FI FTH DI VI SI ON

PHI PPS, P. J.

, DI LLA RD and PETERSON, JJ.

N O T IC E : M otions for r e c ons i de r a tion m us t be

ph y sic a l ly r e ce iv ed i n our c le r k ’s offic e w ithin te n

da y s of the da te of de c is ion to be de e m ed tim e ly file d.

http://w w w .ga a ppe a l s .us /r ule s

M ay 24, 2016



# I n th e Co u r t o f

A p p eals o f

G eo r g ia

A1 6 A0 13 4

. GEORGIA INTERLOCAL RISK M A NAGEM E NT

AGENCY v . CITY OF SANDY SPRINGS, GEORGIA. PE-0 0 5

P E T E R S O N , J u d g e.

Geo rg i a In t erl ocal Ri sk Man ag em en t Ag en cy (“ G IRM A”) ap p eal s t h e g ran t o f

a m o t i o n t o d i s m i s s it s d ecl arat o ry ju d g m en t act i o n

. GIRM A arg u es t h at an ex cl u s i o n

i n t he ag reem en t b ars co v erag e an d t h u s i t s h o u l d n o t h av e t o co n t i n ue d efen d i n g t h e

l a w s u i t

, an d t h at i t i s en t it l ed t o reco u p s o m e o f i ts d efen s e co s t s. W e a g r e e w i t h

GIRM A th at t h e ex cl u si o n ap p l i es t o b ar co v erag e fo r t h e un d e r l yi n g l aws u i t

, t hu s

freei n g GIRM A fro m i ts d ut y t o d efen d

. 1 Ho wev er, we affi rm t h e t ri al co u rt ’ s fi n d i n g

1 Th e Ci t y of San d y Sp ri n g s req u es t ed on it s m o t i o n fo r reco n s id erat i o n t h at we

m ak e cl ear o u r o p i n i o n d o es n o t d eci d e i t s affi rm at i v e d efen s es of wai v er an d

es t o p p el

, wh i ch were no t rai s ed i n t h e Ci t y ’ s m o t io n t o d i s m i s s o r b efo re th i s Co u rt

. It i s

, o f co u rs e, ax i o m at i c t h at “ a d eci s io n ’ s h o l d in g i s li m i t ed t o t h e fact ual co n t ex t

o f t h e cas e b ei n g d eci d ed an d t h e i ss u es t h at c o n t e x t n eces s ari ly rai s es

. Lan g u ag e

t h at s o un d s l i k e a h o l di n g

— b u t act ual l y ex ceed s t h e s co p e o f t h e cas e’ s fact u alt h at G IRM A i s no t en t i tl ed t o reco u p d efen s e co s t s b e c a u s e ev en i f Geo rg i a l aw

p erm i t t ed an i n s u rer t o reco u p d efen s e co s t s wh ere th ere is n o co nt ract u al p ro v i s i o n

p erm i t t in g s u ch reco v ery , GIRM A d i d n o t t im el y s eek t o res erv e s u ch a ri g h t

.

GIRM A i s a ri s k -s h ari ng arran g em en t wh erei n m u n i ci p al i t i es co n tract t o p o ol

t h ei r g en eral li ab i l i ty ri s k s

. OCGA § 3 6 -8 5 -2

. Al t h ou g h t ech n ical l y n o t an i n s u ran ce

co m p an y o r i n s u rer, “ [a] m

u ni ci p al i t y t h at en t ers a GIRM A c o v erag e ag reem en t in

effect pu rch as es l i ab i l it y i n s u ran ce.” GIRMA v. G o d f r ey

, 2 7 3 G a. Ap p. 7 7, 7 8 (6 1 4

SE2 d 2 0 1 ) (2 00 5 ); see a l

s o O CGA § 3 6 -8 5 -4

. Th e Ci t y of San d y Sp ri n g s (t h e “ Ci t y ”)

p art i ci p at ed i n t he GIRM A p ro g ram fro m ab o u t D ecem b er 1 , 2 0 0 5 t o M ay 1 , 2 0 1 2.

Th e co v erag e ag reem en t (t h e “ Co n tract ”) o b t ai ned by th e Ci ty p ro v i d ed co v erag e fo r

Erro rs an d Om i ss io n s —

an d s p eci fi cal l y

co v erag e fo r m o n ey

d am ag es i n cu rred b y

a M em b er ari s i n g fro m an y W ro n g fu l Act co m m i t t ed d u r i n g t h e co v erag e p eri o d

(wh ich i n cl u d es al l eg ed co ns t i tu t i o n al v io l at i o n s).

On J u n e 3 0

, 2 0 0 6

, s ev eral o wn ers an d o perat o rs of es tab l i s h m en ts o fferi n g

n u d e d an ci ng an d / o r sel li n g s ex u al l y ex p li ci t m erch an d i s e fi l ed s u it ag ai n s t t h e Ci t y

co n tex t

— i s no t a h o ld i n g n o m at t er h ow m u ch i t s o u n d s li k e o n e.” Cl as s i c Co mmer

. S er vs

. v. Ba l d

wi n

, 3 3 6 Ga. Ap p

. 1 8 3

, 1 9 0 (7 8 4 SE2 d 44 ) (2 01 6 ) (Pet ers o n

, J

. ,

co n cu rri n g fu l l y an d s p eci al l y ). As t h e Ci t y ’ s defen s es o f wai ver an d es t op p el are n ot

at i s s u e on t h i s ap p eal

, n o t h i n g i n t h i s d eci s i o n s h o u l d b e u n d ers t o o d as d eci d i n g

t h em

.

