Lloyd's Syndicate No. 5820 v. AGCO Corp.
| Decision Date | 30 November 2012 |
| Docket Number | A12A1126,Nos. A12A1125,A12A1281.,s. A12A1125 |
| Citation | 319 Ga.App. 260,734 S.E.2d 899 |
| Parties | LLOYD'S SYNDICATE NO. 5820 d/b/a Cassidy Davis v. AGCO CORPORATION. AGCO Corporation v. Lloyd's Syndicate No. 5820 d/b/a Cassidy Davis. Glynn General Purchasing Group, Inc., et al. v. AGCO Corporation. |
| Court | Georgia Court of Appeals |
McMickle, Kirey & Branch, Scott Wayne McMickle, Atlanta, for Lloyd's Syndicate No. 5820.
Freeman, Mathis & Gary, T. Bart Gary, Atlanta, Brown, Readdick, Bumgartner, Carter, Strickland & Watkins, Bradley J. Watkins, Brunswick, McKenna, Long & Aldridge, Seth F. Kirby, Atlanta, for AGCO Corporation.
Hawkins, Parnell, Thackston & Young, Kim Monroe Jackson, Atlanta, Frank C. Bedinger III, Juhee Jun, for Glynn General Purchasing Group, Inc.
AGCO Corporation manufactured and sold agricultural equipment, offering extended protection plans to its customers. Warranty Specialists, Inc. d/b/a Glynn General Corporation sold the extended protection plans to AGCO and administered the plans. Glynn General Purchasing Group, Inc. ("GGPG") obtained a master policy of liability insurance for AGCO from Lloyd's Syndicate No. 5820 d/b/a Cassidy Davis to provide coverage to AGCO for its liability to AGCO's customers pursuant to the extended protection plans. When Warranty Specialists later suspended payment of warranty claims filed in connection with failed wheel motors on equipment enrolled in the extended protection plans, AGCO sued. The trial court granted AGCO's motion for partial summary judgment and denied Cassidy Davis's motion for summary judgment on the issue of whether the extended protection plans and the master insurance policy covered or excluded coverage for equipment failures resulting from a design or engineering defect. The court denied Cassidy Davis's motion for summary judgment on AGCO's claims for bad faith refusal to pay. It also denied AGCO's summary judgment motion based on estoppel and the inapplicability of an exclusion clause in the master insurance policy, and denied summary judgment to Warranty Specialists and GGPG on various claims, including those for breach of contract, fraud and attorney fees. For the reasons that follow, we affirm the judgments.
AGCO manufactured and sold an agricultural spray applicator known as the RoGator. The RoGator was powered by four wheel motors; the failure of one wheel motor caused the entire machine to stop functioning.
Beginning in 2005, AGCO offered extended protection plans ("EPPs") to its customers who purchased RoGators. AGCO purchased the EPPs from Warranty Specialists, paying the latter premiums for each RoGator enrolled in an EPP. Warranty Specialists administered the EPP. Under the EPP, AGCO agreed to repair or replace covered parts of the RoGator, "if required due to a MECHANICAL BREAKDOWN or FAILURE that is the result of a true defect in material or workmanship."
The EPP pertinently provided: "This service contract coverage is limited exclusively to the repair or replacement of covered parts ... determined to have failed due to a MECHANICAL BREAKDOWN or FAILURE as defined under terms and definitions." The EPP defined a covered "mechanical breakdown or failure" as "the actual breaking or electronic failure of any covered part of the covered MACHINE while in ordinary use arising from faults attributable to manufacturing defects in workmanship or materials in such MACHINE causing sudden stoppage of the functions thereof and necessitating repair before it can resume work."
GGPG obtained a master policy of liability insurance for AGCO from Cassidy Davis, which provided coverage to AGCO for any liability AGCO had to its customers for machines enrolled in the EPP.
Pursuant to the EPP and the master policy, the purchaser of a machine that had a mechanical breakdown or failure presented the machine to one of AGCO's dealers, who made the initial determination of coverage; if the repair was covered, the dealer repaired the machine. The dealer then submitted a claim for reimbursement for the repair cost to Warranty Specialists, who would evaluate and pay or deny claims under the EPP. Warranty Specialists paid premiums to Cassidy Davis, and Cassidy Davis paid Warranty Specialists for claims deemed valid.
In mid-to late 2008, after having accepted and paid approximately 25 wheel motor claims, Warranty Specialists stopped processing the claims. In September 2008, it informed AGCO that it was placing all wheel motor claims on hold until it received support from AGCO (such as assistance in paying the claims or higher premiums).
