An Insured’s Right to Independent Counsel in Georgia

Whether the insurer has a right to select counsel for an insured when defending under a reservation of rights is a blurry topic in Georgia.  Under Georgia law, defending under a reservation of rights creates a conflict of interest.  In upholding its duty to defend its insured, the issue becomes whether the insurance company can appoint defense counsel unilaterally on behalf of its insured (as is the case in Florida) or whether the insured can choose their own counsel.  The case law indicates that an insured in Georgia can select their own independant defense counsel, but it must first reject the insurers offer of appointed counsel.  

In conflict situations, if the insurer appoints defense counsel, the insured is entitled to reject appointed counsel and hire their own counsel at the expense of the insurer. See Am. Family Life Assur. Co. of Columbus, Ga. v. U.S. Fire Co., 885 F.2d 826, 831 (11th Cir. 1989) (“The existence of a conflict of interest would have justified American Family in rejecting Boston Old Colony’s offer to provide a defense…. In such circumstances, Boston Old Colony would have been obligated to pay for American Family’s defense.”). 

Even if the insured accepts appointed defense counsel, the insured may still be entitled to hire independent counsel which the insurer may also have to pay for. Util. Serv. Co., Inc. v. St. Paul Travelers Ins. Co., 5:06-CV-207 (CAR), 2007 WL 188237 (M.D. Ga. Jan. 22, 2007) (“Am. Family Life held that the presence of a conflict of interest may enable the insured to retain independent counsel at the expense of the insurer.”).  The right to have the insurer pay for both appointed defense counsel as well as independent counsel is much less clear.  In Util Serv., the court simply made this holding in ruling on a motion to dismiss the insured’s request for independent counsel fees.  The motion to dismiss by the insurer was denied.

Accordingly, although an insured may reject appointed defense counsel in a reservation of rights situation and select their own counsel, the law on whether the insured can simply accept appointed defense counsel AND hire their own independent counsel at the expense of the insurance company is much less clear.

Relative of Deceased Insured Was Not Entitled to File Coverage Action Without Proof of Status as Insured

Great Lakes Reinsurance (U.K.) PLC v. Branam (3d DCA 2013)

The complex underlying facts can be summarized thusly: an insurance policy was issued to an individual and to a company for which the individual was the sole officer, director, and shareholder. The individual was then murdered in connection with a coverable loss under the policy and, as a result, one of the individual’s family members filed a claim under the policy, issuing three separate demands. The insurer declined to take a coverage position on these demands, each time requesting documentation to support the relative’s authority to act unilaterally on behalf of the insureds.

The relative filed a breach of contract action against the insurer, contending that the insurer effectively denied coverage by refusing to adjust the relative’s claims within ninety days of their submissions. The insurer moved for a directed verdict, which the trial court denied. The third district reversed, noting the lack of evidence to establish that the claims filed were valid or otherwise triggered the insurer’s contractual obligations. More specifically, the court emphasized that without the policy rights and without a trial court order authorizing the relative to file a claim unilaterally, the relative remained a stranger to the policy and lacked authority to file a claim thereunder.

Insured’s Failure to Comply With EUO Requirements Was a Breach of the Policy’s Cooperation Clause

Citizens Prop. Ins. Corp. v. Ifergane (Fla. 3d DCA 2012)

This case involved a coverage dispute with regard to a wind-only dwelling policy issued by Citizens Property Insurance Corporation. The policy was issued solely to Alexandra Ifergane and provided coverage with respect to a house in which Alexandra resided with her then-husband, Haim.

In October of 2005 the house sustained damages during Hurricane Wilma. The following month Alexandra and Haim divorced and Alexandra thereafter executed a quit claim deed to Haim, assigning him all of her rights and interests in the home. When a tender was made to Citizens for the 2005 damages, Citizens sought to take examinations under oath of Haim and Alexandra. Alexandra declined to comply with the requests, asserting that she was not obligated to sit for an EUO since she had assigned to Haim all of her rights and interests in the property.

In response, Citizens filed an action for declaratory judgment against the Iferganes, seeking a determination regarding its coverage obligations. Citizens sought, inter alia, a determination as to the validity of the quit claim assignment, a declaration that Alexandra is obligated to appear for an EUO (examination under oath) and to comply with other policy conditions, and a determination that Alexandra’s failure or refusal to comply with the EUO request and policy conditions constituted a breach of contract precluding recovery under the policy as a matter of law. Alexandra moved to dismiss the complaint and Haim, in turn, filed a cross-motion insisting that Alexandra’s alleged failures could not be imputed to him because he was an innocent resident spouse co-insured under the policy.

