Coverage Analysis
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GEORGIA

  ACCIDENTS OR OCCURRENCES

  Intent inferred as a matter of law in certain cases where the insured's conduct is inherently injurious. Roe v. State Farm, 376 S.E.2d 876 (Ga. 1989) and Allstate Ins. Co. v. Jarvis, 195 Ga. App. 335, 393 S.E.2d 489 (1990)(sexual molestation).  

  An insured’s intentional cutting up of stolen railroad cars for scrap metal was not an “accident” despite the insured’s erroneous belief that it had good title to the rail cars.  Mindis Metals, Inc. v. Transportation Insurance Company, 2000 WL 430043 (11th Cir. April 20, 2000)(Georgia law).  Likewise, a federal district court has ruled that allegations that the insured committed fraud or conversion by destroying the plaintiff’s cars and cutting them into scrap have been held not to allege an “occurrence” or “accident” regardless of the insured’s claims that it was unaware that the transactions were unauthorized.  Macon Iron and Paper Stock Company, Inc. v. Transcontinental Insurance Company, 1999 WL 1702730 (M.D. Ga. March 10, 1999).

  Voluntary intoxication may destroy an insured's capacity to intend harm.  State Farm v. Morgan, 364 S.E.2d 62 (Ga. App. 1987), aff'd, 276 S.E.2d 509 (Ga. 1988).  

  While any intent to injure will preclude coverage, the intent must be to cause bodily injury.  Thus, in West American Ins. Co. v. Merritt, 456 S.E.2d 235 (Ga. App. 1995), the Court of Appeals ruled that there was coverage where a teenager only intended to "sting" his friend by shooting him with a BB and did not intend to blind him.

  A homeowner's policy that excluded coverage for the consequences of intentional acts was applied on an "objective" standard in Allstate Ins. Co. v. Dillard, 859 F.Supp. 1501 (M.D. Ga. 1994)(shooting by 13 year old boy).

  The Georgia Supreme Court has ruled in SCI Liquidating Corporation v. Hartford Fire Insurance Company, 272 Ga. 293, 526 S.E.2d 555 (2000) that an exclusion in an umbrella policy for bodily injury or personal injury “to other employees arising out of and in the course of their employment” did not extend to Title VII sexual harassment claims against an employer.  Analyzing Georgia workers compensation law, the Supreme Court declared that both prongs of the exclusions were not met since, whereas sexual harassment claims may occur “in the course of employment,” they do not “arise out of” employment.
 

  ALLOCATION AND SCOPE ISSUES

  Under Georgia law, an insurer has standing to pursue claims for contribution and subrogation against a co-insurer that has refused to pay its share of a loss that both insurers owe.  Aetna Casualty & Surety Company v. Empire Fire & Marine Insurance Company, 442 S.E.2d 778 (Ga. App. 1994).

  Where one insurer refuses to provide coverage, forcing another insurer to make payment for the loss, the first insurer cannot argue that these payments were voluntarily made and that coverage is forfeited as being in breach of the policy’s voluntary payments clause.   Continental Insurance Company v. Federal Insurance Company, 266 S.E.2d 351 (Ga. App. 1980) and Arrow Exterminators, Inc. v. Zurich American Insurance Company, No. 1:99-CV-1959 (N.D. Ga. March 30, 2001.
 

  APPELLATE PROCEDURES

  Georgia has both an intermediate appellate court and a state Supreme Court.

  
  BAD FAITH

  Unfair or deceptive consumer practices are proscribed by Ga. Code Ann. § 10-1-390 (Michie 1989 and Supp. 1993).

  OCGA Section 33-4-6 provides that an insured may recover up to 25% of its losses, penalty plus attorney’s fees if the insurer’s refusal to pay a claim was made in bad faith.  First Financial Ins. Co. v. American Sandblasting Co., 1996 Ga. App. LEXIS 1125 (Ga. October 16, 1996).   This penalty interest is the exclusive remedy for an insurer's bad faith failure to pay insurance proceeds.  Howel v. Southern Heritage Ins. Co., 448 S.E.2d 275 (Ga. App. 1994).  

