State Farm Fire & Casualty Insurance v. Terry

Beasley, Judge,

concurring specially.

I concur in the judgment but not in the entirety of the opinion, particularly with the direction given and with the criticism that the law is absurd in this area.

This is a suit on a contract of insurance covering what turned out to be an “uninsured motor vehicle” as defined in OCGA § 33-7-11 (b) (1) (D) (iv). The rights and obligations of the parties to the contract, which rights and obligations are governed in part by OCGA § 33-7-II, were altered by an agreement made and filed in the underlying tort suit brought by the insured against the alleged tortfeasor. By that agreement the insured, who ultimately obtained a $50,000 judgment against the tortfeasor, bought the potential of a second lawsuit wherein the tortfeasor’s liability and the insured’s damages would have to be retried. That is the instant suit. Because the dismissal by its terms relieved the UM carrier of the binding effect on it of any judgment in that tort suit, plaintiff in this contract action must not only show that he has valid UM coverage under his policy in force at the time of the collision and that the tortfeasor’s vehicle is “uninsured” as defined in the statute, but he must also show the elements of the underlying tort rather than simply the existence of an unsatisfied judgment against the tortfeasor.

What happened is this. Terry, the insured, brought a tort claim against Davis for injuries arising out of a motor vehicle collision. As required by OCGA § 33-7-11 (d) in order to preserve an insured’s rights to UM coverage in the event the insured becomes entitled to it, Terry served a copy of the action on his UM carrier, State Farm. At that time, none of the five circumstances listed in OCGA § 33-7-11 (b) (1) (D) existed, and the alleged tortfeasor did not fit the sixth category described in OCGA § 33-7-11 (b) (2) (unknown owner or operator).

OCGA § 33-7-11 (d) did not require the uninsured motor vehicle insurer to take any action after it was notified by service of the tort suit. Instead, because the insurer was potentially liable under its contract, the law gave it “the right to file pleadings and take other *20action allowable by law [such as discovery] in the name of either the known owner or operator or both or itself.” The right is given bécause the carrier in its contract undertakes “to pay the insured all sums which he shall be legally entitled to recover as damages from the owner or operator of an uninsured motor vehicle” to the extent of the policy limits. OCGA § 33-7-11 (a) (1). Therefore, the potential liability exists until its insured recovers by satisfaction of a judgment, if one is awarded against the alleged tortfeasor.

The majority incorrectly states that State Farm “was not a party to the [tort] case and did not have a full and fair opportunity to litigate the liability issue.” State Farm elected to become a party to the suit as another defendant, by filing an answer and cross-claim in its own name. Langford v. Royal Indem. Co., 208 Ga. App. 128, 129 (2) (430 SE2d 98) (1993) (physical precedent as to Division 3). Shortly thereafter, however, while the alleged tortfeasor’s liability was still an issue, State Farm and its insured agreed to a dismissal of State Farm from the tort suit, which dismissal was filed and by which State Farm reserved its right to a full and fair opportunity to litigate the liability issue. The dismissal read in its entirety: “DISMISSAL WITHOUT PREJUDICE AS TO STATE FARM. Plaintiff hereby dismisses, without prejudice, State Farm Mutual Automobile Insurance Company. The parties consent and agree that State Farm will waive any statute of limitations defense in the event that it becomes necessary for State Farm to be re-joined in this litigation. In the event that the plaintiff finds it appropriate to renew an "uninsured motorist claim, under circumstances including a withdrawal of coverage by a liability insurer, State Farm will be served in the manner authorized by law and have a full right to defend on liability and damages in this case. Stipulations and defaults by, or Judgments against, the individual defendant will not be binding upon or create exposure by State Farm. In the event the counsel for the named defendant or insurance carrier (McFrugal) files a Declaratory Judgment Action, counsel for State Farm agrees to participate in the litigation of this case.”

The insured acquired no ripe UM claim during the activity in that case prior to judgment, so the reintroduction of State Farm into the case was not attempted. But the agreement did not extinguish the insured’s potential right to coverage. The dismissal was “without prejudice,” and OCGA § 33-7-11 (a) (1) obligates the insurer for “all sums” within the policy limits which its insured is “legally entitled to recover as damages from the owner or operator of an uninsured motor vehicle.”