Ultimately, the proceedings led to the entry of three distinct orders which were all at issue on appeal before the Third District. First, was an order granting, with prejudice, Alexandra’s motion to be dismissed as a party. The Third District ruled that this order was properly entered since, by virtue of the valid assignment, Alexandra no longer had an “actual, present, adverse and antagonistic interest in the subject matter of the amended complaint ….” There were two other orders reviewed: an order of final judgment and an order granting Haim’s motion for partial summary judgment as to coverage. The court reversed both, ruling that these orders were erroneously entered. The two reasons provided were, first, because there were genuine issues of material fact as to whether Haim was entitled to coverage as a resident spouse on the date of loss and, second, because the assignment from Alexandra to Haim did not relieve Alexandra of her post-loss obligations (as opposed to rights) as a named insured under the policy.

Independent Contractor Exclusion Barred Coverage Under a CGL Policy

Catlin Specialty Ins. Co. v. Cohen et al. (U.S. District Court M.D. Fla. 2012)

This case involved a dispute over the application of an independent contractor exclusion in a commercial general liability (“CGL”) policy. In the underlying state court action, the insured commercial property owner was sued for wrongful death when a man fell to his death from a roof on the premises. The decedent, a security camera installer, had been on the premises in order to take various measurements in order to properly install security cameras in accordance with a contract he had entered into with the insured property owner.

The insured first attempted to argue that the decedent was an unauthorized trespasser since he had ascended the roof without permission. The court rejected this claim, finding that the record established that there had been no prohibition against the decedent’s ascending the roof without permission. The insured then attempted to argue that the decedent was not yet an independent contractor, but was actually a mere business invitee. The explanation offered was that, at the time of his death, the decedent had not yet provided proof of insurance, as contemplated by the camera installation contract.

The court emphasized, however, that under the contract proof of insurance was not required on or before any stated time. Ultimately, the court entered judgment in the insurer’s favor, finding that because the decedent qualified as an independent contractor, the policy exclusion applied.

Insurer’s Appeal Was Barred Because it Failed to Properly Preserve Appellate Issue in Court Below

Advanced Chiropractic & Rehab. Center, Corp. v. United Auto. Ins. Co. (Fla. 4th DCA 2012)

In a county court action, a chiropractic center sued an insurance company for PIP benefits, resulting in a settlement. When the center moved for attorney’s fees, a dispute arose over whether the center knew about an order of dismissal that had been entered in the case. The court held a hearing on the center’s subsequent 1.540(b) motion to vacate the order of dismissal. The hearing was held, without objection, in an informal fashion and without the swearing of witnesses.

After the county court granted the 1.540(b) motion and awarded the center attorney’s fees, the insurer appealed. The insurer’s claim on appeal was that the county court had abused its discretion in finding (1) that the motion for attorney’s fees was timely and (2) that excusable neglect existed sufficient to support rule 1.540(b) relief. The one-judge appellate panel of the circuit court reversed the county court order on the ground that there had been incompetent record evidence, a ground different from those raised by the insurer.

The Fourth District Court of Appeals granted the center’s second-tier petition for writ of certiorari and quashed the appellate decision of the circuit court, explaining that the circuit court had improperly reversed the county court since its reversal had been improperly premised on an issue that was neither preserved in the county court nor raised on appeal.

Court Dismissed Claims for Negligence Per Se and Breach of the Covenant of Good Faith and Fair Dealing

Resnick et al. v. AvMed, Inc., (11th Cir. 2012)

This case involved a class action suit filed against AvMed, a Florida corporation that delivers health care services, on behalf of AvMed customers whose sensitive information had been compromised and identifies stolen as a result of the theft of some AvMed laptops. The complaint alleged seven counts: negligence in protecting sensitive information; negligence per se in violating Florida statute § 395.3025; breach of contract; breach of implied contract; restitution/unjust enrichment; breach of implied covenant of good faith and fair dealing; and breach of fiduciary duties. The district court granted AvMed’s motion to dismiss, noting that the complaint “fail[ed] to allege any cognizable injury.”

