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July 16, 2014
In the Court of Appeals of Georgia
A14A0242. HENDERSON et al. v. GEORGIA FARM BUREAU JE-104
MUTUAL INSURANCE COMPANY.
ELLINGTON, Presiding Judge.
Jennifer and Lee Henderson filed this action in the Superior Court of Lincoln
County against Georgia Farm Bureau Mutual Insurance Company, seeking benefits
under their home owners’ insurance policy for water damage to their home and for
their loss of use, statutory penalties for Georgia Farm Bureau’s alleged bad faith in
refusing to pay benefits, and attorney fees. A jury found in favor of the Hendersons
and awarded them $27,799 for damage to the structure not already paid by Georgia
Farm, $8,400 for their loss of the use of the property, $6,000 in penalty for Georgia
Farm Bureau’s bad faith in refusing to pay a covered loss, and $35,000 in attorney
fees. Georgia Farm Bureau filed a motion for judgment notwithstanding the verdict,
arguing, inter alia, that there was no evidence that the Hendersons’ home sustained
any water damage that was separate and distinct from mold damage, for which
Georgia Farm Bureau paid benefits under a special rider. After a hearing, the trial
court granted Georgia Farm Bureau’s motion for judgment notwithstanding the
verdict “in its entirety[,]” The Hendersons appeal, and, for the reasons explained
below, we reverse.
A motion pursuant to OCGA § 9-11-50 (b) for judgment
notwithstanding the verdict may be granted only when, without
weighing the credibility of the evidence, there can be but one reasonable
conclusion as to the proper judgment. Where there is conflicting
evidence, or there is insufficient evidence to make a “one-way” verdict
proper, judgment [notwithstanding the verdict] should not be awarded.
(Citation and punctuation omitted.) Fertility Technology Resources v. Lifetek Med.,
Inc., 282 Ga. App. 148, 149 (637 SE2d 844) (2006).
The appellate standard for reviewing the grant of a judgment
notwithstanding the verdict is whether the evidence, with all reasonable
deductions therefrom, demanded a verdict contrary to that returned by
the factfinder. If there is any evidence to support the jury’s verdict,
viewing the evidence most favorably to the party who secured the
verdict, it is error to grant the motion.
2
(Citations and punctuation omitted.) Mosley v. Warnock, 282 Ga. 488 (1) (651 SE2d
696) (2007).
Viewed in the light most favorable to the Hendersons, the record shows the
following. Georgia Farm Bureau agreed to cover the Hendersons “against risks of
direct loss to property . . . if that loss is a physical loss of property[.]” Losses caused
by “[c]onstant or repeated seepage or leakage of water or the presence of
condensation or humidity, moisture or vapor, over a period of weeks, months or
years[,]” (hereinafter, “seepage of water, etc.”) were included among the Perils
Insured Against (hereinafter, “the covered risks”) as long as such seepage of water
etc. “and the resulting damage is unknown to all ‘insureds’ and is hidden within the
walls or ceilings or beneath the floors or above the ceilings of a structure.” The policy
limit for such seepage of water etc. was $153,500. Otherwise, that is, for seepage of
water etc. and resulting damage that was known to an insured or was not hidden, the
policy provided no coverage for losses caused by seepage of water etc.
In addition to this coverage, the Hendersons, for an additional premium, opted
for additional coverage for “ensuing mold, fungi or bacteria caused by or resulting
from” one of the covered risks (hereinafter, “ensuing mold”); as noted above, the
covered risks included seepage of water etc. where the resulting damage was
3
unknown to all insureds and hidden as defined by the policy.1 The limit of such
additional coverage for ensuing mold was $32,675.
On October 4, 2010, Jennifer Henderson discovered a puddle of water in her
kitchen and contacted Georgia Farm Bureau. Georgia Farm Bureau’s contractor tore
out a section of the floor and checked the kitchen, dining room, and living room
floors for moisture but discovered no problems other than the area of flooring
damaged by the puddle. Days later, however, the Hendersons removed another part
of the floor in the kitchen and discovered standing water and black mold underneath.
Georgia Farm Bureau’s claims adjuster suggested that the Hendersons should vacate
the house because black mold could be toxic, and the Henderson did so and were
unable to return for one year.
Over the course of that year, the Hendersons’ home was inspected by numerous
engineers, mold remediation specialists, contractors, and repairmen, many of whom
were hired by Georgia Farm Bureau in the course of addressing the Hendersons’
claim for benefits. In addition to areas of mold found under floors, behind walls, and
over ceilings, these workers found such damage as areas of flooring and subflooring
1
If the Hendersons had not opted for additional coverage for ensuing mold,
fungi or bacteria caused by one of the covered risks, Georgia Farm Bureau’s standard
policy excluded coverage for loss caused by “[m]old, fungi or bacteria[.”