2i n t h e No rt h ern Di s t ri ct o f Geo rg i a (“ Fl an i ga n ’s I ”). Th e s u it ch al l en g ed t h e

co n st i t u t io n al i ty o f t h e Ci t y ’ s o rd i n a n c e s reg ul at i n g ad ul t en t ert ai n m en t i n d u s t ri es

wi t h i n ci t y l im i t s

, an d s o u g h t d ecl arat ory an d in ju n ct i v e rel i ef fro m t h e Ci t y

, as wel l

as co m p en s at o ry an d pu n i t i v e d am ag es fro m th e t h e n -u n i d en t ifi ed ci t y m an ag er.

GIRM A p ro v i d ed t h e C i t y wi t h a d efen s e i n t h e s u i t

. Th e p lai n t i ffs s u bs eq u en t l y

d i s m i s s ed t h e s u i t v o lu n t ari l y

.

On Oct o b er 5

, 2 0 0 9

, t h e p l ai n t i ffs refi l ed th ei r fed eral s u i t ag ai n s t t h e Ci t y

as s ert i n g t h e s am e co ns t it u t i o n al ch al l en ge, b u t t his ti m e s eek i n g o n l y d ecl arat o ry an d

i n ju n ct i v e rel i ef (“

Fl an i g a n ’s II ”). GIRM A ag ai n p ro vi d ed a d efen s e t o th e s u i t

, b ut

u n d er a r e s erv at i o n o f ri g h t s

. G IRM A’ s res erv at i o n o f ri g h t s l et t er m ad e cl ear t h at

GIRM A was p ro v i di ng a d efen s e t o t h e Ci t y i n Fl a n i g a n ’s II b u t w as res erv i n g i t s

ri gh t t o d en y co verag e b as ed o n an ex cl u s i o n i n t h e Co nt ract

. In p art i cu l ar, GIRM A

ci t ed Ex cl u s i o n E, wh i ch s t at es t h at co v erag e d o es n o t ap p l y t o “ an y cl ai m ari s i n g o ut

o f o r i n a n y way co n n ect ed w i t h an y cl ai m s eek i n g eq u it ab l e rel i ef, red res s o r an y

o t h er cl ai m

s eek i n g rel i ef i n an y

fo rm o t h er t han m o n ey d am ag es .”

Th e fi rs t t i m e t h e p l ai n t i f f s am en ded t h ei r co m

p l ai n t

, t hey s ti l l d i d n o t s eek

m o ney d am ag es

. Th e Ci t y t h en fi l ed a s ep arat e n u i s an ce act i on i n F u l t o n Co u n t y

3Su p eri o r Co u rt ag ai n s t t h e p l ai n t i ffs

, s eek i n g i n ju n ct i v e rel i ef. 2 Th e p lai n t i ffs

, i n t u rn

,

fi led a s eco n d am en ded co m p l ai n t o n J u n e 2 0, 2 0 1 2, s eek in g n o m in a l a n d

co m p en s at o ry d am ag es fo r t h e Ci ty ’ s al l eg ed ly ret al iat o ry co n d u ct i n fi l i n g t h e

n u i s an ce act io n

.

GIRM A s en t a rev i sed res erv at i o n of ri g h ts l et t e r o n F e b ru ary 1, 2 0 1 3,

i n d i cat i n g t h at i t was s t i l l p r o v i d i n g a d efen s e, b ut rei t erat ed i ts res erv at i o n o f t h e

ri gh t t o den y co v erag e u nd er, am o n g o th er t h i n g s

, Ex cl u s i o n E. In t h e rev i s ed l et t er,

GIRM A fo r t h e fi rs t t i m e ex p l i ci t ly res erv ed t h e r i g h t t o reco v er fu t u re ad v an ced

d e f e n s e co s ts fro m t h at dat e fo rward if it was d et erm i n ed th at GIRM A was n ot

o b l i g at ed t o d efen d t he cl a i m

. G I R M A req u es t ed t h at th e Ci t y co n s en t t o t h e

p ro v is i o n o f a d efen s e su b ject t o t h es e res erv at i on s b y si g n in g an d ret u rn i n g t h e l et t er,

an d i n d i cat ed t h at t h e Ci t y ’ s refu s al t o co n s en t o r ret u rn t h e l et ter as req u es t ed wo u ld

res u l t in G IRM A im

m ed i at el y fi l i n g a d e c l a r a t o ry j u d gm en t act i o n t o d et erm i n e i t s

co v erag e an d d efen se o b l ig at i o n s

. Th e Ci t y d i d n o t s ig n or o t h erwi s e res p o n d t o t h e

rev i s ed res erv at i o n o f ri g h t s l et t er.

