Preferred Risk Mut. Ins. Co. v. Southern Guar. Ins. Co. of Georgia, 73069

• Decision Date: 30 January 1987
• Docket Number: No. 73069,73069
• Citation: 181 Ga.App. 688,353 S.E.2d 590
• Parties: PREFERRED RISK MUTUAL INSURANCE COMPANY v. SOUTHERN GUARANTY INSURANCE COMPANY OF GEORGIA.
• Court: Georgia Court of Appeals

Page 590

353 S.E.2d 590

181 Ga.App. 688

PREFERRED RISK MUTUAL INSURANCE COMPANY v. SOUTHERN GUARANTY INSURANCE COMPANY OF GEORGIA.

No. 73069.

Court of Appeals of Georgia.

Jan. 30, 1987.

Rehearing Denied Feb. 9, 1987.

Certiorari Granted April 16, 1987.

E. Wycliffe Orr, Gainesville, for appellant.

Robert M. Darroch, Elizabeth A. Obenshain, Atlanta, for appellee.

BEASLEY, Judge.

This appeal was brought by Preferred Risk after the trial court's grant of summary judgment to Southern Guaranty on its declaratory judgment action. The original complaint named as defendants Preferred Risk, its insured Mona Gordon, and Mary Ann Cooper, an insured of Southern Guaranty under a policy issued to Cooper's husband and covering Cooper's 1976 Dodge.

On August 6, 1983, Gordon was operating the Dodge with the permission of passenger Cooper, and was involved in a collision. Cooper was injured and sued Gordon. Gordon called upon Southern Guaranty to defend her under the liability provisions of the Cooper policy with Southern Guaranty. That policy provided coverage to anyone using the Cooper vehicle "with the express permission of the named insured" or "within the scope of such expressed permission." Southern Guaranty filed an answer on Gordon's behalf and notified her the next day of its reservation of right to deny coverage.

In the declaratory judgment action, on motion for summary judgment Southern Guaranty contended that no coverage was provided Gordon because of an exclusion in the policy which provided: "This policy does not apply under Part 1 [liability]: ... to bodily injury to the insured or relative of the insured residing in the same household as the insured." The trial court agreed that this provision excluded liability protection and, finding no public policy which would override the express terms of the contract granted judgment to Southern Guaranty.

On appeal, Preferred Risk contends the trial court erred for two basic reasons: 1) Southern Guaranty waived its right to deny coverage by giving notice of its reservation of rights after filing pleadings in the personal injury case; 2) the exclusion in the contract is barred by public policy and in any case does not apply to the instant factual situation.

1. Waiver. It has long been the rule in Georgia that a liability insurer who assumes the conduct of the defense to an action with knowledge of facts constituting noncoverage and without disclaiming liability and giving notice of its reservation of rights is thereafter estopped from denying coverage. Jones v. Ga. Cas., etc., Co., 89 Ga.App. 181, 185, 78 S.E.2d 861 (1953). The insurer can avoid estoppel by giving timely notice of its reservation of rights which fairly informs the insured of the insurer's position. State Farm, etc., Ins. Co. v. Anderson, 104 Ga.App. 815, 123 S.E.2d 191 (1961).

As pointed out in Richmond v. Ga. Farm, etc., Ins. Co., 140 Ga.App. 215, 219, 231 S.E.2d 245 (1976), to avoid losing its defense, the insurer must "(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."

Southern Guaranty performed each of those requirements. It acted to prevent default and the fact it did not give its reservation of rights notice until the following day did not prejudice its insured; this is the crucial factor in such situation. See Moody v. Penn. Millers Mut. Ins. Co., 152 Ga.App. 576, 577(1), 263 S.E.2d 495 (1979). Filing an answer to forestall default does not constitute assuming and conducting the defense to insured's detriment so as to forfeit insurer's rights.

2. Exclusion provision. Harbin v. Sams, 171 Ga.App....