When it developed after judgment that the insured could not collect his judgment from the tortfeasor’s insurer due to its post-judgment insolvency, he turned to his insurer because the motor vehicle became uninsured within the meaning of OCGA § 33-7-11 (b) *21(1) (D) (iv). Although State Farm did not dispute this as fact, it did refuse to pay on the ground its insured had agreed, as a condition of dismissing State Farm from the tort suit without prejudice, that any judgment he won against Davis would not “be binding upon or create exposure by” State Farm.

Consequently, the insured’s suit on the policy, which has a six-year statute of limitation under OCGA § 9-3-24, is burdened by the specific agreement to permit State Farm to challenge Davis’ tort liability and the amount of damages. Had that provision been omitted from the dismissal agreement, Terry would have been entitled to recover the amount of the tort judgment from State Farm in that it admits coverage, assuming it does not contest the fact of uninsuredness.

I find no fault with the statute or with its construction by the Supreme Court in Bohannon v. J. C. Penney Cas. Ins. Co., 259 Ga. 162 (377 SE2d 853) (1989), and Vaughn v. Collum, 236 Ga. 582 (224 SE2d 416) (1976). In order to protect his existing or potential uninsured motor vehicle claim against his UM carrier, all the insured must do is notify the carrier, by copy of the action against the alleged wrongdoing driver and/or owner of the vehicle that judgment is being sought. The reason it must be done at the outset, within the statute of limitation applicable to the tort action, is that the UM carrier is potentially liable from that moment on and is entitled to protect its interests from that point. As succinctly stated in Vaughn, “the uninsured motorist carrier has the same interest in investigating and defending the tort claim as does any defendant in a tort case.” See also Doe v. Moss, 120 Ga. App. 762, 765 (172 SE2d 321) (1969) (the plaintiff’s UM carrier “is a party at interest”).

Were it not to be notified until after judgment, such as when a defendant’s insurer becomes insolvent post-judgment, its opportunity to investigate, participate in discovery and defend against the tort judgment in the first place would be nonexistent. In the absence of the agreement of dismissal in this case, State Farm would have risked its potential liability to pay the judgment becoming actual with the obtaining of a judgment which insurance would not pay. That liability would not depend on whether it took an active part in the tort action, as it had opportunity to do, but on its insured’s compliance with the requirement that he serve the UM carrier within the time he must serve the alleged tortfeasor. Whether the motor vehicle is “uninsured” at that time is immaterial; the law recognizes that it may become uninsured before the injured party recovers his damages.

The economic consequences of requiring service at the outset or, instead, only when “uninsured” becomes an existing fact is a subject for the legislature to consider if it chooses to reconsider OCGA § 33-7-*2211. It is equipped to hear from all interested stakeholders and to decide what procedure best provides due process to those ultimately liable to pay for the results of motor vehicle collisions, in order to achieve the public policy of coverage for an injured innocent driver or passenger.

Justice Weltner’s suggestion in the dissent in Bohannon, supra at 163-164, that requiring notice only after “there is a substantive doubt as to the existence of adequate insurance coverage . . . would protect all parties concerned” because notice would come “well in advance of any money judgment,” is not even borne out in this very case. The “substantive doubt” did not arise until after the judgment. That suggestion overlooks the post-judgment potential of liability arising under any of the circumstances listed in OCGA § 33-7-11 (b) (1) (D). It ignores the stake which the UM carrier has from the very outset of the suit. It overlooks that even notice during the course of the litigation but after discovery is conducted could require discovery all over again anyway. And it ignores the difficulty of determining when “a substantive doubt as to the existence of adequate insurance coverage” arises; such a nebulous event is ill-suited for pegging timely service on.

