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


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.