On appeal, the Eleventh Circuit reversed in part, affirmed in part, and remanded the case. The Court first ruled that because the complaint specifically alleged monetary loss and because the complaint’s contention that the theft of the AvMed laptops caused the plaintiffs’ identity thefts was plausible under the facts pled, the plaintiffs had met the pleading standards for their allegations and had adequately alleged a cognizable injury under Florida law.

The Court ruled, however, that two of the pled causes of action failed to adequately allege entitlement to relief. The first such count, negligence per se, failed because it was premised on application of Florida statute § 395.3025(4), a statute that regulates hospitals, ambulatory surgical centers, and mobile surgical facilities. The Court found that because AvMed was an integrated managed-care organization and not a hospital, ambulatory surgical center, or mobile surgical facility, its failure to comply with § 395.3025 could not serve as a basis for a negligence per se claim.

The second count to fail was the count alleging breach of the covenant of good faith and fair dealing. The Court explained that in order to properly assert such a cause of action, a plaintiff must allege a conscious and deliberate failure or refusal to discharge contractual responsibilities. The Court held that the count failed in this case since the plaintiffs had not alleged that AvMed’s shortcomings were conscious or deliberate acts. As to the remaining counts, the dismissals were reversed and the case was remanded for further proceedings.

Under Georgia Law, First-Party Insurance Policy Was Not Required to Be Conformed to Two-Year Limitation Period Under Georgia Statute

White v. State Farm Fire & Cas. Co. (11th Cir. 2012)

In a dispute over the enforceability, under Georgia law, of an insurance policy’s requirement that lawsuits against an insurer be brought within one year of the date of loss or damage, the Eleventh Circuit certified the following questions to the Supreme Court of Georgia:

“(1) Did the Georgia Insurance Commissioner act within his legal authority when he promulgated Ga. Comp. R. & Regs. 120-2-20-.02, such that a multiple-line insurance policy providing first-party insurance coverage for theft-related property damage must be reformed to conform with the two-year limitation period provided for in Georgia’s Standard Fire Policy, Ga. Comp. R. & Regs. 120-2-19-.01? and (2) Is this action barred by the Policy’s one-year limitation period?”

The Supreme Court of Georgia answered “no” to the first question and “yes” to the second, prompting the Eleventh Circuit to affirm a district court’s grant of summary judgment in favor of an insurer on the issue.

Insurer Was Entitled to Electronic Discovery of Insured’s Entire Computer System

Wynmoor Community Council, Inc., et al. v. QBE Ins. Corp., (S.D. Fla. 2012) – Court granted insurer’s discovery of electronically stored information (“ESI”) by a full mirror image of insured’s computer system. The court reasoned that this extreme request was warranted by plaintiffs’ suspicious document shredding and unwillingness or inability to comply with defendant’s requests for production.

Merly Nuñez v. Geico Gen. Ins. Co., (11th Cir. 2012) – Due to a split among Florida courts, the Eleventh Circuit certified the following question to the Florida supreme court: May an insurer require an insured to attend an examination under oath as a condition precedent to recovery of personal injury protection benefits?

 

An Insured Does Not Have Claims Against an Insurance Company for Breach of Implied Warranty of Good Faith and Fair Dealing

Chalfonte Condo. Apartment Ass’n, Inc. v. QBE Ins. Corp. (11th Cir. 2012)

In a dispute over an action brought by an insured under Fla. Stat. § 627.701(4)(a) against its insurer, the Eleventh Circuit certified the following questions to the Florida Supreme Court:

(1) Does Florida law recognize a claim for breach of the implied warranty of good faith and fair dealing by an insured against its insurer based on the insurer’s failure to investigate and assess the insured’s claim within a reasonable period of time? (2) May an insured bring a claim against an insurer for failure to comply with the language and type-size requirements established by Fla. Stat. § 627.701(4)(a)? (3) Does an insurer’s failure to comply with the language and type-size requirements established by Fla. Stat. § 627.701(4)(a) render a noncompliant hurricane deductible provision in an insurance policy void and unenforceable? (4) Does language in an insurance policy mandating payment of benefits upon ‘entry of a final judgment’ require an insurer to pay its insured upon entry of judgment at the trial level?

The Florida Supreme Court answered each question in the negative, prompting the Eleventh Circuit to affirm in part and reverse in part a district court’s judgment on the issue.