The Duty to Defend Under Georgia Law

I’ve mentioned this before, but I’m also licensed in Georgia, and often times I’ll get to dive into some Georgia law issues for a change.  One of the fundamental insurance coverage issues in is the duty to defend under Georgia law.  It’s pretty basic, and similar to the duty to defend under Florida law, but there is one little-known wrinkle. 

Duty to Defend Under Georgia Law

An insurer’s duty to indemnify and its duty to defend are separate and independent obligations. Penn-America Ins. Co. v. Disabled Am. Veterans, Inc., 481 S.E.2d 850, 852 (Ga. Ct. App. 1997).  Under Georgia law, “[a]n insurer’s duty to defend is determined by comparing the allegations of the complaint with the provisions of the policy.” Fireman’s Fund Ins. Co. v. Univ. of Ga. Athletic Ass’n, Inc., 654 S.E.2d 207, 209 (Ga. Ct. App. 2007). “Where the complaint filed against the insured does not assert any claims upon which there would be insurance coverage, the insurer is justified in refusing to defend the insured’s lawsuit.” Nationwide Mut. Fire Ins. Co. v. Somers, 591 S.E.2d 430, 434 (Ga. Ct. App. 2003); Old Republic Union Ins. Co. v. Floyd Beasley & Sons, Inc., 551 S.E.2d 388, 392 (Ga. Ct. App. 2001). 

Wrinkle: Duty to Investigate

When the complaint on its face shows no coverage, but the insured notifies the insurer of factual contentions that would be covered, there may be a duty to investigate on the part of the insurer. See Colonial Oil Indus. Inc. v. Underwriters Subscribing to Policy Nos. TO31504670 & TO31504671, 491 S.E.2d 337, 338-39 (Ga. 1997).  In Colonial, the court held:

A different rule, however, applies when the complaint on its face shows no coverage, but the insured notifies the insurer of factual contentions that would place the claim within the policy coverage.  The Georgia Court of Appeals held in Loftin v. U.S. Fire Ins. Co., that in this situation the insurer has an obligation to give due consideration to its insured’s factual contentions and to base its decision on “true facts.” The requirement that an insurer base its decision on true facts will necessitate that the insurer conduct a reasonable investigation into its insured’s contentions. To relieve an insurer of any duty to investigate its insured’s contentions would allow the allegations of a third-party to determine the insured’s rights under its contract. Placing a duty of investigation on insurers in these limited circumstances is not an unreasonable burden, especially in light of the availability of the “procedurally safe course” of providing a defense under a reservation of rights and filing a declaratory judgment action to determine its obligations.

 

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