  An insured pressing a claim under Section 33-4-6 must first make a timely demand before the filing of a suit.  Cagle v. State Farm Fire & Casualty Company, 512 S.E.2d 717 (Ga. App. 1999).  The demand letter must specifically describe the claimed misconduct and must specifically request remedial relief from the insurer.  Arrow Exterminators, Inc. v. Zurich American Insurance Company, No. 1:99-CV-1959 (N.D. Ga. March 30, 2001)(letter expressing general dissatisfaction with insurer did not meet procedural requirements of statute).  

  For the most part, an insurer’s liability to its policyholder arises in contract.  “The mere breach of an ordinary contract does not constitute a tort; and if there is no liability except that arising out of a breach of a purely contractual duty, the action must be in contract, and an action in tort cannot be maintained.”  Leonard v. Firemen’s Insurance Company, 111 S.E.2d 773 (Ga. App. 1959) and Cummings v. Prudential Insurance Company, 542 F.Supp. 838, 841 (S.D. Ga. 1982).  An action in tort may be founded based upon an insurer’s acts of negligence that are independent of its contractual duty to provide coverage, as where the insurer fails to settle a claim.  Delancy v. St. Paul Fire & Marine Insurance Company, 947 F.2d 1536, 1545 (11th Cir. 1991)(recognizing exception for claims involving “special relationship”).

  In American Sandblasting, the Georgia Court of Appeals ruled that a liability insurer had acted in bad faith in continuing to deny an insured's claim even after the insured sent correspondence to it showing how its policy exclusion could be interpreted in two different ways.  In view of this evidence, the court refused to find that the insurer had a reasonable basis for continuing to refuse to provide coverage.

  An insurer’s good faith obligations do not end when coverage litigation begins.  Claussen v. Aetna Cas. & Sur. Co., 754 F.Supp. 1576, 1583 (S.D. Ga. 1990)(allowing motion to amend to state claim for “bad faith” based upon Aetna’s refusal to pay claim after intervening changes in law made coverage defenses inapplicable).

  A cause of action for negligent failure to settle within policy limits was recognized by the Georgia Supreme Court in Southern General Ins. Co. v. Holt, 272 Ga. 267, 416 S.E.2d 274 (1992).  However, the assignee of the insured's claim was not entitled to recover punitive damages.

  The Court of Appeals affirmed a bad faith verdict against a liability insurer that settled with its insured for a token amount in return for an agreement not to assign its bad faith rights to the underlying plaintiff in Jefferson Ins. Co. v. Dunn, 482 S.E.2d 383 (Ga. App. 1997)(settlement on eve of insured's bankruptcy held to be a fraudulent conveyance).

  A third party claimant cannot sue an insured for bad faith. Allstate Ins.  Co.  v.  Harris, 211 S.E.2d 783, 785 (Ga.  App.  1974).   However, an insured’s claim for bad faith can be assigned to a third party.  Southern General Ins. Co. v. Ross, No. A97A0546 (Ga. App. June 27, 1997).  

  An insurer may be held vicariously liable for the malpractice of its appointed defense counsel.  Smoot v. State Farm Mutual Ins. Co., 299 F.2d 525, 530 (5th Cir. 1962) (Georgia law). 
 

  “BODILY INJURY”

  Under Georgia law, purely mental harm is not a “bodily injury.”  Anderson v. Southern Guaranty Insurance Company, 508 S.E.2d 726, 729 (Ga. Ct. App. 1998).  See also
Presidential Hotel v. Canal Ins. Co., 373 S.E.2d 671, 672 (Ga. App. 1988)(sexual harassment) and Wilmington Island Construction Co. v. Cincinnati Ins. Co., 179 Ga. App. 477, 347 S.E.2d 308 (1986).
  Allegations of emotional distress and economic loss based on theories of breach of contract and RICO were held not to seek damages “because of bodily injury” inasmuch as the underlying court had previously ruled that the plaintiff’s tort claims were barred by the statute of limitations.  Pacific Employer’s Insurance Company v. Cesnik, 2000 WL 1035382 (11th Cir. July 27, 2000).  (Georgia law).  In Cesnik, the Eleventh Circuit ruled that the “because of” language required that there be a connection between the damages sought and a covered bodily injury.
 

  BROAD FORM COVERAGE

  Under Georgia law, a claim for advertising injury must be supported by evidence that the injury resulted from the insured's advertising activities.  Bowden v. Aetna Casualty & Surety Co.,  977 F.Supp.  1475  (N.D. Ge. 1997).  

