Rli Ins. v. Highlands On Ponce, LLC

• Decision Date: 05 July 2006
• Docket Number: No. A06A0726.,A06A0726.
• Citation: 280 Ga. App. 798,635 S.E.2d 168
• Parties: RLI INSURANCE COMPANY v. HIGHLANDS ON PONCE, LLC.
• Court: Georgia Court of Appeals

280 Ga. App. 798

635 S.E.2d 168

RLI INSURANCE COMPANY v. HIGHLANDS ON PONCE, LLC.

No. A06A0726.

Court of Appeals of Georgia.

July 5, 2006.

Reconsiderations Denied July 28, 2006.

Charles Medlin, Steven Kyle, Bovis, Kyle & Burch, Atlanta, for Appellant.

C. Michael Johnson, Fellows, Johnson, Davis & Labriola, Michael Flint, Michael D. Flint & Adler, LLC, Shira Adler, Atlanta, for Appellee.

BARNES, Judge.

Highlands on Ponce, LLC ("Highlands") sued its insurer RLI Insurance Company because the insurer would only pay a portion of its claim following a fire. The parties filed cross-motions for summary judgment. The trial court granted Highlands' motion for partial summary judgment on the issue of additional coverage, and denied RLI's corresponding motion seeking a declaratory judgment on the issue of the additional coverage. RLI appeals. Upon our review, we reverse.

Summary judgment is proper when there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. In ruling on a motion for summary judgment, the opposing party must be given the benefit of all reasonable doubt, and the court must construe the evidence and all inferences and conclusions arising therefrom most favorably to the party opposing the motion. Moore v. Goldome Credit Corp., 187 Ga.App. 594, 596, 370 S.E.2d 843 (1988). However, "rules of contract construction and interpretation are separate from those rules allocating burdens of proof at trial and on motion for summary judgment," and thus are to be independently applied. Thomas v. American Global Ins. Co., 229 Ga.App. 107(1), 493 S.E.2d 12 (1997).

This dispute arose after an April 30, 2001 fire involving apartments being constructed by Highlands. Highlands had purchased builder's risk insurance coverage through an insurance broker, McGriff, Seibels & Williams ("MSW"). RLI Insurance Company issued a builder's risk insurance policy to Highlands effective August 30, 2000 to June 30, 2002 showing $29,507,000 in blanket policy limits for any one occurrence. In April 2001, the apartments suffered extensive damage as a result of a fire, and RLI reimbursed Highlands $1,244,542 for the losses sustained including $100,000 in soft costs and $100,000 in lost business income.

Hard costs represent the amount it would take to physically repair or replace those items of constructed property damaged in the event of a loss. Soft costs include additional interest expense, property taxes, and advertising expense. Business income includes losses of rent during the period of reconstruction.

Although Highlands claimed losses in soft costs and business income well in excess of $100,000, RLI refused to pay for any loss above that amount. Highlands, thereafter, filed suit against RLI alleging breach of contract, bad faith, fraud, expenses of litigation and punitive damages. RLI counterclaimed against Highlands seeking a declaratory judgment that it has no liability to Highlands for soft costs or business income in excess of $100,000 each or $200,000 total. Subsequently, Highlands filed a motion for partial summary judgment seeking a ruling from the court that the policy provided the additional coverage. It argued that the policy terms clearly and unambiguously provided for the additional coverage. All other issues were reserved.

Subsequently, RLI also filed a motion for summary judgment, maintaining that it "has no liability to [Highlands] for either soft costs or business income in excess of $100,000 each ... because the policy unambiguously limits coverage for soft costs and business income to $100,000 each." RLI further argued that even if the policy is ambiguous, certain material facts established that the parties intended that coverage for soft costs and business income be limited to $100,000.

In granting Highlands' motion and denying RLI's, the trial court found that,

RLI's policy is ambiguous in that the policy's sections on blanket limits on liability and its section on additional limits are subject to more than one reasonable interpretation. Under Georgia law, when the language of an insurance contract is ambiguous and subject to more than one reasonable construction, the policy must be construed in the light most favorable to the insured, which provides him coverage.

1. RLI contends that the trial court erred in finding its policy ambiguous with respect to the amount of insurance available for soft costs and business income, and in construing the ambiguity in favor of Highlands. It maintains that the trial court should have found that the policy clearly and unambiguously limited liability for soft costs and business income to $100,000 each in the date of the loss. Both parties vigorously contend that the contract was unambiguous.

The policy set forth several provisions regarding blanket coverage and limits of liability for other coverage. The following provisions are at issue:

Limits of Liability:

The Insurer shall not be liable for more than $29,507,000 for any one occurrence, except as hereinafter provided:

The Limit of Liability applies blanket. Sub-limits stated in the sub-limits schedule shall apply as a part of and not in addition to the Limit of Liability.

Additional limits of insurance apply in addition to the Limit of Liability. Limit of Liability applies Per Occurrence unless otherwise stated.

Sub-limit Schedule:

Earthquake — Liabilities shall not exceed $29,507,000 per policy year

Flood—Liabilities shall not exceed $29,507,000 per policy year

Additional Limits of Insurance: Some coverages are automatically provided with their own Limit of Insurance. Increased limits may be purchased for an additional premium.

Additional Limits of Insurance:

Soft Costs — Limit of Insurance Automatically Provided — $100,000 per occurrence....

In any one occurrence for Business Income and Rental Income at the project site — Limit of Insurance Automatically Provided — $100,000 per occurrence.

"An insurance policy is simply a contract, the provisions of which should be construed as any other type of contract." Hunnicutt v. Southern Farm Bureau Life Ins. Co., 256 Ga. 611, 612(4), 351 S.E.2d 638 (1987). Construction of the contract, at the outset, is a question of law for the court. Deep Six, Inc. v. Abernathy, 246 Ga.App. 71, 73(2), 538 S.E.2d 886 (2000). The court undertakes a three-step process in the construction of the contract, the first of which is to determine if the instrument's language is clear and unambiguous. Woody's Steaks v. Pastoria, 261 Ga.App. 815, 817(1), 584 S.E.2d 41 (2003). If the language is unambiguous, the court simply enforces the contract according to the terms, and looks to the contract alone for the meaning. Id.

[I]f the contract is ambiguous in some respect, the court must apply the rules of contract construction to resolve the ambiguity. Finally, if the ambiguity remains after applying the rules of construction, the issue of what the ambiguous language means and what the parties intended must be resolved by a jury.

Id. "`Ambiguity' is defined as duplicity, indistinctness, an uncertainty of meaning or expression used in a written instrument, and [it] also signifies ... open to various interpretations." (Punctuation omitted.) Early v. Kent, 215 Ga. 49, 50(1), 108 S.E.2d 708 (1959).

Here, the policy provides that the blanket limit of $29,507,000 applies unless otherwise stated. It further stipulates that "sublimits" shall apply as part of the blanket limit and not in addition to that limit, but that "additional limits" apply in addition to the blanket limit of liability. The contract also provides that "some coverages are automatically provided with their own Limit of Insurance," and that increased limits could be purchased for an additional premium. Soft costs and business income were identified as having additional limits of liability, and for both the additional limit of liability was automatically provided for at $100,000 per occurrence. Read as a whole, however, the policy appears to establish broader liability coverage than RLI maintains it does, in particular for soft costs. Section A(3) of the policy details the soft costs covered and there is no mention of a limit of liability. Section A(4) discusses loss of income coverage and includes a provision that "Covered income means the following income for which a Limit of Insurance is shown in the Coverage Form Declarations: (1) Net income ... and (2) Continuing normal operating expenses incurred in your operation." (Emphasis supplied....