Charlie McDaniel, Erica Parsons and Jason Hammer are scheduled to present at the NBI seminar "Litigating the Uninsured & Underinsured Motorist Claim," on Friday December 7, 2012. To register online or to download a brochure to register, visit the NBI website.
The Georgia Court of Appeals recently issued two opinions addressing the question of when an incident arises out of the "use" of a motor vehicle for purposes of UM coverage.
In Mough v. Progressive Max Ins. Co., a man was shot and killed while riding his motorcycle. The motorcyclist was involved in a road-rage incident and was clipped by the driver of another vehicle. Id. at *1. After following the driver of the vehicle to her house, the motorcyclist was shot and killed by the driver's father. Id.
The motorcyclist's policy provided uninsured motorist coverage for injury arising out of the "use" of an uninsured motor vehicle. Id. at *1. The motorcyclist's parents argued that his death arose out of the "use" of the driver's vehicle because "without [the vehicle] leading [the motorcyclist] to the barrel of [the shooter's gun], the occasion for [the motorcyclist] to be shot and killed would not have occurred." Id.
The Georgia Court of Appeals noted that "'arising out of' does not equal proximate cause or require that the injury be directly caused by the use of a vehicle; only a 'slight causal connection' between the damages and the use of the vehicle is required." Id.
In cases involving shootings, the "general rule is that where a connection appears between the 'use' of the vehicle and the discharge of the firearm and resulting injury, such as to render it more likely that the one grew out of the other, it comes within the coverage defined." Id.
In a July 2011 decision, Collins v. Auto Owners, the Fourth Circuit Court of Appeals affirmed the trial court's grant of summary judgment in favor of Auto-Owners and held the evidence did not support a finding that Auto-Owners acted in bad faith. The Plaintiff in the underlying case, Calvin Collins, was injured in an automobile accident with Mark Frasie (who had no insurance). Mr. Collins was insured by Auto-Owners under three uninsured motorist policies of $500,000 each. Auto-Owners, as the uninsured motorist carrier, was essentially defending the claim on behalf of Mr. Frasier. During settlement negotiations, Mr. Collins consistently demanded $1 million or more to settle the claims. The most that Auto-Owners offered to settle was $100,000 because Auto-Owners felt that Frasier had legitimate defenses to both liability and damages. When the underlying case went to trial, the jury returned a defense verdict for Mr. Frasier and found that he was not liable to Mr. Collins for the damages because Mr. Frasier had suffered a sudden and unforeseeable incapacity. Mr. Collins brought this claim in federal court for bad faith refusal to settle the case within policy limits.
The Court held Auto-Owners did not act in bad faith because Auto-Owners had legitimate reservations about the validity of Mr. Collins' claims, as evidenced by letters and memos to Collins' attorney from Auto-Owners outlining the meritorious defenses. Specifically, the court noted that "the fact that the parties had different estimations of the value of the claim is not, under South Carolina law, evidence of bad faith on the party offering the lower amount." The Court further clarified that if there is a "reasonable ground for contesting a claim, there is no bad faith, even where the insurer makes no offer to settle."
Many personal policies of insurance define the term "auto" as a private passenger vehicle designed for operation principally on public roads. While no Georgia courts have decided the issue, courts in other jurisdictions have determined that a golf cart is not an "auto" under private auto policies of insurance. See Bailey v. Netherlands Ins. Co., 615 F.Supp.2d 1332 (M.D. Fla. 2009); Progressive Casualty Insurance Co. v. Dunn, 665 A.2d 322 (Md. 1995); Herr v. Grier, 671 A.2d 224, 226 (Pa. Super. Ct. 1996); Progressive Cas. Ins. Co. v. McCrea, 2010 WL 2108965 (Conn. Super. Ct. 2010); Jennings v. Midville Gold Club, Inc., 636 A.2d 707, 708 (R.I. 1994); Seaboard Fire & Marine Ins. Co. v. Gibbs, 392 F.2d 793, 794 (4th Cir. 1968).