  In Elan Pharmaceutical Research Corp. v. Employers Ins. of Wausau, No. 96-9249 (11th Cir. June 26, 1998), the Eleventh Circuit found that the insured's dissemination clinical studies through trade periodicals as part of a campaign to develop a market for its product constituted "advertising activity," rejecting Wausau's contention that only "widespread distribution" to the general public or specific consumers should be covered.  However, addressing an issue of first impression in Georgia, the Eleventh Circuit ruled that the insured had failed to establish a causal connection between this advertising and the plaintiff's claimed injuries. 

  Allegations by abutting property owners that gasoline had leaked from the insured's tanks onto their land was held to be outside the scope of "personal injury" coverage in Truitt Oil & Gas Co. v. Ranger Ins. Co.,  498 S.E.2d 572 (Ga. App.  1998).  The Court of Appeals ruled that the neighbor's claim was for "loss of use of property" and did not allege any demand based on "wrongful entry or invasion of the right of private occupancy."

  Although the "occurrence" policy limitation bars coverage for intentional acts, ambiguity has been found given the conflict between this limitation on coverage and the grant of insurance for intentional torts under "personal injury" coverage provisions. Lincoln National Health Ins. Co. v. Brown, 782 F.Supp. 110, 112 (M.D. Ga. 1992).
 

  BREACH OF POLICY CONDITIONS

  Insurer does not need to show prejudice. Granite State Ins. Co. v. Nord Bitumi U.S., Inc., 422 S.E.2d 191 (Ga. 1992);  Townsend v. National Union Fire Ins. Co., 196 Ga. App. 789, 397 S.E.2d 61 (1990) and State Farm Mutual Auto Ins. Co. v. Sloan, 150 Ga. App. 464, 258 S.E.2d 146 (1978).  Georgia's standard is whether insured's delay, under all the circumstances, was "unjustified and unreasonable."  Caldwell v. State Farm Fire & Cas. Ins. Co., 192 Ga. App. 419, 385 S.E.2d 97 (1989)(10 month delay that was motivated by desire to avoid increased premium at policy renewal unreasonable as a matter of law).  See also  EVI Equipment, Inc. v. Northern Ins. Co., 188 Ga. App. 818, 374 S.E.2d 788 (1988).

  The obligation to give notice of an occurrence arises when a reasonable insured would conclude that an incident would give rise to a possible claim.  Guaranty National Ins. Co.  v.  Brock, 222 Ga.  App.  294, 295 (1996), citing Southern Guaranty Ins.  Co.  v.  Miller, 183 Ga.  App.  261, 263 (1987).  

  A policyholder may be excused for failing to give notice "as soon as practicable" of an occurrence if an ordinarily prudent person acting reasonably would have believed that he was not liable for the incident.  Guaranty National Ins. Co. v. Brock, 474 S.E.2d 46 (Ga. App. 1996) and Southern Guaranty Ins. Co. v. Miller, 358 S.E.2d 611 (Ga. App. 1987).  However, the same excuse does not apply to the separate requirement that immediate written notice be provided for any suit.  On the other hand, the Court of Appeals ruled in Plantation Pipeline Company v. Royal Indemnity Company, No. A00A0690 (Ga. App. July 11, 2000) that an insured’ delay was not excused by its assumption that it was not legally liable for discharges of pollution from its property and that the insured’s failure to provide notice had precluded Royal’s opportunity to investigate the claims.

  A notice requirement may be satisfied by information obtained from a third-party other than the policyholder.   Mahone v. State Farm Mutual Auto Insurance Company, 373 S.E.2d 809 (Ga. App. 1988) and Levinthal v. American Bankers Insurance Company of Florida, 283 S.E.2d 3 (Ga. App. 1980).

  An insured that settles a claim without notice to its insurer forfeits its rights to coverage for the settlement.  The insured is relieved of these responsibilities if the insurer has already refused to provide coverage, however.  Jones v. Southern Marine & Aviation Underwriters, 888 F.2d 358, 361-62 (11th Cir. 1989).  Similarly, in Simmons v. Select Ins. Co., 183 Ga. App. 128, 358 S.E.2d 288 (1987), the Georgia Court of Appeals held that the insured's  voluntary payment of a potential claim, in "direct contravention" of a policy proscription against unilateral settlements, resulted in a forfeiture of coverage.  However, in Granite State Ins. Co. v. Nord Bitumi U.S., Inc., 262 Ga. 502, 422 S.E.2d 191 (1992), the court held that an insured did not forfeit its primary coverage by unilaterally settling the uninsured excess exposure of a subrogation claim against it.

