Sapp v. Canal Ins. Co..

• Court: Georgia Supreme Court
• Writing for the Court: HUNSTEIN, Chief Justice.
• Citation: Sapp v. Canal Ins. Co.., 288 Ga. 681, 706 S.E.2d 644 (Ga. 2011)
• Decision Date: 28 February 2011
• Docket Number: No. S10G0619.,S10G0619.
• Parties: SAPP et al.v.CANAL INSURANCE COMPANY.

288 Ga. 681

706 S.E.2d 644

11 FCDR 407

SAPP et al.

v.CANAL INSURANCE COMPANY.

No. S10G0619.

Supreme Court of Georgia.

Feb. 28, 2011.

Stephen Roberts Chance, Lance D. Lourie, Watkins, Lourie, Roll & Chance, PC, Atlanta, William H. Hedrick, William Hedrick, Albany, for appellant.Gilliland, Ratz & Browning, Charles A. Ratz, Robert W. Browning, Atlantic, McCall, Williams, Wilmot & Powell, W. Earl McCall, Robert C. Wilmot, Spurlin & Spurlin, John C. Spurlin, Tifton, for appellee.HUNSTEIN, Chief Justice.

In April 2007, appellant Pamela Sapp was injured in a car accident when her car was struck by a dump truck driven by David Lamb and owned by Lamb's employer, Entra Demond Blackmon, d/b/a EDB Trucking. Sapp and her husband sued Lamb and EDB in Tift County Superior Court; the Sapps also filed a federal lawsuit against EDB's insurer, appellee Canal Insurance Company. Thereafter, Canal filed a declaratory judgment action in Tift Superior Court, as to which the Sapps filed a counterclaim, seeking a declaration that the accident was not covered under the subject insurance policy. Specifically, Canal claimed that, because the accident undisputedly occurred outside the 50–mile radius-of-use limitation set forth in the insurance policy, injuries resulting from the accident were not covered under the policy. On cross-motions for summary judgment, the trial court granted Canal's motion, finding no coverage with respect to the Sapps' claims, and dismissed with prejudice all claims against Canal. The Court of Appeals affirmed, finding that EDB's insurance policy was a basic automobile liability policy rather than a motor carrier policy; that the policy was thus not subject to statutory minimum liability limits imposed on motor carrier policies; and that the 50–mile radius-of-use limitation in the policy was therefore valid and operated to preclude coverage for claims arising out of the accident. Sapp v. Canal Ins. Co., 301 Ga.App. 596, 688 S.E.2d 375 (2010). This Court granted the Sapps' petition for writ of certiorari to consider the applicability of the Georgia Motor Carrier Act, OCGA § 46–7–1 et seq., and the validity of the 50–mile radius-of-use limitation under the circumstances presented here. As explained more fully below, we find that the Motor Carrier Act does apply in this case and that the 50–mile radius-of-use limitation is thus invalid. Accordingly, we reverse.

1. The threshold issue in this case is whether the insurance policy issued to EDB by Canal was a motor carrier policy subject to Georgia's Motor Carrier Act.¹ The Court of Appeals found as a matter of fact that it was not, citing the absence of any evidence that EDB had ever obtained a motor carrier permit as required at the time under the Act and its implementing regulations and the lack of a “Form F” endorsement to the policy, which would have signified the policy's status as a motor carrier policy. See Ross v. Stephens, 269 Ga. 266, 268–269, 496 S.E.2d 705 (1998).² Though there appears to be no dispute that EDB failed to obtain the permit required to operate as a motor carrier and that the insurance policy did not include a Form F endorsement, we do not find these facts dispositive as to the applicability of the Motor Carrier Act.

“The state motor carrier acts were enacted to protect members of the general public against injuries caused by the negligence of a Georgia motor carrier.” (Footnote omitted.) DeHart v. Liberty Mut. Ins. Co., 270 Ga. 381, 385(1), 509 S.E.2d 913 (1998). A “motor carrier of property” is defined under Georgia law as “a motor common or contract carrier engaged in transporting property, except household goods, in intrastate commerce in this state.” OCGA § 46–1–1(8). A motor carrier, which may be classified either as a “common” or “contract” carrier,³ is one which “own[s], control[s], operat[es], or manag[es] any motor propelled vehicle ... used in the business of transporting for hire of persons or property ... on the public highways of Georgia.” OCGA § 46–1–1(9)(B); see also OCGA § 46–1–1(9)(A). Transporting “for hire” is defined as “an activity wherein for payment or other compensation a motor vehicle and driver are furnished to a person by another person....” OCGA § 46–1–1(6). As Canal states in its pleadings, EDB at the time of the accident “operated a dump truck business.” Specifically, as the undisputed evidence shows, EDB was in the business of furnishing a dump truck and driver, for compensation, to haul crushed rock and like materials on the public roadways of Georgia. There can thus be no dispute that EDB was at the relevant time a motor carrier of property under Georgia law.

