U.S. Fidelity & Guar. Co., Inc. v. Paul Associates, Inc., s. A98A0179

• Court: United States Court of Appeals (Georgia)
• Citation: 496 S.E.2d 283,230 Ga.App. 243
• Decision Date: 16 January 1998
• Docket Number: Nos. A98A0179,s. A98A0179
• Parties: , 98 FCDR 409 UNITED STATES FIDELITY & GUARANTY COMPANY, INC. v. PAUL ASSOCIATES, INC. et al. MIC ENTERPRISE et al. v. PAUL ASSOCIATES, INC. et al. PAUL ASSOCIATES, INC. et al. v. UNITED STATES FIDELITY & GUARANTY COMPANY, INC. to A98A0181.

Page 283

496 S.E.2d 283 230 Ga.App. 243, 98 FCDR 409 UNITED STATES FIDELITY & GUARANTY COMPANY, INC.
v.
PAUL ASSOCIATES, INC. et al.
MIC ENTERPRISE et al.
v.
PAUL ASSOCIATES, INC. et al.
PAUL ASSOCIATES, INC. et al.
v.
UNITED STATES FIDELITY & GUARANTY COMPANY, INC. Nos. A98A0179 to A98A0181. Court of Appeals of Georgia. Jan. 16, 1998.
Certiorari Denied May 15, 1998.

Page 285

[230 Ga.App. 253] Swift, Currie, McGhee & Hiers, Jeffrey Y. Lewis, John D. Sullivan, Atlanta, for United States Fidelity & Guaranty Company.

Todd K. Maziar, Atlanta, for MIC Enterprise, Inc.

Lokey & Smith, Malcolm Smith, Jon W. Burton, Atlanta, for Paul Associates, Inc.

[230 Ga.App. 243] ELDRIDGE, Judge.

Defendants-appellees and cross-appellants Paul Associates, Inc. ("Paul") is the insurance agency of Claude Paul II. MIC Enterprise is a company operated by Michael Basile, Cynthia Basile, and Michael Coleman, who are also defendants-appellees and cross-appellants. Coleman and Cynthia Basile went to Paul to obtain workers' compensation insurance coverage. Paul submitted an application through the Georgia Workers' Compensation

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Insurance Plan (the assigned risk pool) to obtain coverage. Under the plan, the National Council on Compensation-Insurance Southern Division ("NCCI") made an assignment of the coverage to plaintiff-appellant and cross-appellee United States Fidelity & Guaranty Company, Inc., ("USF&G") as carrier. Both USF&G and NCCI processed the application based upon the information contained in the application.

The policy of workers' compensation insurance was issued by USF&G to MIC for one year. After the policy was issued, USF&G discovered that the application contained numerous, significant false statements. The very basis for qualification and assignment under the plan was that MIC had been rejected in writing by four separate workers' compensation insurance carriers; however, MIC had never applied for nor been rejected previously for coverage.

USF&G sued all the defendants for negligent misrepresentations. Also, USF&G sued MIC and the principals, the Basiles and Coleman, for breach of contract and personal liability for MIC's debts and liabilities.

Prior to trial, Paul filed a motion in limine to exclude any evidence which showed that Paul had previously filed similar applications for other insureds under the plan that did not qualify, but that he had represented did qualify. USF&G proffered evidence that, as he had done with MIC, Paul previously had submitted similar applications for two other insureds that had not been rejected by four carriers. USF&G argued that this was impeaching evidence which showed habit or custom of Paul in submitting erroneous applications. [230 Ga.App. 244] The trial court granted Paul's motion in limine, keeping out this evidence.

At trial, Coleman directly contradicted Paul's testimony by testifying that MIC had never applied for nor been rejected for workers' compensation insurance and that neither he nor Cynthia Basile ever told Paul that MIC had been rejected.

While Paul testified in deposition testimony that he could not remember how he came up with the names of the insurance companies listed on the application as having previously rejected MIC's application, at trial Paul testified that Coleman and Cynthia Basile had given him such information. On cross-examination, Paul testified that he "always" got the information by telephone for the application from the insured; that his usual practice and procedure in filling out insurance applications was to take the information regarding rejections from the applicants over the telephone; and that he got such information from MIC in this way and that he remembered this after the deposition. USF&G sought permission from the trial court to use the previously excluded similar cases to impeach Paul about how he "always" handled information regarding rejection; however, the trial court denied such permission.

The jury returned verdicts for MIC on the breach of contract claim; USF&G received a verdict of $133,363 for breach of contract against Coleman and the Basiles, to be apportioned equally; USF&G received a verdict for negligent misrepresentation against Coleman, the Basiles, and Claude Paul II, in the total amount of $24,300, apportioned as follows: $9,000 against Paul and $5,000 against each of the other individuals; defendants' claim for contribution from third-party defendants was denied; USF&G received expenses of litigation of $15,000 against Coleman, and against each of the Basiles, totaling $45,000. Judgment was entered upon the verdict on October 10, 1996.