  An insured may not obtain reimbursement for defense costs or payments made prior to the date that it gives notice to the insurer. Boardman Petroleum, Inc. v. Federated Mutual Ins. Co., 926 F.Supp. 1566 (S.D. Ge. 1995).
 

  BURDEN OF PROOF

  Insurer must demonstrate applicability of policy exclusion.  State Farm v. Morgan, 364 S.E.2d 62 (Ga. App. 1987).
 

  CHOICE OF LAWS

   Governed by the law of the state where the contract is made. American Home Life Assurance Co. v. United States Fire Ins. Co., 885 F.2d 826 (11th Cir. 1989) and Avemco Ins. Co. v. Rollins, 380 F.Supp. 869, 872 (N.D. Ga. 1973), affirmed without opinion, 500 F.2d 1182 (11th Cir. 1974).  Insurance contracts are considered as having been "made" in the state where the policy is delivered.  Casey Enterprises, Inc. v. American Hardware Mutual Ins. Co., 655 F.2d 598, 602 (5th Cir. 1981); General Electric Credit Corp. v. Home Indemn. Co., 309 S.E.2d 152 (Ga. App. 1983).  

  However, in Shorewood Packaging Corp. v. Commercial Union Ins. Co., 865 F.Supp. 1577 (N.D. Ga. 1994), a Georgia District Court ruled that the Georgia Supreme Court has limited the application of out-of-state law to statutes and related case law.  Since claims in question only involved the issue of coverage for cleaning up polluted sites in Georgia and New York and did not involve any question of statutory interpretation, the court ruled that Georgia law should apply.  A contrary view was adopted in JP Stephenson Co., Inc. v. Liberty Mutual Ins. Co., No. 91-1241 (N.D. Ga. March 9, 1993)(where site was located in South Carolina and only connection to Georgia was location of insured's corporate headquarters, South Carolina law should apply).
 

  CONFLICTS OF INTEREST

  Georgia courts have declared that defense counsel represents both insured and insurer in the absence of a conflict of interest. Coscia v. Cunningham, 299 S.E.2d 880 (Ga. 1983).

  "DAMAGES"

  Georgia Court of Appeals ruled in Atlantic Wood Industries, Inc. v. Argonaut Ins. Co. 196 Ga. App. 503, 396 S.E.2d 541 (1990) that clean up costs are "damages."  See also  Briggs & Stratton Corporation v. Royal Globe Insurance Company, 64 F.Supp.2d 1340 (M.D. Ge. 1999);   Dickies Industrial Services, Inc. v. Liberty Mutual Ins. Co., No. 1:97-CV-1391 (N.D. Ga. March 31, 1999);  Claussen v. Aetna Cas. & Surety Co., 754 F.Supp. 1576 (S.D. Georgia 1990); South Carolina Ins. Co. v. Coody, 813 F.Supp. 1570 (M.D. Ga. 1993) and Boardman Petroleum, Inc. v. Federated Mutual Ins. Co., 926 F.Supp. 1566 (S.D. Ge. 1995).
 

  DECLARATORY JUDGMENT ACTIONS
  In Atlantic Wood Industries, Inc. v. Argonaut Ins. Co., 258 Ga. 800, 375 S.E.2d 221 (1989), the Georgia Supreme Court ruled for the first time that insureds were free to commence a declaratory judgment action.  Previously, this right had been restricted to carriers. 
  There must be a justiciable controversy at the time that the DJ is filed. Atlanta Gas Light Co. v. Aetna Cas. & Sur. Co., 68 F.3d 409 (11th Cir. 1995)(dismissing DJ that was filed the day after notice was given, prior to any objection being received).
  

  DIRECT ACTIONS

 The Eleventh Circuit has ruled in Payne v.  Selective Ins.  Co., No.  96-9328 (11th Cir. August 6, 1998), that a district court erred in permitting a tort claimant to pursue a direct action against a school bus insurer for injuries suffered by a student who was assaulted by a fellow student on a school bus.  In light of the Georgia Supreme Court’s resolution of its certified question on this issue, the court found that the Georgia statute requiring County School Boards to  purchase liability insurance for school buses did not create a private cause of action against insurers for persons injured on buses.
 

