Lee v. Mercury Ins. Co. of Ga.

Citation343 Ga.App. 729,808 S.E.2d 116
Decision Date03 November 2017
Docket NumberA17A0624
CourtUnited States Court of Appeals (Georgia)

Toby Kei Leana Morgan, Atlanta, for Appellant.

Frank Edward Jenkins III, Erik John Pirozzi, Cartersville, for Appellee.

Self, Judge.

Ronald Lee appeals from the trial court's order granting Mercury Insurance Company of Georgia's ("Mercury") motion for summary judgment and denying his cross-motion for summary judgment on the issue of insurance coverage following a house fire. Lee contends that the trial court erred by concluding that the policy did not provide coverage as a matter of law, asserting that the trial court should have instead concluded that he was entitled to summary judgment in his favor for breach of the insurance contract and the right to recover bad faith damages under OCGA § 33-4-6.1 He also asserts that genuine issues of material fact exist regarding Mercury's claim that it is entitled to void the policy based upon alleged misrepresentations in his application for insurance. Finally, he argues that the trial court erred in denying his motion to strike the affidavit of Mercury's director of underwriting, as well as denying his motion to compel production of Mercury's claim file.

For the reasons explained below, we reverse the trial court's grant of summary judgment in favor of Mercury with regard to all issues other than bad faith, grant Lee's motion for summary judgment on the issue of coverage under the policy, and affirm the trial court's denial of Lee's motion to strike and motion to compel. Based upon our conclusion that genuine issues of material fact exist with regard to whether Mercury is entitled to void the policy, Lee cannot yet obtain a recovery under the policy.

"On appeal, we review the grant or denial of summary judgment de novo, construing the evidence and all inferences in a light most favorable to the nonmoving party." (Citation and punctuation omitted.) Seki v. Groupon, Inc., 333 Ga. App. 319, 775 S.E.2d 776 (2015). So viewed, the record shows that Lee lived with his wife in South Carolina, but traveled frequently as a senior project manager for a company constructing public housing developments. He typically traveled during the week and was home in South Carolina on the weekends. He explained that most projects would take 10-12 months to complete.

In 2007, Lee frequently traveled between two projects: one in Winder, Georgia, and the other in Crestview, Florida. During this time, Lee's childhood friend, Jim Constable, faced significant financial difficulties because he was caring for his wife, who suffered from a long-term terminal illness, and unable to work. To help his friend, Lee agreed to purchase Constable's home at 7066 Dalmatia Drive in Riverdale, Georgia, pay the mortgage payments, and allow Constable's family to continue living there for free. This arrangement "gave [Lee] a place to stop, plus it helps [Constable] and his family, and [Lee didn't] have to rent motel rooms." Lee explained that he "was traveling constantly, flying through Atlanta. And I'd just stop in there ... and then go catch another flight the next day."

In December 2007, Lee purchased the Riverdale house from Constable, and Constable's family continued living on the property. It is undisputed that Constable paid no rent. As part of their arrangement, Constable gave Lee all of the furniture in the bedroom, living room, kitchen, and dining room. Lee wanted the option to rent the house in the event Constable's money problems deteriorated to the point where he had to move out and live with other family members. When Lee first took out the loan in 2007, he stayed at the Riverdale house so many nights each week, his mortgage company considered it his primary residence. Later, he stayed there "maybe one night a week, every other week, or something."

In 2010, Lee made a claim with a different insurance carrier for hail damage to the Riverdale house. After telling Constable that this carrier planned to increase his premiums as a result of the claim, Constable stated that his friend, Lawrence Arnold, was an insurance agent who could obtain insurance for the house. In his deposition, Lee explained that he talked with Arnold over the telephone to provide him with the information required to complete the application. Because he was not there to sign the application, Lee asked if Constable could sign his name, and Arnold replied, "yes, that's fine." According to Lee, Arnold knew that he would not be living there full-time; Lee told him that he would "be stopping in ... because I travel." Lee also testified that Arnold never asked him if he would be living there, because Arnold "knew [Constable] was living there" based upon Arnold's friendship with Constable.