The laudable intention of the legislature, which seeks to protect the innocent, injured UM-insured motorist from loss, is to allow the issue of coverage to be tried right in the tort suit, if the UM carrier wishes, and to require the issue of tort liability to be tried only once. The salutary effects of avoiding multiple suits is recognized in Moss v. Cincinnati Ins. Co., 154 Ga. App. 165, 170 (268 SE2d 676) (1980) (unanimous whole court). As to the issue of coverage, this avoids the necessity for a separate declaratory judgment action by the UM carrier to resolve that issue before it must decide whether to defend the alleged tortfeasor. U. S. Fidelity &c. Co. v. Bishop, 121 Ga. App. 75, 77 (172 SE2d 855) (1970).

If the UM carrier who faces a potential claim wishes to take its chances after notice (by way of service of the tort complaint) and not defend in the name of the operator or owner or itself or some combination thereof, then it will be bound by the judgment because it could have done so. Its insured in a subsequent contract action need prove only four facts: the tort judgment, timely notice of the tort suit on the UM carrier, uninsuredness of the judgment debtor’s vehicle, and UM coverage; the insured need not re-prove tort liability and damages. See, e.g., Smith v. Phillips, 172 Ga. App. 459, 460, 462 (323 SE2d 669) (1984).

I do agree with the majority that, insofar as it would apply to the statute now in force, Rabun v. Williams, 168 Ga. App. 467, 470 (3) (309 SE2d 624) (1983), was in error in granting total summary judgment. I assume Aetna had made itself a party defendant in that case *23and raised the defense of no coverage in its answer. The opinion merely states, id. at 467, that the insured served Aetna with a copy of the complaint and that Aetna filed a motion for summary judgment, id. at 468 (1), Aetna was not entitled to it because it did not show it had no potential liability, only that there was other insurance at the time. So it was entitled to only partial summary judgment, on that issue. The court confused the insurer’s role as a defendant in the case. It was not made a defendant by plaintiff on the theory of contract liability, nor could it have been because no cause of action yet existed. It was made a defendant by its own voluntary action, to contest coverage, but it could not prove it would never be liable for any uninsured judgment.

The court in Rabun there considered the potential liability as merely “speculation,” but it did suggest that the “actual occurrence of one of [the statutory] events” could make it liable. Id. at 470 (3). The problem with allowing summary judgment is that had one of those events subsequently occurred and the plaintiff sought to recover the tort judgment from his UM carrier in a contract action, he would be met with the summary judgment in the UM carrier’s favor in the tort suit, based on a finding of no contract liability for the underlying tort. But otherwise the UM insurer would have been bound by the tort judgment in a later suit on the contract because it had been a party to that suit and chose not to contest that aspect of the case. Res judicata, as defined in Waldroup v. Greene County Hosp. Auth., 265 Ga. 864, 865-866 (1) (463 SE2d 5) (1995), or collateral estoppel, see Blackburn v. Blackburn, 168 Ga. App. 66, 72 (2) (308 SE2d 193) (1983), would apply. The grant of summary judgment to Aetna in Rabun was premature.

Yarbrough v. Dickinson, 183 Ga. App. 489 (359 SE2d 235) (1987) (physical precedent only), affirmed summary judgment to the UM carrier which had entered the suit as a defendant and sought summary judgment because there was then no uninsured motor vehicle as defined in OCGA § 33-7-11 (b). The trial court had granted it “but provided it was not to affect any future claim by Yarbrough for PIP benefits or other coverage under that policy.” Id. In effect it was a limited summary judgment because it did not finally resolve the issue of coverage. In any later suit by its insured on the contract, demanding payment of an unsatisfied judgment which somewhere along the line had become one on an uninsured vehicle, the carrier would not be able to defend on the ground of res judicata or collateral estoppel because the summary judgment did not cover potential contract liability. In contrast, the summary judgment in Rabun was not limited.

For the reasons stated herein, I do not agree with the criticism of Bohannon and Vaughn in Stout v. Cincinnati Ins. Co., 226 Ga. App. 220 (486 SE2d 195) (1997), cited in the majority opinion, or in the *24case Stout cites, Reid v. U. S. Fidelity &c. Co., 223 Ga. App. 204 (477 SE2d 369) (1996).