2 Th e n u i s an ce act i o n al s o i n cl u d ed a cat ch -al l pro v i s i o n in t h e pray er fo r rel i ef,

s eek i n g al l o t h er rel i ef as t h e co u rt “ d eem s ju s t an d p ro p er[,] ” i n cl u d in g “ d am ag es

,

an d o t her m on et ary

rel i ef[.] ”

4Lat er i n Fl a n i g a n ’s II , o n Ap ri l 9 , 2 0 1 4

, t h e Di s t ri ct Co urt g ran t ed t h e Ci t y ’ s

m o ti o n fo r s u m

m ary j u d gm en t wi t h res p ect t o t h e p l ai n ti ffs ’ cl ai m s o v er t h e fi l i n g o f

t h e n u is an ce act io n . Nei t h er p art y ap p eal ed t h e Co u rt ’ s o rd er.

Fo l l owi n g t h e co u rt ’ s o rd er i n Fl an i g an ’s II

, GIRM A fi l ed s ui t ag ai n st t h e Ci t y

o n J u l y 1 1

, 2 0 1 4, s eek i n g a d ecl arat ory ju d g m e n t t h a t n o co v erag e ex i s t s fo r

Fl a n ig a n’s II

, G I R M A i s n o t o b l i g at ed t o p ro v id e a d efen se t o t h e Ci t y i n t h at

l aws u i t

, an d i t i s en t i t l ed t o d efen s e co s t s s t art i n g fr o m t h e d at e o f i t s rev i s ed

r e s erv at i o n o f ri g h t s (t h e “ D ecl arat o ry J u dg m en t Act i o n ”). T h e Ci t y m o v ed t o d i s m i s s

t h e s u i t

, arg u i n g GIRM A had a d u t y t o d efen d as a m at t er o f l aw an d co u l d n ot

wi t h d raw i t s defen s e u n ti l t h e Ci t y was p ro tect e d b y a fi n al ju d g m en t o n al l

p o t e n t i a l l y o r arg u ab l y co v ered cl ai m s

. Th e t ri al co u rt ag reed

, g ran t ed t h e Ci t y ’ s

m otion, a nd dism isse d G I R M A ’ s Decl arat o ry Ju d gm en t Act i on

. T hi s a ppe a l f ollow e d.

“ W e ap p l y

a d e n ov o s t an d ard o f rev i ew t o th e t ri al co u rt ’ s g ran t o f a m o t i o n

t o di s m i s s

. A m o t i o n t o di s m i s s m ay b e gran t ed o n l y wh ere a co m p l ai n t s h o ws wi th

cert ai n ty t h at t h e pl ai n t i ff w o ul d n o t b e en t it l ed t o rel i ef u n der an y s tat e o f fact s t h at

co u ld b e p ro v en i n s u p p o rt o f h i s cl ai m .” Al ca t ra z Med i a, LLC v. Y a h o o ! In c.

, 2 9 0

Ga. Ap p

. 8 82

, 88 2 (6 6 0 SE2 d 7 9 7 ) (2 0 0 8 ) (ci tat i o n s o m i t t ed ). Fu rt her, i n rev i ewi n g

t h e g ran t o f a m o t i o n t o d i s m i s s

, we “ m u s t c o n s t ru e t h e p l ead i n g s i n t h e l i g h t m o s t

5fav o rab l e t o t h e a p p el l an t wi t h al l d o u bt s res o l v ed i n t h e ap p el l an t ’ s fav or.” Ewi n g

v. Ci ty o f A t l a n t a

, 2 8 1 Ga. 6 5 2

, 6 5 3 (2 ) (6 4 2 SE2 d 1 0 0 ) (2 0 0 7). Al t h o u gh GIRM A

i s n o t t ech n i cal l y an i n s u ran ce co m p an y o r i n s u rer, we ap p l y p ri n ci p l es o f i n s u ran ce

l aw i n an al y zi n g co verag e i s s u es

. S ee, e.g

. , Ci t

y o f Co ll eg e Pa r

k v. Geo r g i a In t er l o ca l

Ri s k Mg mt . Ag en cy , 3 1 3 Ga. Ap p . 2 3 9

, 2 4 3 -4 4 (2 ) (7 2 1 SE2 d 9 7 ) (2 0 1 1 ).

1

. Th e Co n t ract en t i tl ed t h e Ci t y t o co v erag e fo r Erro rs an d Om i s s i o ns

— an d

s p eci fi cal l y m o n ey d a m a g e s i n cu rred b y a M em b er ari s i n g fro m an y W ro ng fu l Act

co m m i t t ed d u ri n g t h e co v erag e p eri o d

. Th e Co n t ract ’ s d efi n i t io n o f a “ W ro n g fu l Act ”

i n cl u d es al l eg ed co n s t it ut i o n al v i o l at i o ns

, an d Fl a n ig a n ’s II al l eg ed co n s t i t u t i o n al

v i o l at i o n s. GIRM A co n ced es t h e al l eg at i o n s i n Fl an i g a n ’s II co n s t i t u t e a “ W ro n g fu l

Act ,” bri n g i n g th e cl ai m wi t h i n t h e i n s u ri ng cl au s e, bu t arg u es t h at E x cl u s i o n E

ex cl u d es co v erag e an d n eg at es i t s d ut y t o d efen d

. T h erefo re, t h e fi rs t i s s u e we m u s t

ad d res s i s wh et h er E x cl u s i o n E o p erat es to ex cl ud e co v erag e fo r Fl a n ig an ’s II u n d er

t h e p o l i cy

. If t h ere i s n o co v erag e, G IRM A d o es n o t hav e a d u ty t o d efen d

. S ee Pen n

Amer i ca n In s

. Co

. v. D i s a b led A m. Vet er a n s

, In c.