4
that were completely rotted through, where one “could just step through the hole and
be under the house[,]” critical rot to 90 percent of the floor joists, and a “trough” or
“dry riverbed” in the crawlspace, where water flowed through and collected in
puddles.2
Ultimately, Georgia Farm Bureau conceded that the Hendersons had suffered
losses caused by mold in excess of the limit of their additional mold coverage
($32,675) and tendered payment for such. Georgia Farm Bureau, however, denied the
Hendersons’ claim under coverage for other (non-mold) damage from seepage of
water etc. (policy limit of $153,000).3 Although the jury apparently rejected Georgia
Farm Bureau’s characterization of the Hendersons’ losses, the trial court, after
verdict, agreed with Georgia Farm Bureau, finding that
2
We note that there was some evidence that, as constructed, the Hendersons’
home lacked certain improvements intended to limit seepage of water or collection
of condensation, such as, rain gutters, “French” drains, vapor barriers in the
crawlspace, and properly installed (right-side down) subfloor insulation. There was
no evidence, however, that the Hendersons were aware of those deficiencies, or the
significance of such deficiencies, before the water and mold damage occurred.
3
It is undisputed that the seepage of water that caused all of the Hendersons’
property damage was unknown to them and hidden within the walls or ceilings or
beneath the floors or above the ceilings until the day in October 2010 that the
Hendersons lifted part of the floor in the kitchen and saw standing water and mold
underneath.
5
[t]he overwhelming weight of the evidence established that the
‘resulting damage’ was not water damage. Rather, it was mold damage.
As a consequence, the policy’s limited mold coverage applied, and [the
Hendersons] could not recover more than the mold coverage limits
unless they could identify and quantify areas of the structure which were
only damaged by water, not mold. There is no evidence in the record of
any non-mold damage that can support an award of damage beyond the
Mold Endorsement Limit, which was exhausted by Georgia Farm
Bureau’s earlier payment before suit was filed. . . . [The Hendersons]
failed to show any damages that were caused solely by water or moisture
that were separate and distinct from the mold damage to the structure.
. . . Based on the evidence, there was no remaining coverage available
under the policy because the actual damages sustained by [the
Hendersons] were ensuing mold damages, all of which fell under [their]
limited mold coverage and had been paid in full by [Georgia Farm
Bureau].
1. The Hendersons contend that the trial court erred in failing to apply the
policy according to its plain terms. Further, they contend that the trial court erred in
ruling that there was no evidence of water damage that was separate from the mold
damage for which Georgia Farm Bureau paid benefits to the mold coverage policy
limit. Accordingly, they contend that the trial court erred in granting Georgia Farm
Bureau’s motion for judgment notwithstanding the verdict as to their claim for
benefits for property damage.
6
As with any other contract, where the terms of an insurance contract “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.” (Citation and punctuation
omitted.) Fireman’s Fund Ins. Co. v. Univ. of Georgia Athletic Ass’n, Inc., 288 Ga.
App. 355, 356 (654 SE2d 207) (2007). Even when the trial court is authorized to
construe an insurance contract, because a pertinent provision is ambiguous, the trial
court must construe strictly against the insurer any ambiguities in the contract and any
exclusion from coverage sought to be invoked by the insurer as drafter of the
document and must read the insurance contract in accordance with the reasonable
expectations of the insured where possible. Id. at 357.
In concluding that the Hendersons had failed to come forward with evidence
showing that the property had been damaged by water only and not by mold, the court
was implicitly construing the policy of insurance to mean that mold damage is not and
can never be an item of damage that results as a consequence of water seepage. This
is perplexing in light of the policy’s express requirement that mold damage ensue as
a consequence of a covered risk, one of which is seepage of water etc.
The trial court’s interpretation is also not demanded by the evidence. Although
the evidence showed that all of the Hendersons’ mold damage was moisture damage
7
(in the sense that mold growth and resulting damage only occurs in the presence of
persistent or recurrent moisture), the evidence did not show the reverse, that is, that
all of the Hendersons’ water damage was mold damage.4 The Bartram, LLC v.
Landmark American Ins. Co., 864 FSupp2d 1229, 1239 (III) (F) (N.D. Fla. 2012) (As
used in a standard builder’s all-risk insurance policy, an “ensuing loss” is one that
follows and flows proximately from an underlying covered loss.). There was no
evidence at all that the “trough” and “dry riverbed” in the crawlspace resulted from
mold, that the rotted floor and subfloor, through which a person could fall into the
crawlspace, resulted from mold, or that the critical failure of the floor joists resulted
from mold, even if the moisture that caused these items of destruction might have
also allowed mold to flourish.
