In Lloyd’s Syndicate No. 5820 d/b/a Cassidy Davis v. AGCO Corp., the Georgia Court of Appeals affirmed the denial of the insurer’s motion for summary judgment on the issue of bad faith under O.C.G.A. § 33-4-6.
The insured, AGCO Corporation, manufactures and sells agricultural equipment. With the purchase of a spray applicator known as the RoGator, AGCO offered extended protection plans (“EPP”). Warranty Specialists sold the EPPs to AGCO and administered the claims. A master liability policy was secured from Cassidy Davis to provide coverage to AGCO for liability incurred under the EPP offered to its customer.
When wheel motors on the RoGators began to malfunction, claims were filed under the EPP and Warranty Specialists initially paid the claims. But, when the volume of claims continued to rise, Warranty Specialists ceased processing and paying claims. As a result of Warranty Specialists actions, AGCO paid the claims and then sued Warranty Specialists, seeking relief pursuant to O.C.G.A. § 33-4-6. The Georgia Court of Appeals affirmed the trial court’s denial of summary judgment to Cassidy Davis on the bad faith claim arising under O.C.G.A. § 33-4-6.
In its motion, Cassidy Davis argued that AGCO was legally barred from recovering for bad faith because AGCO had not made a demand for payment pursuant to O.C.G.A. § 33-4-6 and thus failed to trigger any duty for Cassidy Davis. Cassidy Davis relied upon the language of the master liability policy that the insurer ‘agrees to indemnify [AGCO] for all sums which [AGCO] shall be held legally liable to pay in respect to the contractual liability’. Cassidy Davis argued that the phrase, “legally liable,” meant a judgment must be obtained. And, since no judgment was obtained at the time demand for payment was made – no payment was due and Cassidy Davis could not be in bad faith – as a matter of law.
The Court of Appeals, however, found that ‘indemnify’ “has been defined as ‘to reimburse another for a loss suffered because of a third party’s or one’s own act or default.’” The court also noted that indemnify has also been defined as “’a duty to make good a loss, damage or liability incurred by another.’” The Court rejected the argument that a judgment was a condition precedent.
As a judgment against AGCO was not required before a demand for payment could be made, AGCO’s demand for reimbursement satisfied the provisions of O.C.G.A. § 33-4-6. According to the Court of Appeals, the term ‘indemnify,’ as used in the contract of insurance “is broad enough to include any liability, not just liability resulting from a judgment.” Thus, Cassidy Davis was not entitled to summary judgment on the bad faith claim.