Onebeacon America Ins. Co. v. Catholic Diocese of Savannah

• Decision Date: 02 September 2011
• Docket Number: CASE NO. CV410-118
• Parties: ONEBEACON AMERICA INSURANCE COMPANY, as successor to Commercial Union Insurance Company, Plaintiff, v. THE CATHOLIC DIOCESE OF SAVANNAH, Defendant.
• Court: U.S. District Court — Southern District of Georgia

ONEBEACON AMERICA INSURANCE COMPANY, as successor to Commercial Union Insurance Company, Plaintiff, v. THE CATHOLIC DIOCESE OF SAVANNAH, Defendant.

CASE NO. CV410-118

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF GEORGIA SAVANNAH DIVISION

SO ORDERED : September 2, 2011

ORDER

Before the Court are Defendant's Motion for Summary Judgment (Doc. 23) and Plaintiff's Motion for Summary Judgment (Doc. 25}. For the reasons that follow, Plaintiff's motion is GRANTED and Defendant's motion is DENIED. The Clerk of Court is DIRECTED to close this case.

BACKGROUND

Plaintiff originally filed suit in this Court on May 11, 2 010, seeking a declaratory judgment to clarify its duties and obligations under certain insurance policies issued to Defendant many decades ago. (Doc. 1.) On May 28, 2010, Defendant timely filed an answer and asserted a counterclaim against Plaintiff, which alleged that Plaintiff "acted in bad faith" and "was negligent in its claim handling." (Doc. 6 ¶¶ 11-12.} This insurance dispute is related to an underlying lawsuit filed in the Court of Common Pleas of Jasper County, South Carolina: Allan Carl Ranta v. The Roman Catholic Diocese of Savannah. (Doc. 1 ¶ 6.) In this suit, Allan Carl Ranta ("Ranta") alleged that Wayland Yoder Brown ("Brown") sexually molested him from 1978 to 1982 while Brown was employed by Defendant as a priest, youth leader, and counselor. (Id. at 7.) Defendant contends that certain insurance policies it purchased from Commercial Union Insurance Company, numbered as: CZ-W28-7237, CZ-9745-001, and AZ9745004, provide coverage for Ranta's lawsuit. (Doc. 23, Attach. 2 ¶ 1; Doc. 31 ¶ 1.)

Defendant moved for summary judgment on December 30, 2010, claiming that Plaintiff has waived all coverage defenses by failing to immediately seek declaratory relief.¹ (Doc. 23, Attach. 1.) Plaintiff filed its motion for summary judgment on the same date, arguing that Defendant failed to comply with the policies' conditions precedent requiring notification to the Plaintiff, that Defendant voluntarily compromised the underlying lawsuit and is not entitled to indemnification, and that charitable immunity would have barred any claims covered by the policies. (Doc. 25, Attach. 1.) As to Defendant's counterclaim, Plaintiff contends that an "insured cannot asserta claim against its insurer for bad faith failure or negligent failure to compromise in the absence of a jury verdict." (Id. at 21.) The parties have filed numerous responsive briefs opposing each other's motions and supporting their own. (Docs. 27, 30, 33, 34.)

ANALYSIS

I. SUMMARY JUDGMENT STANDARD

According to Fed. R. Civ. P. 56(a), "[a] party may move for summary judgment, identifying each claim or defense—or the part of each claim or defense—on which summary judgment is sought." Such a motion must be granted "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Id. The "purpose of summary judgment is to 'pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial.' " Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quoting Fed. R. Civ. P. 56 advisory committee notes).

Summary judgment is appropriate when the nonmovant "fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The substantive law governing the action determines whether an element is essential.DeLong Equip. Co. v. Wash. Mills Abrasive Co., 887 F.2d 1499, 1505 (11th Cir. 1989).

As the Supreme Court explained:

[A] party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact.

Celotex, 477 U.S. at 323. The burden then shifts to the nonmovant to establish, by going beyond the pleadings, that there is a genuine issue as to facts material to the nonmovant's case. Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991) .

The Court must review the evidence and all reasonable factual inferences arising from it in the light most favorable to the nonmovant. Matsushita, 4 75 U.S. at 587-88. However, the nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Id. at 586. A mere "scintilla" of evidence, or simply conclusory allegations, will not suffice. See, e.g., Tidwell v. Carter Prods., 135 F.3d 1422, 1425 {11th Cir. 1998). Nevertheless, where a reasonable fact finder may "draw more than one inference from the facts, and that inference creates a genuine issue of material fact, then the Court should refuse to grant summaryjudgment." Barfield v. Brierton, 883 F.2d 923, 933-34 (11th Cir. 1989) . Where, as in this case, there is no real dispute concerning any facts material to the outcome of this case, the issue is only a question of law. See United States v. Oakley, 744 F.2d 1553, 1555-56 (11th Cir. 1984) . As a result, the case may be decided on cross-motions for summary judgment. Id.