USF&G filed a motion for new trial and alternatively, a motion notwithstanding the verdict. The motion for new trial was denied, but the trial court granted the judgment n.o.v. against MIC on the breach of contract claim in the amount of $133,363 on February 4, 1997. The parties filed their respective notices of appeal or cross-appeal.

Case No. A98A0179

1. USF&G's first and second enumerations of error involve the same issue: whether the trial court erred in not allowing it to either cross-examine Paul on prior similar applications for other insureds for purposes of impeachment or in granting the motion in limine to the same effect. This asserted error was harmless error.

[230 Ga.App. 245] To the extent that the trial court's exclusion of the prior similar acts, either for impeachment

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or to prove habit, was error, such error was harmless, because USF&G received a verdict from the jury as to all defendants, and the evidence, if admissible, had relevance to the issue of liability and not of damages. "Inasmuch as appellant['s] counsel's question was only relevant to the question of liability, even if it [was] error to disallow it, the trial court's ruling was harmless since a verdict was rendered for the appellant." Gurly v. Hinson, 194 Ga.App. 673(1), 391 S.E.2d 483 (1990); see also Robinson v. Murray, 198 Ga. 690(2), 32 S.E.2d 496 (1944); American Alloy Steel v. Bearings & Drives, 188 Ga.App. 792, 374 S.E.2d 570 (1988); Maloy v. Dixon, 127 Ga.App. 151(2), 193 S.E.2d 19 (1972).

2. The third enumeration of error is that "the trial court erred in failing to charge the jury that an insurer may rely on representations in an insurance application as true without conducting an independent investigation." We do not agree.

USF&G's charge was taken from a case decided on summary judgment to cancel a fire insurance policy for misrepresentations on the application. In addition to the portion in the requested charge, this Court held as follows: "Although [the insurer] relies on OCGA § 33-24-6(c) to support this position, this Code section applies only to statements involving applications for life or accident and sickness insurance. See, e.g., Fidelity Bankers Life Ins. Co. v. Renew, 121 Ga.App. 883, 884(2), 176 S.E.2d 103 (1970). However, OCGA § 33-24-7(a) provides that statements in applications are 'representations' and subsection (b) states the circumstances under which an insurer can avoid the policy for '(m)isrepresentations, omissions, concealment of facts, and incorrect statements.' [ (Emphasis omitted.) ] Thus it is implicit that an insurer is entitled to rely on statements of an applicant as true, without conducting an independent investigation. Of course, it assumes a risk, because recovery on policies issued on such representations is prevented only in the three instances in the statute. The burden on the insurer is to prove one of them." (Emphasis supplied.) Graphic Arts Mut. Ins. Co. v. Pritchett, 220 Ga.App. 430, 432(2), 469 S.E.2d 199 (1995). This language of the charge has been taken out of context from a fire insurance contract coverage case and it is not an accurate and complete statement of the applicable law in this workers' compensation insurance case for the collection of premiums in a breach of contract and negligent misrepresentation action. Any charge to such effect under these facts and circumstances should be based on OCGA § 34-9-133, which mandates coverage when an assignment is made under the assigned risk plan.

"In order for a refusal to charge to be error, the requests must be entirely correct and accurate, and adjusted to the pleadings, law, and evidence, and not otherwise covered in the general charge." (Citation [230 Ga.App. 246] and punctuation omitted.) Heffernan v. Home Depot U.S.A., Inc., 226 Ga.App. 167, 168(2), 486 S.E.2d 51 (1997); Lee v. Bartusek, 205 Ga.App. 551, 422 S.E.2d 570 (1992). "Although the language used by appellate courts in a decision may embody sound law, it is not always proper to employ such language in a charge to the jury. Department of Transp. v. Hillside Motors, 192 Ga.App. 637, 640(3), 385 S.E.2d 746 [ (1989) ]." Continental Research Corp. v. Reeves, 204 Ga.App. 120, 126(3), 419 S.E.2d 48 (1992). "A request to charge itself must be correct, legal, apt, even perfect, and precisely adjusted to some principle involved in the case. If any portion of the request is inapt or incorrect, denial of the request is proper." (Citations and punctuation omitted; emphasis in original.) Mattox v. MARTA, 200 Ga.App. 697, 699(4), 409 S.E.2d 267 (1991); accord Continental, supra at 126-127, 419 S.E.2d 48. The trial court did not err in rejecting the request to charge.

3. The fourth enumeration of error is that the trial court erred "in charging the jury as to USF&G's negligence by giving third party defendants' requests to charge nos. 5 and 6, and the supplemental charge regarding OCGA § 51-12-33 relating to contributory and comparative negligence." We do not agree.

USF&G brought this action against the defendants for negligent misrepresentation, not to avoid coverage, but to obtain damages flowing from the tort; therefore,

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tort defenses, either in avoidance or in mitigation, were applicable.

USF&G, by being licensed to sell workers' compensation insurance, bound itself to accept a certain number of...