US v. Rutland, Inc., Civ. A. No. CV 493-109.

• Citation: 849 F. Supp. 806
• Decision Date: 13 April 1994
• Docket Number: Civ. A. No. CV 493-109.
• Parties: UNITED STATES of America, Plaintiff, v. RUTLAND, INC., d/b/a Maaco Auto Painting & Body Works, Defendant, Georgia Insurer's Insolvency Pool, Intervening Defendant.
• Court: U.S. District Court — Southern District of Georgia

849 F. Supp. 806

UNITED STATES of America, Plaintiff, v. RUTLAND, INC., d/b/a Maaco Auto Painting & Body Works, Defendant, Georgia Insurer's Insolvency Pool, Intervening Defendant.

Civ. A. No. CV 493-109.

United States District Court, S.D. Georgia, Savannah Division.

April 13, 1994.

Lawrence B. Lee, Savannah, GA, for U.S.

Edward M. Hughes, Savannah, GA, for Rutland, Inc.

Wilbur C. Brooks, James T. Budd, Chambers, Mabry, McClelland & Brooks, Atlanta, GA, for Georgia Insurers Insolvency Pool.

ORDER

EDENFIELD, Chief Judge.

Before the Court are the Plaintiff's, the Defendant's and the Intervening Defendant's motions for summary judgment and the Intervening Defendant's motion for a declaratory judgment. For the reasons set forth herein, the Plaintiff's motion for partial summary judgment is GRANTED and the Defendant's and Intervening Defendant's motions for summary judgment are DENIED.

BACKGROUND

The essential facts of this case are not in dispute. In 1989, the United States of America ("USA") entered into a contract with Rutland, Inc., d/b/a Maaco Auto Painting and Body Works ("Rutland") under which Rutland was to paint certain Air National Guard vehicles. On or about June 10, 1990, an Air National Guard vehicle that had been delivered to Rutland for painting was stolen from Rutland's property and subsequently wrecked and destroyed. USA brought this negligent bailment action against Rutland claiming that Rutland failed to adequately secure the vehicle in question and seeking $44,681.00 in damages.

At the time of the alleged incident, Rutland was insured by First Southern Insurance Company, a Florida corporation that was declared insolvent subsequent to the loss in question, but before this action was filed. As a result of that insolvency, the Georgia Insurer's Insolvency Pool ("GIIP") took up Rutland's defense under a reservation of rights.

On October 26, 1993, Magistrate Judge G.R. Smith entered an Order allowing GIIP to intervene as a Defendant in this action, and on November 24, 1993, GIIP filed a counterclaim and a cross-claim against the respective Parties for a declaratory judgment on their rights and liabilities under the Georgia Insurer's Insolvency Pool Act, O.C.G.A. §§ 33-36-1, et seq. (1990) ("Act"). All three of the Parties have moved for summary judgment.

ANALYSIS

I. Summary Judgment

The "purpose of summary judgment is to `pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986) (quoting Fed.R.Civ.P. 56 advisory committee's note). The Court's analysis ends "where there is no genuine issue of material fact and where the moving party is entitled to judgment as a matter of law." Great Lakes Dredge & Dock Co. v. Miller, 957 F.2d 1575, 1578 (11th Cir.), cert denied, Chevron Transport Corp. v. Great Lakes Dredge and Dock Co., ___ U.S. ___, 113 S.Ct. 484, 121 L.Ed.2d 388 (1992); Real Estate Fin. v. Resolution Trust Corp., 950 F.2d 1540, 1543 (11th Cir.1992) (both citing Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986)). Thus, summary judgment is appropriate where the nonmovant "fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322, 106 S.Ct. at 2552; Tidmore Oil Co. v. BP Oil Co./Gulf Prods. Div., a Div. of BP Oil Co., 932 F.2d 1384, 1387-88 (11th Cir.), cert. denied, ___ U.S. ___, 112 S.Ct. 339, 116 L.Ed.2d 279 (1991). The substantive law governing the action determines whether an element is essential. E.g., Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); DeLong Equip. Co. v. Washington Mills Abrasive Co., 887 F.2d 1499, 1505 (11th Cir.1989), cert. denied, 494 U.S. 1081, 110 S.Ct. 1813, 108 L.Ed.2d 943 (1990).

A dispute of material fact "is `genuine' ... if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Liberty Lobby, 477 U.S. at 248, 106 S.Ct. at 2510. "Factual disputes that are irrelevant or unnecessary will not be counted." United States v. Gilbert, 920 F.2d 878, 883 (11th Cir.1991) (citation omitted); see Useden v. Acker, 947 F.2d 1563, 1575 (11th Cir.1991), cert. denied, Useden v. Greenberg, Traurig, Hoffman, Lipoff, Rosen, & Quentel, ___ U.S. ___, 113 S.Ct. 2927, 124 L.Ed.2d 678 (1993).