, 2 6 8 G a. 5 64

, 5 6 5 (4 9 0 SE2 d 3 7 4 )

(1 9 9 7) (wh ere t h e co m

p l ai n t set s fo rt h t ru e fact ual al l eg at i o n s s h owi n g no co v erag e,

t h e i n su rer i s ex cu s ed fro m p ro v i d in g a d efen s e). W e co n cl u d e t h at t h e cl ai m s ari s e

6o u t o f cl ai m s s eek i n g eq u i t ab le rel i ef, Ex cl u s i o n E ap p l i es

, an d t h us GIRM A h as n o

d u t y t o d efen d

.

Excl u s i o n E o f t h e Co n t r a ct

Ex cl u s i o n E s t at es t h at co v erag e d o es n o t ap p l y t o “ an y cl ai m ari s i n g o u t o f o r

i n a n y way co n n ect ed w i th an y cl ai m s eek i n g eq u i tab l e rel ief, red res s o r an y o t h er

cl ai m s eek in g re l i e f i n an y fo rm o t h er t h an m o n ey dam ag es

. ” W e h av e prev i o u s l y

d efi n ed “ ari s i n g o u t o f” t o m ean “ h ad i t s o ri g i n s i n,” “ g rew o u t of,” o r “ fl o wed fro m .”

BBL-McCa r th

y, LLC v. Ba ld

wi n Pa vi n g Co

. , 2 8 5 Ga. Ap p . 4 9 4 , 4 9 8 (1 ) (6 4 6 SE2 d

6 8 2 ) ( 2 0 07 ). “ M o reo v er, we h av e al s o h el d t h at t h e t erm ‘ ari s i n g o u t o f’ do e s n o t

m ean p ro x i m at e cau s e i n th e s t ri ct l eg al s en s e

. . . . Al m o s t an y cau s al co n n ect i o n o r

rel at i o n s h i p wi l l d o

. ” Id

. (ci t at i o n s o m i t t ed ). In d et erm i n i n g wh et her cl ai m s “ ari s e o ut

o f” ex cl u d ed co nd u ct

, w e co nd uct a “ b u t fo r” an al y s is

. S ee Ci t y o f Co l l eg e Pa r

k

, 3 1 3

Ga. A p p

. at 2 4 3 -4 5 (2 ); Co n t i n en t a l Ca s

. Co

. v. H.S .I. F i n a n

. S vs

., In c.

, 26 6 Ga. 2 6 0,

2 6 2 (4 6 6 SE2 d 4 ) (1 9 9 6 ). “ Cl ai m s ari s e o u t o f ex cl u d ed co nd u ct wh en ‘ b ut fo r’ t h at

co n du ct

, t h ere co u l d b e no cl ai m ag ai n s t t he i ns u red

. ” Vi d eo W a reh o u s e, In c. v.

S o u t h er n Tr u s t In s

. Co

. , 2 9 7 Ga. Ap p . 7 8 8 , 7 9 1 (6 7 8 SE2 d 4 8 4 ) (2 0 0 9 ).

Co n t r a ct Pr ovi s i o n s An d

Th ei r Rel a t io n t o Excl u s i on E

7W h en i n t e r p r et i n g a co n t ract

, we l o o k t o t hat co n tract ’ s l an g u ag e. In t h e

Co n t ract

, t h e cap i t al i zed t erm “ Cl ai m ” i s defi n ed as “ a d em an d ag ai n s t a M em b er o r

b y a M em b er fo r m o n ey d am ag es fo r co m p en s ab l e l o s s es .” Ex cl u s i o n E u s es t h e wo rd

“ cl ai m ,” b u t d oes n o t cap i t a l i z e i t

. Al t h o u gh fai l ure t o cap i t al i ze a t erm d o es n ot

al way s m ean t h at t h e un cap it al i ze d t e r m l ack s t h e cap it al i zed t erm ’ s s peci fi cal l y

d efi n ed m ean i n g

, u n d er th e ci rcu m s t an ces h ere, we co n cl u de t h at t h e w o rd sh o u l d b e

i n t erp ret ed acco r d i ng t o i ts n o rm al an d ord i n ary u sag e. As d efi n ed i n t h e Co n t ract

,

t h e cap i t al i zed t erm “ Cl ai m ” m ean s a d em an d fo r m on ey d am ag es

. Bu t as u s ed i n t h e

ex cl u s i o n

, t h e u n cap i t al i zed t erm “ cl ai m ” i s i nt en d ed t o m ean t h o s e d em an d s fo r

s o m et h in g o th er t h an m o ney d am ag es

. M o reo v er, G IRM A co n ced ed at o ral arg u m en t

t h at t h e t e r m “ cl ai m ” as u s ed i n t h e ex cl u s i on i s i n t en d ed to h av e i t s o rd i n ary

m ean i n g

, an d t h e Ci t y di d n o t di s ag ree. 3 Acco rd in g l y

, i n an al y zi n g t h e ap p l i cab i l i t y

o f Ex cl u si o n E i n t h e cas e at h an d

, we c o n s i d er t h e wo rd “ cl ai m ” acco rd i n g t o i t s

n o rm al an d o rd i n ary

u sag e.