The provisions of the Motor Carrier Act in effect at the time of the accident required a motor carrier of property to obtain a permit from the State Revenue Commissioner as a prerequisite to operating on the State's public highways. Former OCGA § 46–7–15.1, Ga. L.2005, [288 Ga. 683] p. 334, § 28–3. ⁴ As a condition of obtaining such permit, the carrier was required to obtain a policy of indemnity insurance to protect the public against injuries proximately caused by the negligence of such carrier or its agents. Former OCGA §§ 46–7–12(a), 46–7–12.1(a), Ga. L.2005, p. 334, § 28–2.1; former PSC Transp. Rule 7–2.1(a), (c). The PSC's Transportation Rules fixed minimum amounts of such insurance at $100,000 per person and $300,000 per occurrence. Former PSC Transp. Rule 7–2.1(f).⁵ Persons injured by motor carriers were provided a right of action against not only the carrier but directly against its insurer as well. Former OCGA §§ 46–7–12(c), 46–7–12.1(c), supra; former PSC Transp. Rule 7–2.1(e).⁶ These so-called “direct action” provisions of the Act “establish ‘an independent cause of action against the carrier's insurer on behalf of a member of the public injured by the carrier's negligence.’ ” (Footnote omitted.) Frank E. Jenkins III & Wallace Miller III, Georgia Automobile Insurance Law, § 46:1(c) (2010 ed.). Under this scheme, the insurer “is equivalent to a provider of a substitute surety bond, creating automatic liability in favor of a third party who may have a claim for damages for the negligence of the motor common carrier. [Cit.]” Andrews v. Yellow Freight System, Inc., 262 Ga. 476, 421 S.E.2d 712 (1992). See also Ross, supra, 269 Ga. at 267, 496 S.E.2d 705 (insurance required by Act “ ‘is a direct and primary obligation’ to any person who sustains actionable injury or loss as a result of the negligence of the common carrier or its agents”).

In this case, as found by the Court of Appeals, there is no evidence that EDB ever obtained a permit to operate in Georgia as a motor carrier. ⁷ However, contrary to the Court of Appeals' determination, EDB's noncompliance with its responsibility to obtain a permit had no impact on its status as a Georgia “motor carrier of property”; while the failure to get a permit rendered EDB in violation of the Motor Carrier Act, it did not render EDB any less a “motor carrier of property” under applicable law. See Georgia Automobile Insurance Law, supra, § 46:5 (“[a] prima facie case [under the direct action statute] is established by showing that the carrier meets the general definition of ‘motor common carrier’ or ‘motor contract carrier’ ”); Great Am. Indem. Co. v. Vickers, 183 Ga. 233, 236–237, 188 S.E. 24 (1936) (“The sustaining of actionable injury is, under the statute, the only condition precedent to a suit on the policy. When actionable injury is alleged in a suit on the policy, the terms of the statute are complied with, and the petitioner upon proper proof of the injury is entitled to recover on the policy.” (Emphasis in original.)).

Moreover, the facts giving rise to EDB's status as a motor carrier were clearly known to Canal at the time it issued EDB's insurance policy, as EDB identified itself in its Application for Commercial Motor Vehicle Insurance as a “common carrier” in the business of hauling soil via dump truck. Though the record is unclear as to why Canal failed to issue a motor carrier policy, it is beyond dispute that Canal, which is in the business of offering insurance to motor carriers, was on notice of EDB's status as such and thus of its need for insurance complying with the Motor Carrier Act. Furthermore, the undisputed evidence reflects that Mr. Blackmon relied on his insurance agent to procure the appropriate insurance coverage and was never informed that his policy lacked the endorsement necessary to provide motor carrier coverage. Under the facts of this case, where EDB sought insurance coverage from Canal; where Canal was on notice of EDB's status as a motor carrier and thus of its need to obtain motor carrier coverage; and where EDB was not informed of nor otherwise had reason to believe the policy it was issued fell short of the coverage it was required by law to maintain, Canal is subject to a direct action under the Motor Carrier Act by third parties injured by virtue of EDB's negligence. Former OCGA § 46–7–12.1(c); former PSC Transp. Rule 7–2.1(e).⁸

Our approach herein is consistent with that we have taken in prior cases in which injured members of the motoring public have sought to recover from a negligent motor carrier's insurer despite some irregularity casting doubt on the existence or extent of coverage. See Progressive Preferred Ins. Co. v. Ramirez, 277 Ga. 392(1), 588 S.E.2d 751 (2003) (insurer liable to injured third party despite fact that policy had lapsed prior to accident); DeHart, supra, 270 Ga. at 385(2), 509 S.E.2d 913 (insurer liable to injured third party despite expiration of policy prior to accident); Ross, supra, 269 Ga. at 269, 496 S.E.2d 705 (insurer liable to injured third party despite fact that injuries were sustained in accident involving vehicle not listed in insured motor carrier's policy). In all these cases, the Court's rationale has hinged on the policy purpose of the Act to protect the motoring public. See, e.g., DeHart, ...