Morgan v. Guaranty Nat. Companies

• Decision Date: 19 September 1996
• Docket Number: No. A96A1781,A96A1781
• Citation: 477 S.E.2d 26,223 Ga.App. 41
• Parties: MORGAN v. GUARANTY NATIONAL COMPANIES.
• Court: Georgia Court of Appeals

Page 26

477 S.E.2d 26

223 Ga.App. 41

MORGAN v. GUARANTY NATIONAL COMPANIES.

No. A96A1781.

Court of Appeals of Georgia.

Sept. 19, 1996.

Reconsideration Denied Oct. 2, 1996.

Murray & Stewart, Larry E. Stewart, Atlanta, for appellant.

Freeman & Hawkins, Kevin J. Bahr, Warner S. Fox, Atlanta, for appellee.

HAROLD R. BANKE, Senior Appellate Judge.

In this declaratory judgment action, Daniel Morgan appeals the denial of his motions to dismiss and for summary judgment and the grant of summary judgment to Guaranty National Companies ("Guaranty") on the issue of whether the commercial liability insurance policy it issued to Georgia CSM, Inc. ("CSM"), Morgan's former employer, covered Morgan's lawsuit against CSM. Morgan enumerates three errors.

This case arose after Morgan was arrested for non-payment of child support on January 20, 1994. Morgan sued CSM for false imprisonment and conversion, alleging CSM withheld child support payments Morgan arranged to be automatically deducted from his salary but failed to forward the sums to the court.

CSM retained counsel and answered but failed to provide Guaranty with notice of the lawsuit for almost seven months. Guaranty thereafter retained counsel to investigate CSM's demand for coverage and informed CSM it did so under a full and complete reservation of rights. CSM's counsel subsequently withdrew and notified Guaranty of this fact.

Several months later, Morgan's counsel informed Guaranty that he had stipulated the case to the next available trial calendar, but was willing to delay trial to allow adequate time to prepare a defense. Guaranty's coverage counsel responded that it had been retained to investigate coverage under a full reservation of rights because the extent of coverage, if any, was unclear.

Several weeks later, the case was called for trial in state court. When no representative appeared on CSM's behalf, the court struck the answer. Only the damages issue was tried to the jury, which awarded Morgan $37,500 in actual damages and $50,000 in punitive damages. Morgan demanded payment from Guaranty, despite the fact that Guaranty was not a party to the action.

Two weeks after the entry of judgment, Guaranty filed the instant declaratory judgment action against Morgan and CSM in superior court, seeking a determination of whether Morgan's claims against CSM were covered. Morgan moved to dismiss the declaratory judgment action. The superior court denied Morgan's motion to dismiss, finding Guaranty had not waived its right to challenge coverage.

Guaranty subsequently moved for summary judgment. Morgan also moved for summary judgment, arguing that the declaratory judgment action was untimely. The superior court granted Guaranty's motion, finding there was no coverage because (1) CSM failed to provide Guaranty timely notice of the state court action; and (2) CSM failed to cooperate in the investigation of the lawsuit. Morgan challenges the denial of his motions and the grant of summary judgment to Guaranty. Held:

1. Guaranty was entitled to file a declaratory judgment action. See Jenkins and Miller, Ga. Auto. Ins. Law (1994 ed.), §§ 7-4, 14-1. "[A] declaratory judgment action is procedurally available to an insurer seeking resolution of the validity of a claimant's post-judgment demand" for payment. Standard Guaranty Ins. Co. v. Hulsey, 204 Ga.App. 508, 510(1), 420 S.E.2d 54 (1992).

Morgan misconstrues Richmond v. Ga. Farm Bureau Mut. Ins. Co., 140 Ga.App. 215, 231 S.E.2d 245 (1976). Richmond's requirement that the insurer immediately seek a declaratory...