State Farm Mutual Automobile Insurance v. Drawdy

Blackburn, Judge,

concurring in part and dissenting in part.

I concur with Division 1 and concur in part with the judgment of the majority. I agree with the majority that Neese and Starnes require that State Farm’s motion for summary judgment be granted, as to the limitation of its liability under the policy, but only as to the amount of coverage required by law, notwithstanding that its insurance contract provides coverage amounts above such limit. To the extent that the insurance contract provides additional coverage, State Farm can properly assert its exclusion and deny coverage beyond that amount. However, I agree with Judge Beasley that, the exclusion based upon the condition precedent of notice of the accident to State Farm by its insured contained in the insurance contract is unenforceable as against public policy to the extent of the liability insurance *240required by law (presently $15,000).1

“Prior to 1963, liability insurance was purchased in Georgia for the benefit and protection of the insured and his or her assets.” Cotton States Mut. Ins. Co. v. Neese, 254 Ga. 335, 337 (329 SE2d 136) (1985). In 1963, the Georgia legislature adopted an uninsured motorist act which required uninsured motorist coverage to be offered, but its purchase was not required. See OCGA § 33-7-11. “As with liability insurance, uninsured motorist protection was for the benefit of the insured, not the driver of a vehicle struck by the insured.” Id. However, upon the adoption of the 1974 Motor Vehicle Accident Reparations (no-fault) Act, “liability insurance was required by law not only for the benefit of the insured but to ensure compensation for innocent victims of negligent motorists.” (Emphasis supplied.) Id. at 337.

In Neese, the Supreme Court determined that an exclusion in a policy of automobile insurance, which excluded liability coverage while an insured “attempted] to avoid apprehension or arrest,” was unenforceable as a matter of public policy in view of Georgia’s compulsory insurance law, but only to the extent of insurance coverage required by law.2 Id. at 341-342. In construing the insurance contract before it, the Supreme Court “noted two aids to construction: (1) An insurance contract is to be construed against the insurer which drafted it, and (2) the advent of compulsory motor vehicle liability insurance in this state established the public policy that ‘innocent persons who are injured should have an adequate recourse for the recovery of their damages.’ [Cit.]” Id. at 338. The Court determined in that case, that the public’s identifiable interests were at least threefold: “(1) as insureds, to limit the insurer’s risks and thereby keep automobile insurance premiums as low as possible; (2) as members of the public in general to improve safety on the highways; and (3) as accident victims, to have access to insurance funds to satisfy their judgments.” Id. at 341.

In Travelers Ins. Co. v. Progressive Preferred Ins. Co., 193 Ga. App. 864, 865 (389 SE2d 370), cert. denied, 193 Ga. App. 911 (1989), this court applied the analysis of Neese, supra, and determined that an unlicensed driver exclusion was enforceable against its insured when the victim had access to uninsured motorist coverage, as it provided adequate recourse for the recovery of her damages. The court noted that the public policy interest in enforcement of the unlicensed *241driver exclusion was very strong. Id. In Auto-Owners Ins. Co. v. Jackson, 211 Ga. App. 613, 615 (440 SE2d 242) (1994), cert. not applied for, we followed the analysis of Travelers, supra, and Neese, supra, to determine that an exclusion in an automobile liability policy, which excluded coverage for intentionally caused bodily injury or property damage, was enforceable between the insurer and its insured, “[i]f the injured third party has or had access to a recovery through uninsured motorist coverage under another policy.”

In the year following our holding in Travelers, supra, our Supreme Court was presented with an analogous issue in Cotton States Mut. Ins. Co. v. Starnes, 260 Ga. 235, 237 (392 SE2d 3) (1990), in which they held that public policy was “no longer merely concerned with the right of an individual to elect whether to seek the benefits of an insurance policy. Instead, it is also concerned with providing adequate resources with which to compensate victims of automobile accidents, a new class of beneficiaries to automobile liability insurance contracts.” (Emphasis supplied.)

The issue presented was whether an “additional insured” under the automobile owner’s compulsory liability insurance policy had the right to decline coverage under the traditional “rule of election.” The liability insurance company argued that there was no need for, its “additional insured” to have liability insurance because state law required uninsured motorist coverage. Id. at 238. However, the Supreme Court rejected this argument stating “1) State law does not require a motorist to purchase uninsured motorist coverage, OCGA § 33-7-11 (a) (3); and 2) The policy behind uninsured motorist coverage is to protect the insured’s assets, not the public. [Cit.]” Starnes, 260 Ga. at 238.