Also in September 2008, Warranty Specialists sent an e-mail message to AGCO stating that no further wheel motor claims would be paid because, pursuant to the master policy, Cassidy Davis had invoked the Epidemic Failure Clause ("EFC") in relation to RoGator wheel motors. "With immediate effect, no further claims should be paid in respect of any [AGCO] attachments ...; for the avoidance of doubt this includes any claims pending or subsequently advised."1 When Warranty Specialists failed to pay the dealers' wheel motor claims, AGCO paid the claims.
AGCO sued Warranty Specialists, Cassidy Davis, and GGPG, seeking declaratory relief regarding coverage under the master policy and reimbursement for payment of the warranty claims; asserting claims for breach of contract and bad faith against Cassidy Davis; asserting claims for breach of contract and fraud against Warranty Specialists and GGPG; and asserting claims for money had and received against Warranty Specialists, Cassidy Davis, and GGPG. Cassidy Davis appeals in Case No. A12A1125; AGCO appeals in Case No. A12A1126; and Warranty Specialists and GGPG appeal in Case No. A12A1281. This court reviews the grant or denial of summary judgment de novo.2
1. Cassidy Davis contends that the trial court erred by granting AGCO's motion for partial summary judgment and by denying its motion for summary judgment on the issue of whether there was coverage for breakdowns attributable to design defects. According to Cassidy Davis, the EPP and master policy did not afford coverage for failures resulting from a design or engineering defect, and the RoGator's wheel motor failures resulted from such a defect.3
The trial court ruled that the language of the EPP and master policy was unambiguous and "[did] not exclude or limit coverage for a design or engineering defect"; and that, as used in these contracts, the "the term ‘manufacturing defects' [did] not exclude coverage for breakdowns or failures attributable to, or caused by, a design defect." The court granted AGCO's motion for partial summary judgment "on the issue of whether the EPP and the master policy provide coverage for a mechanical breakdown or failure that is allegedly attributable to, or caused by, a design or engineering defect."
An insurance policy is simply a contract, the provisions of which should be construed as any other type of contract.4 The whole contract should be looked to in arriving at the construction of any part.5
As set out above, the EPP covered the actual breaking or electronic failure of any covered part "while in ordinary use arising from faults attributable to manufacturing defects in workmanship or materials." Where a contract requires that conduct "arise out of" an act, "it does not mean proximate cause in the strict legal sense but instead encompasses almost any causal connection or relationship."6 "Indeed, nothing more than a slight causal connection is required to show that a loss arose out of a specified act set forth in a contract."7 The phrase "arising from faults attributable to manufacturing defects in workmanship or materials" is broad enough to include a breakdown or failure related to a manufacturing defect, even where there was a design or engineering defect. Notably, Warranty Specialists initially paid dozens of wheel motor claims, indicating that it found upon initial review that the wheel motor claims were covered under the EPP. "The construction placed upon a contract by the parties thereto, as shown by their acts and conduct, is entitled to much weight and may be conclusive upon them."8
Coverage is construed broadly and it is the insurer's duty to clearly set forth exclusions to coverage.9 The EPP specifically set forth its exclusions in a section entitled "WHAT IS NOT COVERED." It contained no exclusion for mechanical breakdowns or failures resulting from design or engineering defects.
Thus, coverage for the failures at issue were covered and not excluded under the EPP and master policy. Inasmuch as AGCO was entitled to judgment as a matter of law on this particular issue, and Cassidy Davis was not, the trial court did not err in so ruling.
2. Cassidy Davis contends that the trial court erred in denying its motion for summary judgment on AGCO's claim that it acted in bad faith in denying the warranty claims, because Cassidy Davis had a reasonable basis to deny coverage; further, it argues, AGCO's demand was not made at a time when it had a right to demand payment.
(a) The question of whether an insurer denied benefits in bad faith is for the trier of fact.10 Thus, assuming that the procedural requirements of the Code section were met, the question of whether an insurer has acted in bad faith in denying a claim under OCGA § 33–4–611 must be submitted to a jury unless the insurer can prove as a matter of law that it possessed a reasonable defense to coverage.12 The insurer's defense to the coverage must be reasonable under the circumstances presented in the case.13
There was evidence that, in explaining its basis for denying the claims, Cassidy Davis cited "a clear historical reliability problem on wheel motors," not a contractual provision. And it cited the EFC; AGCO pointed to evidence that the EFC was not part of the EPP or the master policy, that it had been given no notice of the EFC before the clause was invoked, that Cassidy Davis and Warranty...
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