In assessing whether the movant is entitled to summary judgment in its favor, the district court must review the evidence and all reasonable factual inferences arising from it in the light most favorable to the nonmoving party, Welch v. Celotex Corp., 951 F.2d 1235, 1237 (11th Cir.1992); Ryder Int'l Corp. v. First Am. Nat'l Bank, 943 F.2d 1521, 1523 (11th Cir.1991), and must avoid weighing conflicting evidence, Liberty Lobby, 477 U.S. at 255, 106 S.Ct. at 2513; Ryder, 943 F.2d at 1523; Brown v. Hughes, 894 F.2d 1533, 1536 (11th Cir.), cert. denied, 496 U.S. 928, 110 S.Ct. 2624, 110 L.Ed.2d 645 (1990); Tippens v. Celotex Corp., 805 F.2d 949, 953 (11th Cir.1986), or making credibility determinations. Liberty Lobby, 477 U.S. at 255, 106 S.Ct. at 2513; McKenzie v. Davenport-Harris Funeral Home, 834 F.2d 930, 934 (11th Cir.1987).

II. Rights and Liabilities of the Parties Under the Act

The material facts of this case not being in dispute, the present motions call for the Court to define the rights and obligations of the Parties under the Georgia Insurer's Insolvency Act. The Georgia Insurer's Insolvency Act is designed "to provide a remedy for covered claims under property and casualty insurance policies when the insurer has become insolvent and is unable to perform its contractual obligations." O.C.G.A. § 33-36-2 (1990) (emphasis added).

"Covered claims" are defined as claims that "arise out of" an insurance policy issued by a state-authorized insurer that fall within at least one of the classes of claims set forth in O.C.G.A. § 33-36-3(2)(B) (1990). These classes include claims "of a policyholder or insured who at the time of the insured event was a resident of this state," O.C.G.A. § 33-36-3(2)(B)(iii), and claims "of a person having an insurable interest in or related to property which was permanently situated in this state," O.C.G.A. § 33-36-3(2)(B)(iv). However, "a covered claim shall not include any obligation to insurers, insurance pools, underwriting associations, or any person which has a net worth greater than $3 million at the time of the insured event," O.C.G.A. § 33-36-3(F) (1990), and "shall not include any claim or judgment for punitive damages and attorney's fees," O.C.G.A. § 33-36-3(G) (1990).

In this case, USA alleges that Rutland was negligent in failing to properly secure a vehicle that USA had entrusted to Rutland for painting and corrosion control. Because Rutland's insurance carrier became insolvent prior to the filing of this action, GIIP assumed Rutland's defense and subsequently intervened as a defendant. GIIP asserts that USA is a "person which had a net worth greater than $3 million at the time of the insured event" and that GIIP is therefore not liable under the Act. GIIP and Rutland further assert that since Rutland was properly insured for losses of the type in question, and since GIIP is not liable under the Act, Rutland should not be penalized for the insolvency of their insurance company. In other words, they contend, the Act should be read to absolve Rutland of liability in the particular circumstances of this case. USA responds that Rutland's liability is not contingent upon its insurance coverage, regardless of the fact that GIIP has taken up Rutland's defense. Furthermore, USA asserts that GIIP's obligation to Rutland is one of indemnity and, thus, does not arise until and unless USA recovers a judgment against Rutland. In any event, USA maintains that its action is against Rutland, not GIIP, that this action is not substantively barred by the fact that USA has a net worth in excess of $3 million, and that if USA prevails and Rutland makes a claim against GIIP for reimbursement, Rutland's, and not USA's, net worth would be determinative of GIIP's obligations to pay.

Thus, the Court must analyze several issues: (1) is USA, for the purpose of this action, a "person which has a net worth greater than $3 million at the time of the insured event;" (2) if so, can Rutland nonetheless be held liable for USA's loss; and, (3) if so, can GIIP then be held liable to indemnify Rutland in the event that a judgment is returned against Rutland and in favor of USA.

1. USA's Status Under the Act

In its motion for summary and declaratory judgment, GIIP asserts that USA's claim is not a "covered claim" because USA is a "person which has a net worth greater than $3 million at the time of the insured event." O.C.G.A. § 33-36-3(F). The Court has taken judicial notice of the fact that USA's net worth exceeded $3 million at the time of the insured event. (Minute Order, Dec. 13, 1994.) Thus, the Court must now determine whether USA is a "person" under the Act.

Georgia insurance law defines "person" as follows:

"person" means an "individual, insurer, company, association, trade association, organization, society, reciprocal or interinsurance exchange, partnership, syndicate, business trust, corporation, Lloyd's association, and associations, groups, or department of underwriters, and any other legal entity."

O.G.C.A. § 33-1-2(5) (1992) (emphasis added); Georgia Insurer's Insolvency Pool v. Elbert County, 258 Ga. 317, 318, 368 S.E.2d 500 (1988). The term "legal entity" is not defined in the insurance code, but the Georgia Supreme Court has defined it as "an entity, other than a natural person, who has sufficient existence in legal contemplation that it can function legally, be sued or sue, and make decisions through agents as in the case of...