Granted, the Hendersons apparently were not litigation-savvy enough to require
the contractor whom they hired to make their home habitable, after Georgia Farm
Bureau rejected their claim for non-mold benefits, to provide a line-item bill
4
To the contrary, the Hendersons testified that their home had both water
damage and mold damage and that water had damaged the paneling on the walls and
rotted the wood supporting the walls and floor. The contractor who repaired their
home identified the required repairs as being for “water damage.” In addition,
witnesses testified that, “[a]nytime you have mold, water has something to do with
it[,]” and that “condensation occurring on the floor sheathing due to humid air
conditions in the crawlspace” had, in turn, caused the mold growth.
8
attributing each item of repair to general seepage of water, etc. versus to mold. (One
wonders how much such special accounting practices would have added to the total
cost of repairs.) But, the evidence showed that all of the Hendersons’ property
damage was from the seepage of water, etc. and that, of that damage, some of it was
from ensuing mold. Georgia Farm was entitled to pay only $32,675 for the portion of
the Hendersons’ property damage that resulted only from the mold. But, for those
damages resulting from the seepage of water etc. that was not solely mold damage,
a policy limit of $153,500 applied.
The trial court’s order allows Georgia Farm Bureau to penalize the Hendersons,
having opted into so-called “additional” mold coverage, for suffering from both non-
mold-related water damage and mold-related water damage. Because the jury’s
verdict was authorized by the evidence, the trial court applied an inapplicable legal
standard in weighing the evidence, and the trial court construed the policy contrary
to its plain terms and in favor of the insurer and against coverage, the trial court erred
in granting Georgia Farm Bureau’s motion for judgment notwithstanding the verdict
as to the jury’s award for property damage.
2. The Hendersons contend that the trial court erred in granting Georgia Farm
Bureau’s motion for judgment notwithstanding the verdict as to bad faith and
9
attorney’s fees, which was based on its determination that the parties had a bona fide
dispute as to coverage for the Hendersons’ claim for property damage. The question
of bad faith is generally for the jury. Jimenez v. Chicago Title Ins. Co., 310 Ga. App.
9, 12 (2) (712 SE2d 531) (2011); Certain Underwriters &c. v. Rucker Constr., Inc.,
285 Ga. App. 844, 850 (3) (648 SE2d 170) (2007); First Financial Ins. Co. v.
American Sandblasting Co., 223 Ga. App. 232, 233 (2) (477 SE2d 390) (1996); St.
Paul Fire & Marine Ins. Co. v. Snitzer, 183 Ga. App. 395, 397 (2) (358 SE2d 925)
(1987). As the Supreme Court of Georgia has explained, “[t]he proper rule is that [a]
judgment [against an insurer for damages and attorney fees for bad faith in refusing
to pay a claim] should be affirmed if there is any evidence to support it unless it can
be said as a matter of law that there was a reasonable defense which vindicates the
good faith of the insurer.” Colonial Life & Acc. Ins. Co. v. McClain, 243 Ga. 263, 265
(1) (253 SE2d 745) (1979). We discern no basis for concluding that Georgia Farm
10
Bureau’s defense was reasonable as a matter of law.5 Consequently, the trial court
erred in not deferring to the jury’s assessment.
3. The Hendersons contend that the trial court erred in granting in part Georgia
Farm Bureau’s motion for summary judgment relating to bad faith and attorney’s fees.
The record shows that the trial court granted Georgia Farm Bureau’s motion for
summary judgment in part, to the extent that the Hendersons sought a bad faith
penalty for the insurer’s denial of their claim for the loss of the use of their home.
Accordingly, the issue of whether Georgia Farm Bureau denied the Hendersons’ loss
of use claim in bad faith was not submitted to the jury.
Under OCGA § 9-11-56 (c)
[s]ummary judgment is warranted if the pleadings, depositions, answers
to interrogatories, and admissions on file, together with the affidavits,
5
We note that the jury heard the testimony of Georgia Farm Bureau’s claims
adjuster, Phillip K. Palacz, regarding his initial recommendation that the Hendersons’
claim be denied in its entirety (including the mold coverage the insurer later paid) and
the later handling of their claim. See Dissent at *1-2 (2). The jury was responsible for
assessing the credibility of all of the witnesses, including Palacz, and determining, in
the context of all of Georgia Farm Bureau’s actions in the handling of the
Hendersons’ claims, whether the insurer’s decision to pay mold coverage, that was
capped by the policy at $32,675, and to then take the position that such payment
precluded any coverage under the general property damage coverage, that was capped
by the policy at $153,500, arose from a genuine belief that the policy so provided or
whether it constituted a bad faith denial of coverage.
