." Townsend, supra, 196 Ga.App. 789, 397 S.E.2d 61.
KHD acknowledges that "[a]n insurer is entitled to require its insured to abide by the policy terms, [cit.]" and to cooperate with the insurer. Diamonds & Denims v. First of Ga. Ins. Co., 203 Ga.App. 681, 683, 417 S.E.2d 440 (1992). KHD argues, however, that in this case, as in Diamonds & Denims, the insured did not completely fail to cooperate with its insurer, and consequently, a...
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