• Winter 2009 - 1st Party Report Case Updates
  • December 1, 2009 | Author: Steven J. DeFrank
  • Law Firm: Swift, Currie, McGhee & Hiers, LLP - Atlanta Office
  • Mason v. Allstate, 2009 Ga. App. LEXIS 670 (2009)
    In Mason, Amy Stowers attended a birthday party hosted by the insureds for their daughter. Stowers and the insureds’ daughter borrowed the insureds’ ATV and both were injured when the insured’s daughter lost control of the vehicle while riding in a field about fifteen miles from the insureds’ home. The field was owned by friends of the insureds who regularly allowed the insureds to use the property for riding the ATV and for fishing and hunting. Both girls were injured in the accident, and their families submitted claims under the insureds’ homeowner’s insurance policy issued by Allstate Insurance Company (“Allstate”). The policy excluded coverage for “any motor vehicle designed principally for recreational use off public roads” when “that vehicle is owned by an insured person and is being used away from an insured premises.” The policy defined “insured premises” as “premises used by an insured person in connection with residence premises.” Based on this exclusion, Allstate denied coverage for the claims. The trial court granted summary judgment to Allstate.

    The Georgia Court of Appeals affirmed the trial court’s judgment. On appeal, the insureds argued that the policy language, “in connection with,” was ambiguous and therefore a jury should have decided whether the field where the incident occurred was being used in connection with the insured premises. The Court noted, however, that while no Georgia cases had expressly defined the policy language, “in connection with,” a couple of Georgia cases had addressed similar losses under similar policy provisions. The Court also analyzed cases from other jurisdictions that upheld such policy language and that “almost universally ruled” such language would exclude loss away from the insured premises. In the end, the Court was satisfied that, at the time of the incident, the field where the accident occurred was not being used “in connection with” the insureds’ property and, therefore, was not an “insured premises” under the policy.

    Moreover, the court rejected the insureds’ argument that they were using the field “in connection with” their home because they were holding their daughter’s birthday party there; they went to the party from the home and returned home afterwards. The court noted that the same can be said for any outing by any family member at any time. The Court bristled at the notion that such a finding could extend the policy’s definition of “insured premises” to cover almost any family outing or celebration at almost any location regardless of the distance from or actual connection with the insureds’ residence. Such could subject insurers “to virtually endless liability, liability for which neither it nor the insureds could have reasonably expected or intended to be covered by the insurance policy.”

    However, the Court warned that, depending upon the circumstances, it might not require that the incident location be “integral” to the use of the insured premises. A Massachusetts decision cited favorably by the court suggested that, in order for property to qualify as property used “in connection with” an insured location, the property must be “integral” to the use of the insured premises. The Georgia Court found this was too “severe” a limitation and preferred a more “expansive view of the phrase:” whether the property was adjacent to the insured premises, whether it was owned by the insureds and whether it was leased by the insureds. Therefore, in claims involving incidents away from the insured premises, the underlying facts and the relationship between the two locations must be carefully analyzed to determine whether one was being used “in connection with” the other.

    Holder v. Grange, 2008 U.S. Dist. LEXIS 83146 (M.D. GA. 2008), 2008 U.S. Dist. LEXIS 83146 (M.D. GA. 2008)
    In Holder, David Holder purchased a 23-foot, 1991 Grady White Cuddy Cabin fishing boat that he kept at a marina in Fernandina Beach, Florida. Holder was a lifelong resident of Dodge County, Georgia. Holder allowed his friend, David Johnson, to use the boat whenever Johnson wanted. Johnson wanted to become a charter boat captain for a living. Holder informed Johnson that he should obtain charter insurance. But Holder and Johnson gave conflicting testimony about whether Holder authorized use of the boat for charters. Johnson arranged a fishing charter for a customer and Holder’s son. During the chartered trip, the boat struck a jetty and was damaged.

    State Farm, the boat’s insurer, denied coverage, citing exclusions for loss that occurred while the boat was used for any business pursuit or while rented to others. Holder filed suit against State Farm. Based on the exclusionary language contained in the policy, State Farm moved for summary judgment. Holder attempted to defeat the motion by alleging that, because he did not know or consent to the use of his boat as a charter, the exclusions should not apply. The court granted State Farm’s motion. According to the court, Holder’s testimony was not relevant to the issue. That is, it was immaterial what Holder thought about the trip or that he allegedly told Johnson not to charter the boat. The undisputed fact remained that Johnson chartered the boat on the day of the incident.

    US Money v. American International Specialty, 288 Fed. Appx. 558 (2008), 288 Fed. Appx. 558 (2008)
    TierOne Bank Corporation (“TierOne”) filed suit against US Money for unpaid mortgage loans. Judgment was entered against US Money in the amount of $1,625,630.71. USMoney sought coverage from its insurer American International Specialty (“American”) and American denied coverage based on a policy exclusion regarding claims arising out of defective title. The trial court granted American’s motion for summary judgment. USMoney appealed.

    USMoney argued that, under Georgia law, a claim does not “arise out of” a circumstance if the claim could still exist independent of that circumstance. USMoney pointed to evidence that TierOne would have still had valid claims against USMoney even if the property titles were not defective because USMoney forged appraisals and failed to obtain closing insurance. American countered stating that the forged appraisals and closing insurance would not have been necessary if USMoney had valid title to the property.

    The Georgia Court of Appeals held that American was under a duty to indemnify and defend USMoney against claims of breach of contract and negligent misrepresentation because those claims would have a basis even if valid titles had been involved in the transfers. Therefore, those claims did not “arise out of” the defective title and were not subject to the policy exclusion.

    The court further held that TierOne could not have maintained its common law negligence claim without the existence of defective title. Therefore, American was not under a duty to defend USMoney with respect to that claim because the cause of action for negligence “arose under” the existence of defective title and was subject to the policy exclusion.