Georgia Farm Bureau Mutual Insurance v. Roland

Smith, Judge.

Charles and Frances Roland were the named insureds in a Georgia Farm Bureau Mutual Insurance Company homeowner’s insurance policy. After the house identified in the policy was destroyed by fire, Georgia Farm Bureau denied the Rolands’ claims, and the Rolands filed separate actions which were joined by order of the trial court. Georgia Farm Bureau moved for summary judgment as to Frances Roland on the basis that she did not reside in the house at the time of the loss. That motion was denied.

Upon trial of the case, the jury returned a verdict for Charles Roland and Frances Roland for the insured value of the house and its contents, for Charles Roland for attorney fees, and for Frances Roland for bad faith penalties and attorney fees.

Georgia Farm Bureau appeals the denial of its motion for summary judgment on the issue of Frances Roland’s residence, the trial court’s failure to allow outside the presence of the jury a proffer of evidence regarding residence, and the trial court’s directed verdict in favor of Frances Roland on the issue of liability. Georgia Farm Bureau also appeals the denial of its motion for directed verdict on the issue of bad faith penalties and attorney fees.

*835The evidence establishes that Charles and Frances Roland were married in 1975, and both resided in the house named in the policy until October 1990. In early October, Frances Roland separated from her husband, moved out of the house, and ultimately filed for divorce. A hearing was held on the divorce, a decree was issued as of January 4, 1991, and it was entered on March 12, 1991. Frances Roland testified on her deposition that she moved to Florida in October 1990 and lived there until she moved to Tennessee in January 1992. She did not reside in the house named in the policy at any time after October 8, 1990.

The policy contains a “special provision” that requires “the residence premises [must be] the only premises where the named insured or spouse maintains a residence other than business or farm properties.” (Emphasis supplied.)

1. The issue of Frances Roland’s failure to maintain exclusive residence in the insured premises at the time of the fire is controlled by the decisions of this court in Schroeder v. Ga. Farm &c. Ins. Co., 211 Ga. App. 302 (439 SE2d 18) (1993) and Ga. Farm &c. Ins. Co. v. Kephart, 211 Ga. App. 423 (439 SE2d 682) (1993) (involving identical policy language). Because the evidence established that the policy unambiguously required Frances Roland, as a named insured, to live at the “residence premises,” and she was not living there at the time of the fire, no coverage existed for her claim. Id. at 425 (1) (c).

The dissent would overextend the application of OCGA § 33-32-1 (a) and the decisions interpreting it, and it would overrule sub silentio such decisions as Schroeder and Kephart. The dissent relies upon Fireman’s Fund Ins. Co. v. Dean, 212 Ga. App. 262, 265 (1) (441 SE2d 436) (1994), but it involved a substantially different issue: the protection of an insured’s estate from policy language which held it responsible for the misconduct of another insured (arson and murder of the innocent insured). The dissent seeks to expand that decision to all-inclusive proportions, in effect holding that OCGA § 33-32-1 (a) forbids any alteration or addition to the wording of the Standard Fire Policy which conceivably could limit the insurer’s obligations under the policy, even though alterations and additions are provided for in the standard form itself. This constitutes a substantial and unprecedented restriction of the right to contract and a violation of the well-established public policy of this state. See Jefferson Pilot Life Ins. Co. v. Clark, 202 Ga. App. 385, 389 (2) (414 SE2d 521) (1991); Nat. Consultants v. Burt, 186 Ga. App. 27, 32 (2) (366 SE2d 344) (1988).

However, the Standard Fire Policy itself, Ga. Comp. R. & Regs., § 120-2-19.01, provides ample authority for the policy language relied upon by Georgia Farm Bureau here. For example, the language omitted by the dissent from its quotation of the permitted “conditions suspending or restricting insurance” reads as follows: “Unless other*836wise provided in writing added hereto this Company shall not be liable for loss occurring (a) while the hazard is increased by any means within the control or knowledge of the insured. . . .” (Emphasis supplied.) Id. at 283, lines 28-32. As observed in Kephart, supra at 426, a change in occupancy constitutes an increased hazard or risk, which under the terms of the policy would void coverage.

The Standard Fire Policy at page 282, lines 1-6, also provides for voiding the policy on the basis of a material misrepresentation. The special provisions section of the policy quoted above constitutes a representation in clear and unambiguous terms that the insured property is the only residence of the insureds. This court must construe the insurance contract as made, and the Rolands’ failure to comply with this policy provision voided the policy as a matter of law. Schroeder, supra, 211 Ga. App. at 304-305. See also Kephart, supra, 211 Ga. App. at 425 (1) (c).