  DISCOVERY ISSUES

   --Claims Manuals
 

   --Drafting History
 

   --Other Policyholder Claims

  Discovery of files concerning other policyholders should be limited where the files contain information that is confidential to the other insureds.  See Mallen v. Merrill Lynch Futures, Inc., 102 F.R.D. 801, 802 (N.D. Ga. 1984)(a party has an obligation to respect the confidential information of a nonparty client or customer). 

   --Reinsurance Information
 

   --Reserves

  DUTY TO DEFEND
    
  An insurer must consider both facts that are pleaded and those that are known to it considering whether it has a duty to defend.  American Ins. Co. v. McKemie, 244 Ga. 84, 85, 259 S.E.2d 39 and Presidential Hotel v. Canal Ins. Co., 188 Ga. App. 609, 610, 373 S.E.2d 671 (1988).   Accordingly, an insurer may only refuse to provide a defense if the underlying allegations establish that there is no possible basis for coverage.  Penn-America Ins.  Co.  v.  Disabled Veterans, Inc., 268 Ga.  564, 565 (1997).  On the same day that it decided Disabled Veterans, the Georgia Supreme Court declared in Colonial Oil v.  Certain Underwriters at London, 258 Ga.  561, 562 (1997) that an insurer might also be obligated to consider facts extrinsic to those alleged where the underlying allegations were silent with respect to key coverage considerations. 

  An insurer may not prematurely terminate its defense obligation by tendering its policy limits prior to any judgment or settlement.  Anderson v. USF&G, 339 S.E.2d 660 (Ga. App. 1986). 

  Federal district courts have ruled on several occasions that governmental clean up claims were close enough to be a "suit" so as to require a defense.  See Boardman Petroleum, Inc. v. Federated Mutual Ins. Co., 926 F.Supp. 1566 (S.D. Ge. 1995); Briggs & Stratton Corporation v. Royal Globe Insurance Company, 64 F.Supp.2d 1340 (M.D. Ge. 1999)  and Dickies Industrial Services, Inc. v. Liberty Mutual Ins. Co., No. 1:97-CV-1391 (N.D. Ga. March 31, 1999).
 

  ESTOPPEL AND WAIVER

  Georgia courts have ruled that estoppel or waiver cannot be used to expand the scope of coverage.  Matia v. Carpet Transport, Inc., 888 F.2d 118, 120 (11th Cir. 1989).  An insurer's conduct may serve as a basis for waiving policy provisions that might otherwise effect a forfeiture of coverage, such as notice requirements.  Sargent v. Allstate Ins. Co., 165 Ga. App. 863, 865, 303 S.E.2d 43.  However, it cannot "breathe life back into an expired contract," as where the accident occurred after the coverage had terminated.  Prescott's Altama Datsun, Inc. v. Monarch Ins. Co.. 1984 Fire and Casualty Cases 560, No. 67314 (Ga. App. March 13, 1984).  Thus, the Georgia Supreme Court ruled in  Colonial Oil Industries, Inc. v. Certain Underwriters, 491 S.E.2d 337 (Ga. 1997) that an insurer's wrongful refusal to defend did not estop the carrier from questioning the scope of its indemnity obligation.

  The doctrine of estoppel applies when the representations or conduct of one party cause another to act in reliance thereon to the latter’s detriment.  Georgia Farm Bureau Insurance Company v. Vanhuss, 532 S.E.2d 135 (Ga. App. 2000).  
 

  EXCESS INSURERS

  Unless contractually provided for, courts have not required excess insurers to defend.  Continental Ins. Co. v. Synalloy Corp., 667 F.Supp. 1563, 1569-70 (S.D. Ga. 1986), aff'd, 826 F.2d 1024 (11th Cir. 1987).

  However, an umbrella insurer may be obligated to defend a case in which the primary insurer wrongfully refuses to defend.  American Family Life Assur. Co. v. U.S. Fire Ins. Co., 885 F.2d 826 (11th Cir. 1989).

  An excess policy that defines coverage as excess of "the limits of the underlying insurance, as set forth in the attached Schedule," "the amounts specified" in the primary policy or the insured's "retained limit," will not be required to drop down.  Garmany v. Mission Ins. Co., 785 F.2d 941 (11th Cir. 1986).  The 11th Circuit also upheld a "maintenance of underlying insurance" condition in Hercules Bumpers, Inc. v. First State Ins. Co., 863 F.2d 839 (11th Cir. 1989)(umbrella coverage not triggered until underlying limits are exhausted).