3 Th i s co n cl u s i on i s b o ls t ered by t h e bi zarre res u l t s o bt ai n ed u s i n g th e d efi n ed

t erm

. Ex cl u s i o n E wo u l d p ro v id e t h at c o v erag e d o es n o t ap pl y t o : “ an y [d em an d

. . . fo r m o ney

d am ag es ] ari s in g o u t o f o r i n an y way co n nect ed w i t h an y [d em an d

. . . fo r m o n e y d am ag es ] s eek i n g eq u i t ab l e rel i ef, red res s o r an y o t h er [d em an d

. . . fo r

m o ney d am ag es ] s eek i n g rel i ef i n an y fo rm ot h er t han m o ney d am ag es .” Th i s

co n st ru ct i o n wo u ld b e i n co heren t

.

8Un d er i t s o rd i n ary us ag e, a cl ai m i s d efi n ed as “ a d e m a n d fo r s o m et h i n g

ri gh t fu l l y o r al l eg ed l y d u e ” o r “ a ri g h t

. . . t o s o m et h i n g .” W eb s t er’ s N ew W o rl d

Di ct i o n ary 2 6 1 (2 d Co l leg e e d

. 1 9 7 2 ). 4 Here, “ cl ai m ” us ed i n it s o rd i n ary s en s e i s

b ro ad en o u g h t o e n co m

p as s t h e cl ai m s m ad e i n Fl a n i g a n ’s II an d in t h e n u i s an ce

act i on

. Th e nu i s an ce act i o n as s ert ed cl ai m s s eek i n g i n ju n ct i v e rel i ef. 5 Th e fi rs t t wo

co m p l ai n t s i n F

l a n i g a n’s II d i d n o t s eek m on et ary dam ag es fo r an y o f t h e p l ai n t i ffs ’

cl ai m s

. Bu t t h e s e co n d am en d ed co m p lai n t d id

, an d t h at i s t h e o p erat i v e co m p l ai nt

n o w at i s su e i n Fl a n i

ga n ’s II

. Th e q ues t i o n

, t h en

, i s wh et h er t h e cl ai m s i n th e s eco n d

am en d ed co m

p l ai n t aro s e o u t of a cl ai m s eek i n g eq u it ab le rel i ef o r r e l i e f i n a fo rm

4 W e p rev io u s l y n o t ed th e d efi n it i on of “ cl ai m ” u nd er Bl ack ’ s Law Di ct i o n ary

as a “ cau s e of act i o n ” o r “ d em an d f o r m o n ey o r p ro p ert y ,” w i t h “ d em an d ” b ei n g

d efi n ed as an “ as s ert i o n o f a l eg al ri g h t.” S ee P at t er ma n v. Tr a vel er s

, In c.

, 2 3 5 Ga.

Ap p . 7 8 4 , 7 8 6 (5 1 0 SE2 d 3 0 7 ) (1 9 9 8 ), a ff ’d 2 7 2 Ga. 2 5 1

.

5 W e ack n o wl ed g e t hat t h e Ci t y al s o in cl u d ed a cat ch -al l p ra ye r f o r r el i ef

s eek i n g “ s uch o th er rel i ef

. . . as [t he] Co u rt d eem s j u s t an d p r o p er[,] ” i n cl u d i n g

“ d am ag es

, an d o t her m o n et ary rel ief ag ai n s t Defen d an t s[.] ” Bu t t h i s g en eral cat ch -al l

cl au s e i n t h e pray er fo r rel i ef d o es no t co n v ert t h e act i o n in t o on e fo r m o n et ary

d am ag es wh ere t h e co m

p l ai n t ot h erwi s e fai l s t o s et fo rt h a b as i s fo r m o n ey d am ag es

. Ot h erwi s e, al l l aws ui t s seek i ng “ s u ch o t h er rel i ef as t h e co u rt d eem s n eces s ary

, ju s t

,

an d p r o p er,” o r s o m e v ari at i on t h ereo f, as i s o ft en i n cl u ded as a m at t er o f co u rs e,

wo u l d p reci p i tat e a d u t y t o d efen d

. S ee, e.g

. , Cl e m o n s v. S t at e Fa r m Fi r e an d Ca s

. Co

. , 8 7 9 S.W .2 d 3 8 5 , 3 9 3 (Tex . Ct . Ap p . 1 99 4 ).

9o t h er t h an m o n ey dam ag es

, s u ch t hat i t wo u l d fal l w i t hi n t h e ex cl u si on at i ss u e h ere.

W e co n cl u d e t h at t h ey d i d

.