All of the answers in Lee's application for insurance were typed, consistent with Lee's testimony that he did not personally complete the application. In one section of the application, the directions state, "Check all that apply," and an "X" is typed in the boxes beside "Primary" and "Occupied by Named Insured"; the boxes beside "Secondary" and "Additional Residence for Insured" are left blank. This section does not include a box identifying the property as rental property. Another section of the policy directs that all residents of the household be listed, including unrelated individuals. Lee's name, followed by the abbreviation "IN," along with his friend, Jim Constable, and Constable's two children, followed by the abbreviation "OR," meaning "other" are typed into a column titled "Rel. to Ins."

On May 5, 2012, the property was destroyed by an accidental fire in which Constable died and one of his daughters suffered serious injuries. After receiving a letter denying his claim for coverage under the policy in December 2012, Lee filed a complaint against Mercury and Arnold alleging various theories of recovery. He later dismissed his claim against Arnold with prejudice.

During discovery, Lee filed a motion to compel Mercury to produce documents in its claim file. Mercury responded that it had already produced many of the requested documents, as well as a privilege log detailing its attorney-client privilege and work product objections to Lee's remaining requests. The trial court held a hearing, inspected the documents in camera, and then granted Lee's motion in part, but denied it as to documents it determined were protected by attorney-client privilege and the work product doctrine.

Following the completion of discovery, Mercury filed a motion for summary judgment in its favor based upon (1) the misrepresentation in the policy application that the Riverdale house was Lee's primary residence and (2) Lee's failure to reside at the Riverdale house as required by the terms of the policy. Lee filed a response, a cross motion for summary judgment, and a motion to strike the affidavit of Mercury's director of underwriting, which Mercury filed in support of its motion for summary judgment. Lee asserted that he was entitled to summary judgment in his favor on the issue of coverage under the terms of the policy and Mercury's bad faith. Following a hearing, the trial court granted Mercury's motion for summary judgment and denied both Lee's cross-motion for summary judgment and his motion to strike.

1. Coverage Under the Policy. Lee asserts that the trial court should have granted summary judgment in his favor "as there is sufficient evidence in the record to support a finding of breach of contract."2 In his view, the policy provisions expressly cover the loss of the Riverdale house due to fire, and this home qualified for coverage under the policy terms. We agree.

Under Georgia law,

[i]t is well settled that insurance policies, even when ambiguous, are to be construed by the court, and no jury question is presented unless an ambiguity remains after application of the applicable rules of contract construction. Because insurance policies are contracts of adhesion, drawn by the legal draftsman of the insurer, they are to be construed as reasonably understood by an insured.

(Citation and punctuation omitted.) First Financial Ins. Co. v. American Sandblasting Co., 223 Ga. App. 232 (1), 477 S.E.2d 390 (1996). "The policy should be read as a layman would read it and not as it might be analyzed by an insurance expert or an attorney." Cincinnati Ins. Co. v. Davis, 153 Ga. App. 291, 295, 265 S.E.2d 102 (1980). "The insurer, in preparing the language of its policy, has the burden of using language that is clear and precise." Ga. Farm Bureau Mut. Ins. Co. v. Meyers, 249 Ga. App. 322, 324, 548 S.E.2d 67 (2001). "The test is not what the insurer intended its words to mean, but what a reasonable person in the position of the insured would understand them to mean." (Citation and punctuation omitted.) United States Fire Ins. Co. v. Capital Ford Truck Sales, 257 Ga. 77, 78 (1), 355 S.E.2d 428 (1987).

"[I]f a provision of an insurance contract is susceptible of two or more constructions, even when the multiple constructions are all logical and reasonable, it is ambiguous, and the statutory rules of contract construction will be applied." (Citation and punctuation omitted.) American Strategic Ins. Corp. v. Helm, 327 Ga. App. 482, 485, 759 S.E.2d 563 (2014). When a provision of an insurance contract is ambiguous, a well-known rule of construction is that it will be "construed against the party preparing it and in favor of coverage." (Citation and punctuation omitted.) Fireman's Fund Ins. Co. v. Univ. of Ga. Athletic Assn., 288 Ga. App. 355, 357, 654 S.E.2d 207 (2007). "Ambiguity in an insurance policy may [also] be defined as duplicity, indistinctness, an uncertainty of meaning or expression."

(Citation and punctuation omitted.) Alley v. Great American Ins. Co., 160 Ga. App. 597, 599, 287 S.E.2d 613 (1981).

The "COVERAGE A–DWELLING"3 portion of Lee's policy with Mercury states:

We cover:

the dwelling on the residence premises shown in the Declarations used principally

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