Finally, by prefacing the relevant section with the qualifier “[ujnless otherwise provided in writing,” the Standard Fire Policy clearly recognizes that the parties to the insurance contract may agree to special conditions varying from the standard language. This is consistent with the right of parties in Georgia to contract as they wish and to make the provisions of policies of insurance meet the facts and circumstances of the individuals insured, the property insured, the risk, and the premium charged therefor. To create a Procrustean bed of an unamendable Standard Fire Policy would not only change the longstanding law of Georgia, but do a profound disservice to both insurers and insureds.

While the result in this case appears harsh, it is the agreement contracted for by the parties. As observed in Presiding Judge Beasley’s special concurrence in Kephart, the condition of residence extends throughout the life of the policy. 211 Ga. App. at 426-427. A change in the residence of the insureds contrary to the Special Conditions in the policy can result in an increase in hazard or risk to the insurer. The circumstances testified to here, showing at the minimum a potential for violence and vengeful acts growing out of the insureds’ separation and divorce, demonstrate this amply. The trial court erred in denying Georgia Farm Bureau’s motion for summary judgment with respect to Frances Roland.

2'. In light of our decision in Division 1, the trial court erred in refusing to direct a verdict in favor of Georgia Farm Bureau with respect to Frances Roland’s claim for bad faith penalties and attorney fees. With respect to the award of attorney fees to Charles Roland, the trial court also erred in refusing to direct a verdict in favor of Georgia Farm Bureau.

OCGA § 33-4-6 provides 60 days after a demand for payment has been made for the insurer to investigate the claim. As it imposes a *837penalty, this Code section must be strictly construed. Interstate &c. Ins. Co. v. Williamson, 220 Ga. 323, 325 (2) (138 SE2d 668) (1964). Assertion by the insurer of a defense to a claim requires only “reasonable and probable cause” to avoid the penalties of the Code section. See Rice v. State Farm &c. Co., 208 Ga. App. 166, 169 (1) (430 SE2d 75) (1993); Mass. Bay Ins. Co. v. Hall, 196 Ga. App. 349, 355-356 (3) (395 SE2d 851) (1990).

There was strong evidence that the fire was of incendiary origin, including multiple points of origin, low-level burning, the presence of kerosene, and the presence of a stepladder giving access to one of the points of origin.1 There was also evidence of Roland’s heavy drinking and mental instability as a result of the divorce, as well as threats to others and remarks suggesting, or at least expressing a hope, that the house might burn. With respect to evidence of opportunity, the City of Nelson fire department answered the call to the fire on Friday, March 1, 1991, at approximately 10:00 in the evening. While Roland testified he left the house for the ten-hour drive to Florida very early Friday morning, there was other testimony that he did not arrive in Florida until sometime on Saturday morning. Discovery of the fire was delayed for an undetermined period. In consequence, the variance in the testimony regarding the time of Charles Roland’s departure for Florida gave reasonable cause to believe that there was opportunity to set the fire. Moreover, a fire obviously may be set by a person hired for that purpose. There was also evidence that Charles Roland had removed guns, jewelry, and other valuables from the house before the fire.

The dissent’s position places too great a burden on the insurer under the terms of OCGA § 33-4-6. It acknowledges that the insurer found “strong evidence of arson and some evidence that Charles Roland had a motive.” However, the dissent concludes that there was no reasonable defense as a matter of law, because there was no evidence of a delayed triggering device and Roland testified he had left the house “approximately 24 hours” before the fire began.2

Under the dissent’s reasoning, an insurer must not only show reasonable and probable cause for making a defense, but must prove its defense, before trial and within 60 days of demand. This places an insurer in an impossible position: it must gather conclusive proof of each and every element of all potential defenses in a 60-day period or run the risk of imposition of bad faith penalties. All that is required by the law is reasonable and probable cause, and “[penalties for bad faith are not authorized where the insurance company has any rea*838sonable ground to contest the claim and where there is a disputed question of fact.” (Citations and punctuation omitted.) Mass. Bay Ins. Co. v. Hall, supra, 196 Ga. App. at 355. The evidence presented of incendiary origin, combined with evidence of motive and opportunity on the part of Charles Roland, was sufficient to constitute reasonable and probable cause to contest the claim. The trial court accordingly erred in failing to direct a verdict in favor of Georgia Farm Bureau Insurance Company as to Charles Roland’s claim under OCGA § 33-4-6.

Judgment reversed.

Pope, C. J., Birdsong, P. J., Beasley, P. J., Andrews, Johnson and Ruffin, JJ., concur. McMurray, P. J., and Blackburn, J., dissent.

Charles Roland admitted to placing the ladder in the house.

As noted above, this testimony was disputed by another witness.