II. CHOICE OF LAW

This Court is exercising jurisdiction based on diversity of citizenship. Therefore, the choice of law rules of the forum state of Georgia determine what substantive law applies to this dispute. U.S. Fid. & Guar. Co. v. Liberty Surplus Ins. Corp., 550 F.3d 1031, 1033 (11th Cir. 2008) . Georgia applies the traditional rule of lex loci contractus, Convergys Corp. v. Keener, 276 Ga. 808, 811, 582 S. E. 2d 84, 86 (2003), and an "insurance contract is constructively made at the place where the contract is delivered," McGow v. McCurry, 412 F.3d 1207, 1217 (11th Cir. 2005) (quoting Fed. Ins. Co. v. Mat' 1 Distrib. Co., 203 Ga. App. 763, 767, 417 S.E.2d 671, 674-75 (1992)). The parties appear to agree that Georgia law governs this dispute, as virtually all cases cited in the brief apply the law of this state. Accordingly, the Court will apply Georgia law to this case.

III. DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

The primary argument Defendant advances in its Motion for Summary Judgment is that Plaintiff waived all coverage defenses by failing to immediately seek declaratory relief. (Doc. 23, Attach. 1 at 4.) Defendant cites the case of Richmond v. Ga. Farm. Bureau. Ins. Co., 140 Ga. App. 215, 219, 231 S.E.2d 248, 248 (1976), for the proposition that

[u]pon learning of facts reasonably putting it on notice that there may be grounds for noncoverage and where the insured refuses to consent to a defense under a reservation of rights, the insurer must thereupon (a) give the insured proper unilateral notice of its reservation of rights, (b) take necessary steps to prevent the main case from going into default or to prevent the insured from being otherwise prejudiced, and (c) seek immediate declaratory relief including a stay of the main case pending final resolution of the declaratory judgment action.

Id. However, this case and the third part of the rule it creates are not the end of the analysis. Subsequent cases have significantly softened the requirement of seeking "immediate" declaratory relief. InS. Gen. Ins. Co. v. Buck, 202 Ga. App. 103, 105, 413 S.E.2d 481, 482-83 (1991), the Georgia Court of Appeals held that an insurance company had not waived its right to seek judicial determination of policy coverage despite waiting fourteen months following the filing of the underlying tort suit to initiate a declaratory judgment. Even though the court

disapprove[d] of such a lengthy delay and recognize[d] that the immediacy requirement of Richmond has not been met, we cannot, in the absence of a showing of prejudice by appellees as movants on summary judgment, conclude as a matter of law that Southern General waived its right to seek a judicial determination of its obligation for coverage under the policies of insurance.

Id. at 105, 413 S.E.2d at 483.

Relaxation of strict compliance with this rule is a reflection of the policy on which this requirement is founded. The Supreme Court of Georgia explained that the rule in Richmond "is based on principles of fairness, and, in determining whether an insurer has met the requirements thereof, the crucial inquiry is whether the rights of the insured have been adequately protected," specifically mentioning fully informing the insured and preventing the entry of default against the insured in the underlying litigation. Kelly v. Lloyd's of London, 255 Ga. 291, 293-94, 336 S.E.2d 772, 775 (1985). More recent cases continue to require that an insured demonstrate prejudice resulting from the insurer's delay in filing a declaratory judgment action. Danforth v. Gov't Emps. Ins. Co., 282 Ga. App. 421, 429, 638 S.E.2d 852, 860 (2006) (noting that noncompliance with Richmond does not preclude a declaratory judgment action where insured cannot show that any prejudice resulted from [insurer's] conduct).

Therefore, Defendant must demonstrate prejudice before Plaintiff would be stopped from contesting coverage under the policies. The Court concludes, however, that based on the facts of this case, Defendant is unable to satisfy that requirement. A brief overview of the conduct of the parties and their communications with each other evidences why this required element of Defendant's argument is lacking.

Although the conduct resulting in the Ranta lawsuit occurred decades ago, Ranta filed suit against Defendant in 2006. (Doc. 23, Attach. 2 ¶ 3; Doc 31 ¶ 3.) Defendant first made a demand for coverage, defense, and indemnification under the policies in "January or February of 2008." (Doc. 23, Attach. 2 ¶ 4; Doc. 31 ¶ 4.) Plaintiff first responded to this notice of claim by letter dated October 21, 2008, in which Pla...