  The Georgia Court of Appeals has recognized an excess insurer's right to pursue a primary carrier on a theory of equitable subrogation.  However, since the excess insurer stands in the shoes of the insured, it is also subject to any defenses which could be asserted by the primary carrier against the insured.  See Home Ins. Co. v. North River Ins. Co., 385 S.E.2d 736, 740 (Ga. App. 1989).  

  However, a primary insurer has no independent obligation to give notice to an excess carrier.  Evanston Ins. Co. v. Stonewall Surplus Lines Ins. Co., 111 F.3d 852 (11th Cir. 1997).
 

  KNOWN LOSS

  Whereas a “known loss” defense was recognized by a U.S. District Court in South Carolina Ins. Co. v. Coody, C.A. 92-54-4-M (M.D. Ga. February 11, 1993), a state trial court rejected it in a later pollution case, noting that Coody had relied on New Jersey and Third Circuit cases and had not cited any Georgia authority in support of this rule. Plantation Pipeline v.  Royal Indemnity Co., Fulton No.  E67737 (Ga.  Super.  January 29, 1999).
 

  NUMBER OF OCCURRENCES

  "Cause" test seemingly adopted in old "accident" case.  St. Paul Mercury Indemnity Co. v. Rutland, 225 F.2d 689 (5th Cir. 1955)(diverse injuries resulting from a railroad crash were all one "accident").
 

  POLLUTION EXCLUSION
  Georgia Supreme Court ruled in Claussen v. Aetna Cas. & Surety Co., 259 Ga. 333, 380 S.E.2d 686 (1989) that gradual contamination may still be "sudden" so long as it is unexpected or unintended by the insured.  The court also suggested that the exclusion was only intended to avoid coverage for "active polluters."  The federal district court has since ruled in the same case that deliberate dumping by third parties on the insured's property was "accidental."  

 Since then, however, federal courts have generally ruled that intentional releases of pollutants are not "accidental" even if the insured did not intend to cause injury by its deliberate acts.  Virginia Properties, Inc. v. Home Ins. Co., 74 F.3d 1131, 1134 (11th Cir. 1996);  Seaboard Industries, Inc. v Aetna Cas. and Surety Co. 1:90-CV-1061-RCF (N.D. Ga. April 20, 1992); Damar, Inc. v. United States Fire Ins. Co., No. 1: 92-CD-1049 (N.D. Ga. September 28, 1993), aff'd mem (11th Circuit 1994).   On the other hand, in Dickies Industrial Services, Inc. v. Liberty Mutual Ins. Co., No. 1:97-CV-1391 (N.D. Ga. March 31, 1999), Judge Hunt declared that the insured’s knowledge that perc vapors were escaping from its dry cleaning facility did not compel a finding that the discharges of pollutants were intentional.  More recently, Judge Duval ruled in Briggs & Stratton Corporation v. Royal Globe Insurance Company, 64 F.Supp.2d  1346 (M.D. Ga.  1999) that clean up claims against an insured who provided chemicals to an electroplater that intentionally discharged chemical waste were “accidental” as the intentional discharge of waste by the site operator was unintended from the insured’s standpoint. 

  The Georgia Court of Appeals has upheld the "absolute" exclusion in a series of cases.   Truitt Oil & Gas Co. v. Ranger Ins. Co., 498 S.E.2d 572 (Ga. App.  1998)(gasoline that leaked out of underground tanks was clearly a “pollutant”); Perkins Hardwood Lumber Co. v. Bituminous Cas. Corp., 378 S.E.2d 407 (Ga. App. 1989)(smoke for insured's fire) and American States Ins. Co. v. Zippro,  445 S.E.2d 133 (Ga. App. 1995)(asbestos dust from contractor's negligent sanding of plaintiff's kitchen). Accord Damar, Inc. v. United States Fire Ins. Co., No. 1: 92-CD-1049 (N.D. Ga. September 28, 1993), aff'd mem (11th Circuit 1994)(clean up of pollution on insured's property)

  A federal district court has ruled in North Georgia Petroleum Co.  v.  Federated Mutual Ins.  Co., 68 F.Supp.2d 1321 (N.D. Ga. 1999) that such exclusions are not against public policy.  The court refused to distinguish Zippro on the basis that this claim involved a “completed operation.”  the court declined to find that there was an ambiguity in the policy with respect to the insurance for completed operations and the application of the exclusion.