Th e cl ai m s i n th e s eco nd am en d ed co m p l ai n t “ g rew o u t o f” t h o s e as s ert ed in

t h e fi rs t t wo co m

p l ai n t s fi l ed i n t h e Fl a n i

g a n ’s II act i o n t h at o ri g i n al l y s o u g h t o n l y

d ecl arat ory an d i nju nct i v e rel i ef. Th e cl ai m s i n t h e s eco nd am en d ed co m p l ai n t al s o

“ fl o wed fro m ” t h e fi l i n g o f t h e n u i s an ce act i o n

, b ecau s e t h e s eco nd am en d ed

co m p l ai n t s p eci fi cal l y as s ert ed an ad d i t i o n al cl ai m p ert ai n i ng t o t he al l eg ed

i m p l i cat i o n s fro m t h e fi l i n g of t h e n u i s an c e a c t i o n

. Bu t fo r t he fi l i n g of Fl a n i g a n ’s

II an d t h e n u i s an ce act i on

, t he cl ai m s i n t h e s eco n d am en d ed co m p lai n t i n Fl a n i

g a n ’s

I I wo u l d n o t ex i s t. Th u s, t he cl ai m s as s ert ed i n t he s eco n d am en ded co m p l ai n t i n

Fl a n ig a n’s II fal l wi t h i n Ex cl u s i o n E, an d t h erefo re n o co v erag e, an d rel at ed l y

, n o

d u t y t o d efen d

, ex i s ts

. In s uran ce co v erag e i s a m at t er o f co n t ract bet ween t h e i n s u rer

an d t h e i ns u red

, an d t h i s Co u rt “ wi l l no t s t rai n t o ex t en d c o v e r a g e wh ere n o n e was

co n tract ed o r i nt en d ed .” Jef f er s o n In s

. Co

. o

f New Y o r k v. Du nn

, 26 9 Ga. 2 1 3

, 2 1 6

(4 9 6 SE2 d 6 9 6) (1 9 9 8). “ [A] n i n s u ran ce co m pan y i s free t o fi x t h e t e r m s o f i t s

p o l i ci es as i t s ees fi t, s o l o n g as s u ch t erm s are n o t co n t rary t o law, an d i t i s eq u al l y

free t o i ns u re ag ai n s t cert ai n ri s k s wh i l e ex cl ud i n g o t hers .” Co n t in en t a l Ca s

. Co

. , 2 6 6

Ga. at 2 62

.

10Th e Ci ty’s Hyp o t h et i ca l s

Th e h y p o t h et i cal s cen ari o s p ro p o s ed by t he Ci t y i n i t s b ri ef d o n o t ch an g e o u r

an al y s i s. Th e Ci t y co n

ju red t h e fo l l o wi n g s cen ari o s t h at i t s ay s wo u l d g i v e ri s e t o a

p arad e o f h o rri b l es res u l t i n g fro m o u r co n cl us i o n t h at Ex cl u s io n E ap p li es :

• Th e Ci t y c o n t r a c t s w i t h a b u s i n es s t o m ai n tai n a p ark

, bu t t h e b u s i n es s b an s

d em o ns trat io n s i n t he p ark

. A l aws ui t i s fi l ed ag ai n s t t h e Ci t y an d t h e b u s i n es s

s eek in g m o ney dam ag es

. GIRM A defen d s

, b ut t h en t h e Ci t y l e a r n s t h e

b u s i n es s m ad e m at eri al m i s rep res en tat i on s d u ri ng co n t ract n eg ot i at i o n s

, s o t h e

Ci t y fi l es a cro s s -cl a i m i n eq u i t y t o res ci nd t h e co n t ract

. Co v erag e v an i s h es

b ecau s e t he l aws u i t i s “ co n n ect ed wi t h an y cl ai m s eek i n g eq u it ab l e rel i ef.”

• Em p l o y ees al l eg e t h e Ci ty n eg l ig en t l y ad m i n is t ers i ts b en efi t s pro g ram an d s u e

fo r m o n ey d am ag es

, an d t h e e m pl oy ees l at er t h reat en t o rel eas e pers o n n el

reco rd s th at s u p p o rt t h ei r cas e b u t al s o rev eal co n fi d en t i al i n fo rm at i o n ab o ut

o t h er em p l o y ees n o t in v o l v ed i n t h e s u i t

. GIRM A d efen d s

, an d t h e Ci t y o r t h e

em p l o y ees wh o s e p ers o n al i n fo rm at io n i s t h reat en ed s e ek a t em p o rary

res t rai n i n g o rd er. C o v e rag e v an i s hes b ecau s e t h e l aws u i t i s “ co n n ect ed wi th

an y cl ai m s eek i ng eq u it ab l e rel i ef.”

