Supreme Court of Georgia Agrees to Revisit the Late Notice Defense in Insurance Coverage Cases


By Phil Savrin
Matt Hoover sustained a serious brain injury in October 2006 when he fell from a ladder while climbing down from the roof at a residence.  He was at the residence because a supervisor at the water extraction company where he worked had asked him to deliver a different ladder to the residence, as a favor to a client of the company.  The company’s owner visited him at the hospital that same day and understood the injuries were life-threatening.  In addition, his father told the owner of the company that he would be looking to the company for compensation.

Despite having clear knowledge of not only the severity of the injury, but also a claim for compensation, the company did not notify its insurer for a period of two years.  During that period of time, the company resisted a workers compensation claim by contending that it was not subject to the workers compensation laws.  Instead of pursuing that claim, Hoover decided to withdraw his workers compensation claim and pursue a claim in tort.  In his lawsuit – filed two years after the injury — he contended that the company was liable vicariously because the supervisor who sent him to the residence either knew or should have known that he would be asked to assist with roof repairs.  It was only after the lawsuit was filed two years after the injury that the insurance company learned of the incident.
The insurer disclaimed coverage, including a defense, after reviewing the complaint and the policy provisions.  In addition to citing an exclusion of coverage for injuries to employees in the course of employment, the disclaimer letter stated that coverage could be barred if the insured failed to compliance with the notice conditions.  The company, represented by counsel, brought a third-party coverage claim against the insurer due to its disclaimer.  Just before trial, however, the company dismissed the coverage claim without prejudice.  A verdict was thereafter returned for approximately $16 million.  The company then assigned the insurance claim to Hoover who sued the insurer directly in a separate proceeding.
Following a period of discovery, the trial court decided that the company had not timely reported the incident to the insurer such that there was no duty to indemnify.  It nevertheless concluded that the insurer had a duty to defend and entered judgment accordingly.  In reviewing the case, the Court of Appeals found that the company breached the notice provision and that the breach voided both a duty to defend and indemnify.
Hoover petitioned the Supreme Court for discretionary review, arguing that the company had waived the notice defense by not defending under reservation of rights and, further, that the notice provision was not breached.  Last month, the Supreme Court granted the petition and asked for briefing on the following questions:

  1. Did the Court of Appeals properly analyze the claim that the [insurer] waived its notice defense?
  2. Was timely notice a prerequisite in this case to [the insurer] having a duty to provide a defense in the underlying tort action?

The issues will be briefed in the coming months and oral argument will be heard in February.  We will report on the outcome of the case in a future Lawline given its significant implications for insureds and insurers alike.
For more information, contact Phil Savrin at 770.818.1405 or