11
if any, show that there is no genuine issue as to any material fact and
that the moving party is entitled to a judgment as a matter of law. We
review the grant or denial of a motion for summary judgment de novo,
and we view the evidence, and the reasonable inferences drawn
therefrom, in a light most favorable to the nonmovant.
(Punctuation and footnotes omitted.) Assaf v. Cincinnati Ins. Co., _ Ga. App. _ (Case
No. A14A0145, decided June 5, 2014). As with the part of the Hendersons’ bad faith
claim that was submitted to the jury, see Division 2, supra, we discern no basis for
concluding that Georgia Farm Bureau’s defense was reasonable as a matter of law.
Consequently, the trial court erred in granting in part Georgia Farm Bureau’s motion
for summary judgment.
Judgment reversed. Phipps, C. J., Barnes, P. J., and McFadden, J., concur.
Andrews, P. J., Ray and McMillian, J J., concur specially and in judgment only as to
Division 1 and dissent as to Divisions 2 and 3.
12
A14A0242. HENDERSON et al. v. GEORGIA FARM BUREAU CWM-013
MUTUAL INSURANCE COMPANY.
MCMILLIAN, Judge, concurring specially in part and in judgment only and
dissenting in part.
1. Pursuant to Court of Appeals Rule 33 (a), I concur specially and in judgment
only as to Division 1.
2. I must respectfully dissent from Divisons 2 and 3 of the majority’s opinion
because the record demonstrates that the Hendersons failed to prove that they were
entitled to recover a bad faith penalty or attorney fees. The Hendersons assert that the
trial court erred in granting a JNOV as to their claim for bad faith and attorney fees.
Specifically, the Hendersons claim that GFB acted in bad faith because Palacz
initially applied an exclusion under the Policy to deny them coverage, a decision that
was overruled by his superiors after the Hendersons made a written demand, and
because GFB denied additional coverage under the Water Damage Coverage
provision of the Policy.
To establish liability for penalties and attorney fees under OCGA § 33-
4-6, “the insured must prove: (1) that the claim is covered under the
policy, (2) that a demand for payment was made against the insurer
within 60 days prior to filing suit, and (3) that the insurer’s failure to pay
was motivated by bad faith.” Since it imposes a penalty, the statute’s
requirements are strictly construed.
(Citations and punctuation omitted.) Jimenez v. Chicago Title Ins. Co., 310 Ga. App.
9, 11-12 (2) (712 SE2d 531) (2011). “Penalties for bad faith and attorney fees are not
authorized where the insurance company has any reasonable ground to contest the
claim and where there is a disputed question of fact.” (Citation and punctuation
omitted.) Bell v. Liberty Mut. Fire Ins. Co., 319 Ga. App. 302, 307 (3) (734 SE2d
894) (2012). And
[t]he test of bad faith within the meaning of the law in such cases is as
of the time of trial, in the final analysis, and not at the time of refusal to
pay upon demand. Whatever the facts are at the time of such refusal to
pay if at the trial there was a reasonable ground for the insurer to contest
2
the claim there can be no finding against the insurance company for bad
faith and attorney’s fees regardless of the outcome of the case.
(Citation and punctuation omitted.) Fortson v. Cotton States Mut. Ins. Co., 168 Ga.
App. 155, 158 (1) (308 SE2d 382) (1983). “Since it imposes a penalty, the statute’s
requirements are strictly construed.” (Citation and punctuation omitted.) Jimenez, 310
Ga. App. at 12 (2).
Here, although GFB initially refused coverage, it reversed its position within
60 days of the Hendersons’ demand, and after investigating to determine the amount
of the Hendersons’ damages, it paid them in excess of their policy limits to cover the
full cost of remediation and other documented damage to furniture. Also, a genuine
dispute existed as to whether GFB owed any amounts over and above the policy
limits under the Mold Coverage provision. I believe that GFB reasonably contested
the issue of whether they were required to pay any additional amounts under the
Water Damage Coverage provision without proof of water damage separate and apart
from mold damage.
Accordingly, I would find that the trial court properly granted a JNOV and
summary judgment as to the Hendersons’ bad faith claims.
3
I am authorized to state that Presiding Judge Andrews and Judge Ray join in
this opinion.
4