11In each o f t h e p ro p o s ed s cen ari o s ab o v e, t h e i n i t i al act i o n i n cl u d es a cl ai m fo r m o n ey

d am ag es

, o u t o f w hi ch a lat er req u es t fo r eq u i t ab l e rel i ef ari s es

. Bu t h ere, t h e si t u at i o n

i s t h e co n v ers e

— t h at i s

, t h e i n i t i al act i o n was o n e fo r eq u i t ab l e rel i ef t h at o n l y l at er

g av e ri s e t o a cl ai m fo r m on ey d am ag es

. Pri o r t o Fl a ni g a n ’s II, t h e cl ai m at is s u e d id

n o t o n ly “ ari se o ut o f” cl ai m s s eek i n g eq u i t ab l e rel i ef, t h ey were cl ai m s s eek i n g o n l y

eq u it ab l e rel i ef. Ou r an al y s i s i s l i m i t ed t o s peci fi c l an g u ag e i n t h e ex cl us i o n : wh et h er

GIRM A’ s cl ai m fo r decl arat o ry ju d g m en t “ ari s e[s ] o u t o f

. . . an y cl ai m s s eek i n g

eq u i t a b l e rel i ef, red res s o r an y o t h er cl ai m s eek i n g rel i ef i n an y fo rm o t h er t h an

m o ney d am ag es

. ” Ho w co v erag e m ay s h i ft u n d er o t h er l an g u ag e i n t he ex cl u s i o n in

s cen ari o s i m ag i n ed b y t h e C i t y d o es n o t affect o u r d eci s i o n o n t he act ual d i s p u t e

b efo re u s

. T h e t ri al co urt erred i n g ran t i n g t h e Ci t y ’ s m o t i o n t o d i s m is s GIRM A’ s

Decl arat o ry

J u d g m en t Act i o n, an d we rev ers e.

2

. Becau s e w e ag ree t h at GIRM A d o es n o t h av e a d u t y t o d efen d, we m us t

n o w a d d r e s s G IRM A’ s cl ai m t h at i t i s en ti t led t o reco v er l i t i gat i o n co s t s in

Fl a n ig a n’s II i n cu rred su b s eq u en t t o t h e i s s u an ce o f it s rev i s ed res erv at io n o f ri g h t s

l et t er o n Feb ru ary 1

, 20 1 3

. GIRM A d o es n o t po i n t t o an y p ro v is i o n i n th e i n s u ran ce

ag reem en t g ran t in g i t t h e ri gh t t o reco u p d efen s e co s t s

. GIRM A i n s t ead arg u es t h at

t h e Ci ty i m

p l i ed l y ag reed t h a t GIRM A wo u l d b e ab le t o reco ver d efen s e co s t s by

12co n ti n u i n g t o accep t GIRM A’ s d efen s e ev en aft er t h e am en d ed res erv at i o n o f ri g h t s

l et t er t h at

, as o f Feb ru ary 1

, 2 0 1 3, i ncl u d e d a r es erv at i o n o f t h e ri g h t t o s eek

rei m b u rs em en t o f defen s e co s t s o n u n co v ered cl ai m s

, t hu s creat i n g an i m p li ed -i n -fact

co n tract

. GIRM A al t ern at iv el y arg u es t hat i t wo u ld co n s ti t u t e u nju st en ri ch m en t fo r

t h e Ci ty t o recei v e a free d efen s e w h e r e n o co v erag e ex i s t s

. Th e i s s ue o f wh et h er

i n s u rers are en ti t l ed t o reco up d efen s e co s ts wh ere t h ere i s n o co n t ract u al p ro v i s i o n

creat i n g su ch a ri g h t is an is s u e o f fi rs t i m p res si on i n Geo rg i a co u rt s, b u t we n eed n ot

reach t h at i s s u e h ere.

W e reco g n i ze th at “ [n ] at i o n al ly

, co u rt s are s p l i t as t o wh et h er an i n s urer h as a

ri gh t t o rei m

bu rs em en t o f d efen s e fees p ai d wh ere i t i s d et erm i n ed t h at t he i n s u rer h ad

n o t d u ty t o d efen d

. ” Il l i n o i s Un i o n In s

. Co

. v. NRI Co n st

. In c.

, 8 46 F. Su p p

. 2 d 1 3 6 6,

1 3 7 4 (N.D. Ga. 2 0 1 2 ) (ci t i n g W es t ch es ter

Fi r e In s . Co

. v. W

a l l er i ch

, 5 63 F.3 d 7 0 7,

7 1 4 (8 t h Ci r. 20 0 9 )). Th e “ m ajo ri t y ” vi ew h el d b y co u rt s reco g ni zes an i n su rer’ s ri g ht

t o rei m b u rs em en t of d efen s e co s t s an d fees wh ere i t i s d et erm i n ed t h at t h e i n s u rer h ad

n o d u ty t o d efen d

. S

ee W es t ch es t er

, 56 3 F.3 d at 7 1 4. Th i s vi ew i s ty p i cal l y s u p p o rt ed

b y t wo t heo ri es

— an i m p l ied co n t r a ct or t h e q uas i -co n tract u al t h eo ry o f u n ju s t

en ri ch m en t

.

13GIRM A ci t es au t ho ri t y fro m t h e No rt h ern Di s t ri ct o f Geo rg i a, Il l i no i s Un i o n

In s u r a n ce Co

. v. NRI Co n s tr u ct i o n In c.