  However, claims for personal injury caused by the plaintiff's inhalation of fumes from the insured's adhesive product while working on his boat were held to be outside the scope of the exclusion in Bituminous Cas. Corp. v. Advanced Adhesive Technology, Inc., 73 F.3d 335 (11th Cir. 1996).  The 11th Circuit ruled that the injuries were caused by an "emission" which was outside the scope of the exclusion's reference to "discharge, dispersal, release or escape."  Relying on Claussen, the court ruled that the existence of multiple dictionary definitions of "emission," only one of which was "discharge" required a finding of coverage.  The court also noted that the exclusion was intended to shield insurers from "environmental" liabilities and that it would require a "strained" interpretation of the exclusion to apply it to claims based on a customer's intended use of an insured product.

  A "petroleum operations" exclusion, which did not contain a "sudden and accidental" exception, was held not to exclude a release of gasoline from a pipeline into the surrounding aquifer on the grounds that the aquifer was not a "body of water" within the scope of the exclusion.  Lumbermens Mutual Casualty Company v. Plantation Pipeline Co., 214 Ga. App. 23, 447 S.E.2d 89 (1994).
 

  PUBLIC POLICY

  An exclusion in a medical malpractice policy limiting coverage to $25,000 for sexual misconduct claims has been ruled not void as against public policy.  American Home Assur. Co. v. Smith, 462 S.E.2d 441 (Ge. App. 1995).
 

  PROPERTY DAMAGE

  The Georgia Court of Appeals has ruled that losses suffered by a claimant as a consequence of illegal finance charges under a retail installment contract were not covered as money is not “tangible property.”  Mack v.  Nationwide  Mutual Fire Insurance Company, 517 S.E2d 839 (Ga. App. 1999).  
 

  PUNITIVE DAMAGES

  The Georgia Court of Appeals has ruled that coverage for damages arising out of bodily injury must also encompass coverage for punitive damage awards.  Lunceford v. Peachtree Casualty Insurance Company, 495 S.E.2d 88 (Ga. App. 1997).   See also  Greenwood Cemetery, Inc. v. Travelers Indem. Co., 232 S.E.2d 910, 913-14 (Ga. 1977) and U.S. Fire Ins. Co. v. Goodyear Tire & Rubber Co., 920 F.2d 487 (8th Cir. 1990)(contrasting Georgia and Minnesota law).

  Accordingly, absent an exclusion for punitive damages, such awards would be reasonably understood as arising out of or being on account of bodily injury for which the insurer is legally liable. Lincoln National Health Ins. Co. v. Brown, 782 F.Supp. 110, 113 (M.D. Ga. 1992)(upholding exclusion for punitive damages).

  Punitive damage awards are subject to a statutory cap of $250,000 under O.C.G.A. §51-12-5.1(g).  Bagley v. Shortt, 261 Ga. 762, 410 S.E.2d 338 (1991).
 

  STANDARDS FOR POLICY INTERPRETATION

  In interpreting an insurance policy, Georgia courts have ruled that “where the terms are clear and unambiguous, and capable of only one reasonable interpretation, the court is to look to the contract alone to ascertain the parties’ intent.”  Boardman Petroleum, Inc. v. Federated Mutual Insurance Company, 498 S.E.2d 492 (Ga. 1998).  Georgia strives to effect the intent of the parties in interpreting insurance contracts, "it is contract law rather than the underlying motives of the contracting parties that is ultimately controlling."  Mag Mutual Ins. Co. v. Gatewood, 186 Ga. App. 169, 173, 367 S.E.2d 63 (1988).  

  If a policy provision is susceptible of two equally reasonable but conflicting interpretations, the one maximizing coverage will be adopted. Travelers Ind. Co. v. Whalley, 160 Ga. App. 438, 441, 287 S.E.2d 226, 229 (1981); State Farm Mutual Automobile Ins. Co. v. Stanley, 773, F.Supp. 1539 (S.D. Ga. 1991);  Aley v. Great American Ins. Co., 287 S.E.2d 613 (Ge. App. 1981).  Thus, where ambiguity exists, it will be strictly construed against the insurer as drafter of the policy.  Hercules Bumper, Inc. v. First State Insurance Company, 863 F.2d 839, 841 (11th Cir. 1989).  The insurer is the master of the writing and thus it has a duty to use language that is “clear and precise.”  Travelers Indemnity Company v. Whalley Construction Company, 287 S.E.2d 226 (Ga. App. 1981).  

