Piedmont Office Realty Trust, Inc. v. XL Specialty Ins. Co.
Decision Date | 20 April 2015 |
Docket Number | No. S15Q0418.,S15Q0418. |
Citation | 297 Ga. 38,771 S.E.2d 864 |
Parties | PIEDMONT OFFICE REALTY TRUST, INC. v. XL SPECIALTY INSURANCE COMPANY. |
Court | Georgia Supreme Court |
King & Spalding, Anthony P. Tatum, Bethany M. Rezek, Merritt E. McAlister, J. Andrew Pratt, Jeffrey S. Bucholtz, for appellant.
Swift, Currie, McGhee & Hiers, D. Lee Clayton ; Wiley Rein, Charles C. Lemley, for appellee.
Weissman, Nowack, Curry & Wilco, Seth M. Friedman, amici curiae.
Piedmont Office Realty Trust, Inc. (“Piedmont”) purchased and maintained two insurance policies—a primary policy issued by Liberty Surplus Insurance Company and an excess coverage policy issued by XL Specialty Insurance Company (“XL”). The primary policy provided coverage of up to $10 million for claims against Piedmont. The excess policy provided an additional $10 million in excess of the primary policy's coverage limits.
The excess policy provides that XL will only pay for a “loss” which Piedmont becomes “legally obligated to pay as a result of a securities claim.” The policy also contains a “consent to settle” clause which reads:
No claims expenses shall be incurred or settlements made, contractual obligations assumed or liability admitted with respect to any claim without the insurer's written consent, which shall not be unreasonably withheld. The insurer shall not be liable for any claims expenses, settlement, assumed obligation or admission to which it has not consented.
In addition, the policy contains a “no action” clause which reads:
No action shall be taken against the insurer unless, as a condition precedent thereto, there shall have been full compliance with all of the terms of this policy, and the amount of the insureds' obligation to pay shall have been finally determined either by judgment against the insureds after actual trial, or by written agreement of the insureds, the claimant and the insurer.
Piedmont was named as a defendant in a federal securities class action suit in which the plaintiffs sought damages exceeding $150 million. Relatively early in the litigation, Piedmont moved for summary judgment. The district court denied Piedmont's motion. Thereafter, following years of discovery and litigation, Piedmont renewed its summary judgment motion. The district court granted the renewed motion and dismissed the class action suit. Plaintiffs appealed.
While the plaintiffs' appeal was pending, plaintiffs and Piedmont agreed to mediate plaintiffs' claim. By that time, Piedmont had already exhausted its coverage limit under its primary policy and another $4 million of its excess policy simply by defending itself. Anticipating a settlement with plaintiffs, Piedmont sought XL's consent to settle the claim for the remaining $6 million under the excess policy. XL agreed to contribute $1 million toward the settlement, but no more.
Without further notice to XL and without obtaining XL's consent, Piedmont agreed to settle the underlying lawsuit with plaintiffs for $4.9 million. The district court approved the settlement and Piedmont demanded XL provide coverage for the full settlement amount. XL refused.
Piedmont filed suit against XL for breach of contract and bad faith failure to settle under OCGA § 33–4–6. XL moved to dismiss the complaint; the district court granted XL's motion; and Piedmont appealed. Thereupon, the 11th Circuit certified the following questions to this Court:
Piedmont Office Realty Trust, Inc. v. XL Speciality Ins. Co., 769 F.3d 1291 (11th Cir.2014).
Trinity and another entity, Phoenix Outdoor, LLC, were sued in tort and the trial court ordered the parties to mediation. The plaintiffs initially demanded $14 million from the defendants. Phoenix's insurer offered $10 million on behalf of Phoenix; Central offered $200,000 on behalf of Trinity, although plaintiffs demanded Trinity pay $1.37 million at that time. The case ultimately settled for $12 million. Of that amount, without Central's approval, Trinity agreed to contribute $954,530. Central deemed Trinity's payment of an amount exceeding $200,000 to be voluntary and it refused Trinity's demand for the additional $754,530. Trinity brought suit against Central in state court claiming Central breached the insurance agreement and refused to settle with the plaintiffs in bad faith. Central removed the case to federal district court which certified this question of Georgia law to this Court: “Whether an action for negligent or bad faith failure to settle a case requires that a judgment be entered against an insured in excess of the policy limits before the action can be asserted.” We answered that question affirmatively, relying on the plain language of the policy, as we were required1 to do:
In this case, as in Trinity, the plain language of the insurance policy does not allow the insured to settle a claim without the insurer's written consent. It also provides that the insurer shall only be liable for a loss which the insured is “legally obligated to pay.” Finally, the policy contains a “no action” clause which stipulates that the insurer may not be sued unless, as a condition precedent, the insured complies with all of the terms of the policy and the amount of the insured's obligation to pay is determined by a judgment against the insured after a trial or a written agreement between the claimant, the insured, and...
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