In the present case, the insurance contract required written notice of an “accident or loss” as soon as practicable as a condition precedent to any action. State Farm argues that it should be allowed to exclude coverage pursuant to Drawdy’s failure to notify it of the loss for some eight months.

In Ginn v. State Farm &c. Ins. Co., 196 Ga. App. 640, 642 (396 SE2d 582) (1990), we determined that “[concerning third parties, lack of notice of accident is not a viable defense available to an insurer, and considerations of excusable delay or prejudice are immaterial.” Pursuant to Ginn, State Farm’s condition precedent to suit is unenforceable.3 However, State Farm argues that as uninsured motorists benefits are available to the victim, the public policy considerations of providing recourse to victims is no longer present because the *242victim can obtain relief through its uninsured motorist carrier,4 and it should be able to rely on its notice requirement as a bar to coverage. I cannot agree.

The public policy behind compulsory liability insurance was for the protection of victims. See 1974 Motor Vehicle Accident Reparations Act. The public policy behind uninsured motorist coverage was for the protection of the insured’s assets. See Starnes, supra at 238. The rationale of Travelers, supra, and Jackson, supra, is inconsistent with public policy as determined by our Supreme Court. To permit the defendant’s liability carrier to benefit from premiums paid by the plaintiff (the uninsured motorist insured) protects the assets of the liability carrier, not those of the insured, in contravention of stated public policy.

The public policy that “liability insurance was required . . . to ensure compensation for innocent victims of negligent motorists,” Neese, supra at 337, does not relate to the presence or absence of uninsured motorist coverage, but rests on its own bottom. The allowance of the subject exclusion where there is uninsured motorist coverage eviscerates the public policy as the innocent victim is not then compensated by liability insurance, but rather by uninsured motorist insurance paid for by said victim. Such an allowance also violates well settled principles of collateral sources.

In Travelers, supra, this court implies that the enforcement of the “unlicensed driver exclusion” improves safety on the highway (presumably because fewer unlicensed persons would be driving because they are not insured). There is no factual basis for this conclusion, and indeed if it were true, then we should permit “driving under the influence exclusions” as a means to reduce drunk driving. If the logic of Travelers, supra, is correct, we could accomplish this by the simple expedient of having victims compensated by their own uninsured motorist carrier rather than by the drunk driver’s liability carrier.

This court also based its opinion in Travelers, supra, on the assumption that the insurer’s risks would be limited and therefor premiums would be kept as low as possible. Where we are simply shifting the risk of loss from the liability carrier to the uninsured motorist carrier, any reduction in liability premiums (paid by the tortfeasor) would be reflected in increases in the uninsured motorist insurance premiums (paid by the victim).

The last reason cited by this court for its ruling in Travelers, supra, related to the access to insurance funds by accident victims to *243satisfy their judgments. It is true that where there is uninsured motorist coverage available, there should be insurance funds available for accident victims. This is true, however, whether or not there is uninsured motorist insurance involved, and whether or not the exclusion herein involved is enforceable. It ignores the fact that public policy provides that victims should be compensated primarily by liability insurance and that uninsured motorist coverage was intended to be secondary or backup coverage. It also ignores the shift in premium costs from the tortfeasors to the victims.

While this court relied upon the above factors referred to in Neese, supra, it is important to note that said case did not involve the issue of uninsured motorist coverage and our Supreme Court specifically stated therein that it would wait for a proper case to determine whether the existence of uninsured motorist coverage would affect the result in such a case.

To the extent that Travelers, supra, and Jackson, supra, relied solely on the existence of uninsured motorist coverage to find the exclusions therein enforceable, I would overrule them.

I am authorized to state that Judge Ruffin joins in this dissent.

The Motor Vehicle Accident Reparations Act, OCGA § 33-34-1 et seq., requires that bodily injury liability insurance be purchased in, at least, the amount of $15,000 per person in any one accident and $30,000 for two or more persons in any one accident, for the operation of any motor vehicle registered in Georgia. See also OCGA § 40-9-37 (a).

To the extent more coverage than that required by the law was available, the exclusion was enforceable. Id.

The present case does not implicate OCGA § 33-7-15 as State Farm received notice of the complaint.

“A motor vehicle is uninsured if there is no liability insurance on it, or if the insurer of such vehicle legally denies coverage.” Neese, 254 Ga. at 337.