, 8 4 6 F. Su p p

. 2 d 1 3 66 (N.D. Ga. 2 0 1 2 ), in

wh i ch t h e No rt h ern Di s t ri ct p red i ct ed h o w Geo rg i a co u rt s wo u l d i n t erp ret t h e i s s ue.

Id

. at 1 3 7 4 -7 7 (II)(C)(1 ). In Il l i n o i s Un i o n

, th e No rt h ern Di s t ri ct fo u n d t h e m ajo ri t y

v i ew am o n g th e n at i o n’ s co u rt s t o b e t h e m o s t p ers u as i v e b as ed o n t h eo ri es o f i m p l i ed

i n fact co n tract an d u n

j u s t en ri ch m en t

. Id

. at 1 3 7 7 (II) (C) (3 ). Th at v i ew h o l d s t h at

wh ere n o co n t ract u a l p r o vi s io n ex i s t s, a ri g h t t o reco u p d efen s e co s ts s t i l l ex i s t s

wh ere t h e i n s u rer t i m el y an d ex p l i ci t l y res erv ed t hat ri g h t

. Id

. GIRM A arg u es Geo rg i a

co u rt s s h o u l d ap p l y

t he m ajo ri t y

ru l e reco g n ized i n Il l i n o i s Un io n

.

Bu t ev en i f we were to ad o p t t h e ru l e u rg ed b y GIRM A, 6 i t s res erv at i o n o f t h e

ri gh t t o s eek rei m

b u rs em en t o f d efen s e co s t s was n o t t i m el y h ere. GIRM A fi rs t b eg an

p ro v id i n g a d efen se i n Fl an i g a n’s II in 2 0 0 9

, s ub

ject t o i t s i n it i al res erv at i o n o f ri g ht s

.

It d i d n o t s en d a rev i s ed res erv at i o n o f ri g h t s res erv i n g i t s ri g h t t o s eek d efen s e co s t s

u n t i l 2 0 1 3

. 7 Th at GIRM A l i m i t ed it s req u es t fo r d efen s e co s ts t o t h o s e i t wo u l d i n cu r

6 W e m a k e n o s u ch h o l d i n g h ere. S ee P DK La b s

. In c. v. DEA

, 3 6 2 F.3 d 7 8 6,

7 9 9 (D.C. Ci r. 2 0 0 4 ) (Ro b ert s

, J

., co n cu rri ng in p art an d co n cu rri n g i n t h e ju d g m en t )

(“ i f i t i s n o t n eces s ary

t o d eci d e m o re, i t i s n eces s ary n o t t o d eci d e m o re.”).

7 GIRM A s o u g h t rei m

b u rs em en t o f d efen s e co s t s fro m t h e dat e o f t h e rev i s ed

res erv at io n fo rward

.

14m o vi n g fo rward fro m t h e am en d ed res erv at io n do es n o t ch an g e th e an al y s i s as to

wh et h er i t act ed reas on ab l y p ro m p t l y i n res erv in g t h e ri g h t i n th e fi rs t i n s tan ce. S ee,

e.g

. , Bu i l d

er s In s

. v. Ten en b a um

, 3 2 7 G a. Ap p

. 20 4

, 2 1 0 (1 ) (7 57 SE2 d 66 9 ) (2 0 1 4 )

(an i n s u rer “ m

u s t act reas o nab l y p ro m p t l y ” i n p res erv in g i t s r i g h t s t o as s ert a

p art i cu l ar g ro u n d fo r no n co verag e). If GIRM A act ual l y h as a ri g h t t o reco u p d efen s e

co s t s i n t h i s cas e, t h en s u ch a ri g h t wo u l d h av e ex i s t ed i n 2 0 0 9 , fo u r y ears b efo re i t

at em p t ed t o res erv e t h at ri g h t

. G IRM A arg u es t h e d el ay was reas on ab l e b ecau s e u n t i l

t h e No rt h ern Di s tri ct ’ s d eci s i o n i n Il l i n o i s Un i o n in 2 0 12

, i t d i d n o t h av e a b as i s

u n d er Geo rg i a l aw t o m ak e t h i s res erv at i o n

. Bu t GIRM A ’ s arg um en t m i s u n ders t an d s

t h e n at u re o f deci si o n s o f fed eral co u rt s i n t erp ret i n g Geo rg i a law. Th e No rt h e r n

Di s t ri ct d i d n o t m ak e Geo rg i a l aw i n Il l i n o i s Un i o n

. Th e co u rt m erel y p red i ct ed h o w

Geo rg i a co urt s wo u ld ru l e, an d it b as ed t h i s p red ict i o n o n th e sam e cas e l aw av ai l ab l e

t o GIRM A. Th erefo re, GIRM A was i n th e s am e p o s i t io n an d h ad t h e s am e ab i l i t y to

m ak e s uch a p red i ct i o n i t s el f, an d t o is s ue a ti m el y res erv at i o n acco rd i n g l y

. It d i d n ot

d o s o an d can n o t n ow s eek t o co l l ect d es p i t e i t s fai l u re.

Ju d g men t a f f i rmed i n p a r t a nd r ever

s ed in p a r t

. Ph i

p ps

, P. J., a n d Di l l a r d

, J.,

co n cu r

.

15