  Finally, policies are to be read in accordance with the reasonable expectations of the insured, where possible.  Boardman Petroleum, Inc. v. Federated Mutual Insurance Company, 498 S.E.2d 492 (Ga. 1998).  The test “is not what the insurer intended its words to mean, but what a reasonable person in the position of the insured would understand them to mean.  The policy should be read as a layman should read it and not as it might be analyzed by an insurance expert or an attorney.”  Cincinnati Insurance Company v. Davis, 265 S.E.2d 102 (Ga. App. 1980).   See also Nationwide Mutual Fire Ins. Co. v. Collins, 136 Ga. App. 671, 676, 222 S.E.2d 828, 831 (1975)(the test for evaluating the scope of insurance coverage is not what the insurer meant in drafting the policy but "what a reasonable person in the position of the insured would understand them to mean.")

  Any exclusion for coverage is to be strictly construed.  Finally, insurance contracts are to be read in accordance with the reasonable expectations of the insured where possible.  Richards v. Hanover Ins. Co., 299 S.E.2d 561 (Ga. 1983).

  Allegations against innocent partners of a law firm that embezzled client funds were denied coverage under an E&O policy since their liability "arose out of" the criminal conduct of their partners and was therefore subject to a policy exclusion for criminal misconduct.  Continental Cas. Co. v. H.S.I., 466 S.E.2d 4 (Ga. 1996).  The court ruled that the plain import of the exclusion was to bar coverage for liability that would not have existed "but for" the conduct of the other partners.
 

  THEORIES OF ALTERNATIVE LIABILITY

  Theories have been rejected to date by federal courts.  Blackstone v. Shook & Fletcher Insulation Co., 764 F.2d 1480 (11th Cir. 1985) and Starling v. Seaboard Coast Line & Co., 533 F.Supp. 183 (S.D. Ga. 1982). 
 

  TRIGGER OF COVERAGE

  Coverage is triggered by the occurrence of bodily injury, not at the time of the insured's claimed negligence. Prescott's Altama Datsun, Inc. v. Monarch Ins. Co.. 1984 Fire and Casualty Cases 560, No. 67314 (Ga. App. March 13, 1984)(auto accident).

  The Florida District Court of Appeal, applying Georgia law, has ruled that damage arising out of a ruptured pipeline was triggered as of the date that the pipeline exploded, not early periods of time when the insured contractors may have been negligent in its construction or maintenance.  Hardaway Co.  v.  USF&G, No.  97-01848 (Fla.  App.  November 6,1998) (Georgia law).  The court rejected the insured’s reliance on the Eljer installation trigger theory.
 
  In Boardman Petroleum, Inc. v. Federated Mutual Ins. Co., 926 F.Supp. 1566 (S.D. Ge. 1995), a U.S. District Court ruled that GL policies respond as of the date that an injurious exposure results in bodily injury or property damage, rejecting the insurer's "manifestation" argument.  The ruling was appealed to the Eleventh Circuit, which certified the trigger question to the Georgia Supreme Court in 1997.  However, the court failed to reach the "trigger" question as it found that the "own property" exclusion defeated any coverage that might otherwise apply.  Boardman Petroleum, Inc. v. Federated Mutual Ins. Co., 269 Ga. 326 (1998).  A single dissenting justice argued that the court should have adopted an "exposure" analysis.

 "Exposure" trigger adopted for personal injury claims in Continental Ins. Co. v. Synalloy, 667 F.Supp. 1563 (S.D. Ga. 1986), affirmed per curiam, 826 F.2d 1024 (11th Cir. 1987).  Further, in Briggs & Stratton Corporation v. Royal Globe Insurance Company, 64 F.Supp.2d  1346 (M.D. Ga.  1999),  Judge Duval declared that clean up claims against an insured who provided chemicals to an electroplater that intentionally discharged chemical waste on its property alleged an “occurrence” under an “exposure” trigger. In rejecting Transcontinental’s proposed “manifestation” theory, the District Court declared that coverage was triggered when hazardous waste from the site operator’s electroplating operations was discharged onto the ground.

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