Mullinax v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 24 March 2010
• Docket Number: No. A09A1625.,A09A1625.
• Citation: 303 Ga.App. 76,692 S.E.2d 734
• Parties: MULLINAX et al.v.STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY.
• Court: Georgia Court of Appeals

303 Ga.App. 76

692 S.E.2d 734

MULLINAX et al.v.STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY.

No. A09A1625.

Court of Appeals of Georgia.

March 24, 2010.

Ragsdale, Beals, Seigler, Patterson & Gray, Ronald D. Reemsnyder, Cumming, for Appellants.

Myers & Stroberg, William A. Myers, Gainesville, for Appellee.

BARNES, Judge.

Shirley and James Mullinax appeal the trial court's order denying their motion to correct an alleged clerical error and granting summary judgment to their uninsured/underinsured motorist (UM) carrier, State Farm Mutual Automobile Insurance Company. Because the Mullinaxes met the conditions precedent for pursuing their UM claim, and because the trial court erred in denying their motion to rescind their voluntary dismissal with prejudice, we reverse.

In August 2007 Shirley Mullinax sued David English for personal injuries sustained during a motor vehicle collision, and her husband James Mullinax sued for loss of consortium. The Mullinaxes served a copy of the complaint and subsequent pleadings on State Farm, their UM carrier, which answered and counterclaimed against English for any sums State Farm became required to pay. Having filed defensive pleadings in its own name, State Farm became a party to the action and gained the right to assert any coverage defenses, including an alleged failure to comply with a condition precedent to recovery of UM benefits. Thompson v. Allstate Ins. Co., 285 Ga. 24, 673 S.E.2d 227 (2009). English was covered under an insurance policy issued to his employer, which had liability limits of $25,000 per person.

In January 2008, the Mullinaxes settled their claims against English, releasing him and his insurer for $25,000, pursuant to OCGA § 33-24-41.1. The release allocated $20,000 to settle Shirley Mullinax's claim and $5,000 to settle James Mullinax's claim, and the Mullinaxes agreed not to assert any claims against English or his insurer “except as necessary to prosecute any claim against their uninsured motorist carrier(s).” In February 2008, counsel for the Mullinaxes filed a pleading titled “Voluntary Dismissal with Prejudice as to David English.” The body of the pleading provided that the Mullinaxes dismissed “the above-styled lawsuit with prejudice, as to Defendant David English only. All claims against the Plaintiff's uninsured motorist carrier, State Farm Mutual Automobile Insurance Company are not dismissed.”

In September 2008, State Farm moved for summary judgment, arguing that the Mullinaxes could not recover UM benefits under their policies because they failed to exhaust the limits of English's liability coverage, each having settled for less than the $25,000 policy limit. State Farm also argued that the plaintiffs lost their right to proceed against it when they voluntarily dismissed with prejudice their claims against English. Because their claim against State Farm was based on their negligence claims against English, dismissing English with prejudice defeated the Mullinaxes' claim against State Farm, the insurer argued.

In response, the Mullinaxes filed a motion “to correct a clerical error in the voluntary dismissal with prejudice as to David English” and asked the trial court pursuant to OCGA § 9-11-60(g) “to rescind the Voluntary Dismissal with Prejudice as to David English.” Along with their brief in support of this motion were attached the affidavits of the lawyers for the Mullinaxes and English, in which both stated they did not intend to dismiss the complaint against English with prejudice. English's lawyer stated that he prepared the formal settlement paperwork and “sent Counsel for Plaintiff a limited release, a settlement draft for $25,000, and a Voluntary Dismissal with Prejudice form to be executed.” His express intention was to send a dismissal without prejudice form that would allow their claims to proceed against the UM insurer and “effectuate the intent of the ‘limited’ (not general) release,” but mistakenly sent a dismissal with prejudice instead. The Mullinaxes' lawyer said that the limited release was intended to relieve the defendant and his insurer from liability but retain the rights to pursue the Mullinaxes' own insurer under their UM coverage pursuant to OCGA § 33-24-41.1. His “execution of the Voluntary Dismissal with Prejudice as to all claims of David English was a mistake committed through oversight,” and upon discovering the error he moved promptly in cooperation with English's counsel to correct the error.

At the hearing on the motions, counsel for the Mullinaxes agreed with State Farm that a dismissal with prejudice precluded his clients from obtaining a judgment against English and thus proceeding against their own insurer. He asked the court to allow him to dismiss the case without prejudice and then refile. He knew the difference between a dismissal without and a dismissal with prejudice, could not explain how he failed to catch the error, and had notified his errors and omissions (E & O) carrier of the incident. State Farm argued that the error was not the kind of clerical error that OCGA § 9-11-60(g) was intended to address, but was a legal error which counsel for English included in the first draft and counsel for the Mullinaxes failed to correct despite making other changes to the document before filing it.

Ruling from the bench, the trial court acknowledged the harm ensuing to the Mullinaxes due to this error, but concluded that filing the dismissal with prejudice instead of without prejudice was “an error of law and understanding the application of the law,” a finding repeated in the court's written order. The court also found in its written order that “neither party exhausted Defendant's liability coverage so as to enable either to recover UM benefits from State Farm,” relying on this court's opinion in Allstate Ins. Co. v. Thompson, 291 Ga.App. 465, 662 S.E.2d 164 (2008), since reversed in Thompson v. Allstate Ins. Co., supra, 285 Ga. 24, 673 S.E.2d 227.

1. The Mullinaxes argue the trial court erred in finding that they did not exhaust the policy limits of the defendant's liability insurance, which is one prerequisite to their claim for UM coverage from their insurer. OCGA § 33-24-41.1 provides a statutory framework for parties to settle claims against a tortfeasor's liability carrier and still proceed with a claim under the injured party's UM policy. A party must exhaust available liability coverage before recovering under a UM policy. Holland v. Cotton States Mut. Ins. Co., 285 Ga.App. 365, 366(1), 646 S.E.2d 477 (2007). So, for example, a plaintiff who settled with the defendant's liability carrier for $1,000 less than the policy limit was precluded from proceeding with a claim against her UM carrier. Id.

But a spouse is not entitled to recover damages for loss of consortium independent of her spouse's claim “under the ‘bodily injury liability’ coverage in the policy.” Bartlett v. American Alliance Ins. Co., 206 Ga.App. 252, 255(1), 424 S.E.2d 825 (1992). In other words, “the...