The reasoning of these cases is strong. An unmodified, run-of-the-mill golf cart, is not made for use "principally" upon public roadways, particularly in light of the fact that its maximum speed is about 25 miles per hour and it lacks the safety features necessary for travel on public roadways, including a full windshield, doors, a solid roof, turn signals, and a gear-shifting mechanism. Even though such a case has yet to be decided by a Georgia court, it is likely that a Georgia court would determine that a golf cart is not an "auto" under the standard definition set forth in many policies. As such, it is likely that most automobile liability insurance policies do not provide any coverage for accidents involving golf carts.
Whether by design or by accident, bad faith causes of action are occurring in cases where the damages far exceed the policy limits, and the liability insurer clearly intended to pay its policy limits to resolve the case and terminate its exposure. While the Georgia appellate courts afford insurers certain safe harbors for protection against bad faith, plaintiffs' counsel have become very adept at exploiting any deviation from the protocol and the appellate courts are not forgiving when the insurer fails to follow, with precision, the requirements for the safe harbors.
In Fortner v. Grange Mutual Ins. Co., Grange placed additional conditions on the requirement for settlement, and the Supreme Court held it was for the jury to determine whether Grange's additional conditions in response to Fortner's policy limits settlement demand met the standard of care for the prudent insurer. This decision followed Jones v. Frickey, where the Court of Appeals found no meeting of the minds regarding a settlement. The Court stated,
“[a]n answer to an offer will not amount to an acceptance, so as to result in a contract, unless it is unconditional and identical with the terms of the offer. To constitute a contract, the offer must be accepted unequivocally and without variance of any sort.” Jones, at 401.
Most recently, in Penn v. Muktar, Judge Andrews, in which Judge Phipps and Doyle concurred, held that the parties failed to reach a meeting of the minds regarding a settlement. The Penns offered to settle their bodily injury claims for the bodily injury policy limits, but when State Farm tendered its policy limits, the proposed release, in effect, asserted a counteroffer in that it contained language that not only released the bodily injury claims, but the property damage claims and any other claims resulting from the collision.
The Penns refused to sign the release and returned the $50,000 settlement check. The Penns had an uninsured motorist claim which they clearly intended to pursue, but would have been eliminated with the execution of the proposed release forwarded by State Farm.
These cases highlight the importance of clarity and precision in resolving liability claims, so as ensure a meeting of the minds, and not inadvertently create a potential bad faith cause of action. In each case, bad faith, if pursued may ultimately be avoided, but it is much simpler to avoid a potential bad faith claim altogether by meeting plaintiff's demand with clarity and precision.
The Georgia Supreme Court's decision in State Farm Mutual Automobile Insurance Company v. Adams, declined to extend the rationale of Thurmond v. State Farm Mutual Automobile Ins. Co., and appeared to make it more difficult for UM insurers to easily determine the amount by which UM limits exceed the liability limits for a loss. Payments made by the liability insurer to a hospital (Adams) did not serve to reduce the available liability limits to the injured party, while reimbursement of federal worker's compensation payments (Thurmond) were deemed to reduce the available liability limits, and thus increase the exposure of the UM carrier.
However, upon closer examination, the decisions reveal that the determination of how to apply such payments to third parties depends upon the authority by which the payments are made. In Thurmond, the Supreme Court determined that the payments were made pursuant to federal law, which specifically provides that the federal law supersedes and preempts any state or local law. The Georgia Supreme Court, in Adams, which involved payment of a hospital lien imposed pursuant to O.C.G.A. § 44-14-470, held that
"payment of a hospital lien should not be subtracted from a tortfeasor's tort liability coverage to determine the underinsured coverage of an insured who has been injured in an accident,"
as the payment of the hospital lien was for the direct benefit of the insured.
In an important decision, the South Carolina Supreme Court held that UM coverage must be provided to an injured party even when she was a passenger on her husband’s uninsured motorcycle. Nationwide Mutual Insurance Co. v. Erwood (2007). The court distinguished UM coverage from UIM coverage, which cannot be transferred to an uninsured vehicle.