Mead Corp. v. Liberty Mut. Ins. Co., 39679

• Decision Date: 05 December 1962
• Docket Number: No. 39679,No. 3,39679,3
• Parties: MEAD CORPORATION v. LIBERTY MUTUAL INSURANCE COMPANY
• Court: Georgia Court of Appeals

Page 162

129 S.E.2d 162

107 Ga.App. 167

MEAD CORPORATION v. LIBERTY MUTUAL INSURANCE COMPANY.

No. 39679.

Court of Appeals of Georgia, Division No. 3.

Dec. 5, 1962.

Rehearing Denied Dec. 18, 1962.

Syllabus by the Court.

1. The covenant of an insurance company to its insured under a standard form automobile liability policy to defend any suit against the insured alleging an injury covered by the policy is separate and distinct from its covenant to pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages up to the policy limits because of such injury. It does not cease, in the absence of express language in the policy to that effect, merely because the company has paid out damages up to its limit of coverage on other claims arising from the same accident. Where as the result of a collision covered by the policy, the insured incurred liability for four death claims, and the insured and its insurer by agreement settled two of the claims for an amount in excess of the bodily injury liability coverage in the policy, the refusal of the insurance company to undertake the defense of the remaining claims was a breach of its contract with the insured, rendering the insurer liable for necessary expenses incurred in the defense of the remaining claims.

2. No bad faith is alleged such as to render the insurer liable for penalty and attorney fees.

Mead Corporation filed an action in the Civil Court of Fulton County against Liberty Mutual Insurance Company, alleging itself to be an insured of the defendant under a standard form attached policy of automobile liability insurance with bodily injury limits of $100,000 per accident. One of the plaintiff's vehicles was involved in a serious accident resulting in fatal injuries to four persons under circumstances casting liability on the plaintiff. At a time when death claims were either being negotiated or were in suit the plaintiff and defendant, by agreement, settled certain of the claims for the sum of $160,000, the plaintiff paying the excess over the policy coverage. The insurance company, after paying out its limit of liability, refused to concern itself further with the defense of the remaining claims and tort actions, whereupon the plaintiff procured and paid counsel to dispose of the remaining litigation. The present action is brought to recover the $4,813.30 necessarily expended by the plaintiff for court costs and attorney fees attributable to the outstanding claims against which the defendant refused to defend. General demurrers to the petition were sustained and the plaintiff excepts.

Nall, Miller, Cadenhead & Dennis, A. Paul Cadenhead and Thomas A. Rice, Atlanta, for plaintiff in error.

Bryan, Carter, Ansley & Smith, W. Colquitt Carter, Atlanta, for defendant in error.

RUSSELL, Judge.

1. This is a standard automobile liability policy containing the following provisions: 'Coverage A. Bodily Injury Liability. To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person, caused by accident and arising out of the ownership, maintenance or use of any automobile * * *. With respect to such insurance as is afforded by this policy, the company shall: (a) defend any suit against the insured alleging such injury, sickness, disease or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent; but the company may make such investigation, negotiation and settlement of any claim or suit as it deems expedient; * * * (b)(2) pay all expenses incurred by the company, all costs taxed against the insured in any such suit and all interest accruing after entry of judgment until the company has paid or tendered or deposited in court such part of such judgment as does not exceed the limit of the company's liability thereon; * * * (b)(4) reimburse the insured for all reasonable expenses, other than loss of earnings, incurred at the company's request; and the amounts so incurred, except settlements of claims and suits, are payable by the company in addition to the applicable limit of liability of this policy.'

Eliminating as irrelevant to a decision here cases dealing with the question of whether the insurer's duty to defend includes a duty to appeal where there is a judgment against the insured in excess of policy limits (in which connection see Indemnity Ins. Co. of N.A. v. Hawkeye-Security Ins. Co., 158 F.Supp. 817 and Moore v. Columbia Cas. Co., D.C., 174 F.Supp. 566), there is a conflict of authority as to whether the insurer's duty to defend in the trial court in the face of multiple claims continues after the limits of liability have been exhausted. New Hampshire has held on several occasions that it does not. See Lumbermen's Mutual Cas. Co. v. McCarthy, 90 N.H. 320, 8 A.2d 750, 126 A.L.R. 894, followed in Ocean Acc. &c. Corp. v. Peoples Wet Wash Laundry, 92 N.H. 260, 29 A.2d 418, and Travelers Indemnity Co. v. New England Box Co., 102 N.H. 380, 157 A.2d 765. The latter case, following McCarthy, went on to say: 'By its policy the plaintiff agrees to defend any suit to recover damages because of injury to * * * property * * * but expressly stipulates that this right and duty is 'with respect to such insurance as is afforded by this policy.'', construing the words to mean that the duty exists only while 'such insurance' is still afforded in the sense that it has not been paid out in satisfaction of a claim. A different interpretation was put on the words 'such insurance as is afforded by this policy' in Loftin v. U.S. Fire Ins. Co., 106 Ga.App. 287, 127 S.E.2d 53, where it was stated that the phrase means: "If this policy is issued for, or affords insurance for, bodily injury liability or property damage liability, the company shall defend any suit alleging such injury, etc." In other words, the duty to defend is determined by the type of coverage for which a premium is...