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Archive for July, 2012

Georgia Supreme Court Upholds Apportionment Statute

Posted on: July 10th, 2012

By Sun Choy and Jake Daly

Yesterday the Georgia Supreme Court issued its much-anticipated opinion inCouch v. Red Roof Inns, Inc., which involved a challenge to the validity and constitutionality of Georgia’s apportionment statute, O.C.G.A. § 51-12-33.  The case arose out of a third-party criminal attack on a guest of a motel, who subsequently sued the owner and manager of the motel for their alleged negligent failure to maintain the premises in a safe condition.  The plaintiff did not sue the unknown criminals who attacked him (even as John Doe defendants), and so the defendants identified them as at-fault non-parties to whom fault should be allocated pursuant to the apportionment statute.  Upon the plaintiff’s challenge to the statute via a motion in limine, Judge Steve C. Jones of the United States District Court for the Northern District of Georgia certified the following two questions to the Georgia Supreme Court: (more…)

Georgia Supreme Court Expands Diminution in Value Analysis to All Property Damage Claims

Posted on: July 9th, 2012

By: Seth Kirby

For the last decade, Georgia auto insurers have been required to compensate accident victims for the inherent loss in value that a car suffers when it has been in an accident.  This loss is known as diminution in value.  Essentially, it is a recognition that a car that has been in an accident, even if it has been expertly repaired, suffers from a stigma that will affect its value on resale.  Georgia courts determined that the law requires an accident victim to be made whole, so it was not sufficient to simply pay for the repairs necessitated by an accident. 

In the context of an automobile, the logic of this rule is easy to understand.  If presented with two used cars that were identical in features, mileage and overall condition, but one had previously been in an accident while the other had not, any rational consumer would purchase the pristine car.  The only way to overcome this damage stigma, would be a reduction in price for the repaired vehicle. 

In Royal Capital Development LLC, v. Maryland Casualty Company, The Georgia Supreme Court recently announced that diminution in value must be considered in the adjustment of all property damage claims.  As a result, insurers must now conduct an analysis to determine whether any type of property damage results in a stigma to the property which would require compensation in addition to repair costs to make the property owner whole. 

Unlike automobiles, it does not appear that every property damage claim will result in additional compensation for diminution in value.  For instance, hail damage that results in the total replacement of a 20-year-old roof should be viewed as a benefit to the insured as the roof was nearing the end of its normal life.  In contrast, however, water or fire damage repairs could conceivably create a stigma that negatively impacts the value of the property.  In any event, Royal Capital presents a significant new requirement in the adjustment of property claims.

Supreme Court of Georgia Expands Waiver of Sovereign Immunity for Motor Vehicle Claims

Posted on: July 9th, 2012

>By: Sun Choy

Last week, the Supreme Court of Georgia held in Gates v. Glass that the General Assembly created a “two-tier scheme” for waiving sovereign immunity in motor vehicle claims against cities and counties when it amended O.C.G.A. § 33-24-51 and enacted O.C.G.A. § 36-92-2.  In the process, the Court expanded the scope of the waiver of immunity beyond the mandatory “maximum waiver amounts” contained in § 36-92-2 to a greater amount covered by the purchase of “liability insurance.”  The opinion is short on analysis and ignores the legislative intent in enacting § 36-92-2.

Before the mandatory waiver amounts contained in § 36-92-2 became effective in 2005, cities and counties waived sovereign immunity to the extent a motor vehicle claim was covered by insurance.  If the city or county did not purchase insurance to cover a claim involving a motor vehicle, sovereign immunity was retained and the claim was barred.  However, there was no requirement under § 33-24-51 for cities and counties to purchase insurance.  Accordingly, many cities and counties did not purchase insurance, leaving plaintiffs without recourse. 

Recognizing that such a scheme promotes inconsistent results, the Supreme Court urged the General Assembly to amend § 33-24-51 so a potential recovery did not hinge on whether the city or county had purchased insurance.  In response, the General Assembly enacted § 36-92-2, which automatically waives sovereign immunity to a “maximum waiver amount” regardless of the purchase of insurance.  In the preamble to the legislation, the General Assembly specifically stated that one of the purposes of the legislation was to bring “uniformity” of results.

Instead of bringing uniformity of results, the Gates decision again promotes inconsistent results by allowing the waiver of immunity to hinge on the non-mandatory purchase of insurance.  In Gates, the decedent was killed in a freak accident involving a county owned tractor and bush-hog.  Because the tractor and bush-hog does not fall within the more limited definition of “motor vehicle” in § 36-92-2, the automatic waiver of sovereign immunity for motor vehicle claims does not apply. 

The Supreme Court considers this the first tier of waiving immunity.  The second tier of waiving immunity is essentially the same scheme that existed before the enactment of § 36-92-2 –  the city or county waives sovereign immunity to the extent the motor vehicle claim is covered by insurance.  This second tier waiver is broader than the first tier, because it is not limited by the statutory definition of “motor vehicle.”  Instead, the waiver is determined by whether the “motor vehicle” at issue is covered by insurance.   Accordingly, the trial court must now determine if the tractor and bush-hog are covered by the insurance policies purchased by the county. 

By creating this second tier of waiver, the Supreme Court has expanded the waiver of sovereign immunity beyond what was intended by General Assembly.

Supreme Court of Georgia does an About Face on Preserving Coverage Defenses

Posted on: July 5th, 2012

By: Phil Savrin

Three weeks ago, I blogged that even though the Supreme Court of Georgia held that defending an insured without a reservation of rights waived coverage defenses, the standard for preserving defenses was easy to meet. Since then, the Supreme Court issued its decision in Hoover v. Maxum Indemnity Company that turns the preservation standard on its head.

In a sharply-divided ruling, four justices ruled that an insured cannot disclaim coverage on one ground and reserve its rights to disclaim on other ground. Even more, the majority opinion concluded that identifying the potential policy provision at issue, without more, would not be sufficient to reserve rights to disclaim on that provision. Such “boilerplate language,” the majority wrote, does not fairly inform the insured that the insurer intended to pursue denial on that ground. The dissent disagreed strongly, reasoning that a disclaimer letter can include potential grounds that may be uncovered if coverage litigation proceeds.

Maxum has filed for reconsideration of the Supreme Court’s decision. Although such motions are rarely granted, Maxum’s request is being supported by trade groups through amicus briefs that will hopefully gain the justices’ attention to the ramifications of this unprecedented decision.