WHOLE COURT

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

phy s ic a lly re ce iv e d in our cle r k’s off i c 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

June 30, 2017



# I n th e Co u r t o f

A p p eals o f

G eo r g ia

A1 7 A0 45 3

. A M ERICAN SAFETY INDEM NITY CO. v

. STO

CORP.

M C M ILLI A N , J u dg e.

St o Co rp

. (“ St o ”) f

i l e d s u i t ag ai n st A m eri can Safet y In d em n i t y Co m p an y

( “ ASIC”), as s ert i n g b reach o f co n t ract

, d ecl arat o ry ju d g m en t

, an d b ad fai t h c l a i m s

ari s in g fro m ASIC’ s refu s al t o defen d an d i n d em ni fy St o fo r cl ai m s rel at ed t o s t u cco

p ro d uct s t h at St o h ad s u p pl ied t o t wo b u il d i n g p ro ject s. 1 A SIC n ow ap p eal s t h e t ri al

c o u r t ’s o rd er g ran t i ng su m m ary ju d g m en t t o St o o n i t s b reach o f co n t ract an d

d ecl arat ory ju dg m en t cl ai m s an d o n ASIC’ s co u n t ercl ai m fo r res ci s s i o n an d d en y i n g

s u m m ary ju d g m en t t o ASIC o n S t o ’ s cl ai m fo r b ad fai t h. W e rev ers e t h e d en i al o f

1 St o am en d ed i t s o ri g i n al co m p l ai n t t o ad d t h e cl ai m o f b ad fai t h u n d er OCGA

§ 3 3-4 -6

.s u m

m ary ju dg m en t to ASIC o n St o ’ s cl ai m fo r bad fa i t h

, b ut affi rm i n al l o t h er

res p ect s as s et fo rt h b el o w.

1

. “ W e rev i ew a g ran t or d en i al o f s u m m ary ju d g m en t d e n o v o

, co n st ru i n g t h e

ev i d en ce in t h e l i g h t m o st fav o r a b l e t o t h e n o n m ov an t

. ” (Ci t at i o n o m i t t ed .)

Co r r ug a t ed

Rep l a cemen t

s , In c. v. Jo hn s o n , 3 4 0 Ga. Ap p

. 3 6 4 , 3 6 5 (7 97 SE2 d 2 3 8 )

(2 0 1 7). Su m

m ary ju d g m en t i s p ro p er wh en th ere i s n o g en u in e i s s u e of m at eri al fact

an d t h e m o v an t i s en t i t l ed t o ju d g m en t as a m at t er o f l aw. OCGA § 9 -1 1 -5 6 (c). So

v i ewed

, t h e reco rd s h o w s t h at St o m an u fact u res an d s el l s ex t eri o r cl ad d i n g p ro d u ct s

fo r res id en t i al an d co m

m erci al co n s t ru ct i o n

, i ncl u d in g s t u cco pro d u ct s an d co at i n g

fi ni s h es

. ASIC i s s ued t wo s et s o f i n s u ran ce p ol i ci es t o St o

. Th e fi rs t

, i s s u ed an n u al l y

fro m Sep t em

b er 1

, 2 0 0 9

, t o Sep t em

b er 1, 2 0 1 2, were p o l i ci es p ro v i d i n g co verag e fo r

cert ai n s t u cco p ro d u ct s (t h e “ St u cco Po l i ci es ”). T he s eco n d

, is s u ed an n ual l y fro m

Sep tem b er 1

, 2 0 1 0

, t o Sep t em

b er 1

, 2 0 1 2

, were p o l i ci es p ro v i d i ng co v erag e fo r St o ’ s

co at i ng pro d u ct s

, in cl u d in g a p ro d u ct cal l ed Po werfl ex (t h e “ Co at i n g Po l i ci es ”). Th i s

cas e ari s es fro m ASIC’ s ev en t u al refu s al t o d efen d an d in d em n ify St o i n t wo s ep arat e

l aws u i t s fi l ed ag ai n st St o reg ard i n g p ro d u ct s i t s u p p l i e d i n res i d en ti al b u i l d i n g

p ro ject s.

2(a) Cr es cen t Sh o r es

. Cres cen t S hor e s is a r e sid en t i al co m p l ex i n So u t h Caro l i n a

t h at was co m

p l et ed i n 2 0 0 4

. On No vem ber 5

, 2 01 0

, St o n o t i fi ed ASIC o f a p o t en t i al

cl ai m rel at ed t o th e Cres cen t Sh o res co m p lex

. Dav i d Pai g h t

, A S I C ’s as s i g n ed

ad ju s t er, res p o n d ed v i a l et ter d at ed N o v em b er 1 8, 2 0 10

, req u es t i ng ad d i t i o n al

i n fo rm at i o n an d as s ert i ng t h at ASIC’ s “ in v es ti g at i o n a n d ev al u at i o n ” was t o b e

co n du ct ed u n d er a res erv at io n o f ri g ht s

. In J an u ary 2 0 1 1

, t he Cres cen t Sh o res

h o m eo wn er’ s as s o ci at i o n fi l ed a l aws u i t ag ai ns t St o an d ot h ers (t he “ Cres cen t Sh o res

Su i t ”), al l eg i n g th at St o ’ s s tu cco s y s t em h ad s t art ed t o d el am i n at e an d fal l o ff. On

M ay 2 0

, 2 01 1

, A SIC n o ti fi ed St o vi a let t er t h at i t was den yi n g c o v e rag e, wh i ch

d es cri b ed i n d et ai l v ari o u s b as es u n d er t h e p o l i cy fo r d en y i n g co v erag e.

Ho wev er, Pai g h t t es t ifi ed at dep o s it i on t h at ASIC l at er r e

- e va l ua te d i t s p o s i t i o n

an d ag reed o n Sep t em

b er 2 8

, 2 0 1 1 t o d efen d t h e cl ai m

, t h ereaft er t ak i n g co n t ro l o f

t h e l i t ig at i o n

. 2 Pai gh t al s o co n fi rm ed at h i s d ep o s i ti o n t h at h is cl ai m s n o t es i n d i cat ed :

“ ASIC wi l l p ro v i d e a defen se fo r t h is m at t er. W i l l u p d at e co v erag e p o s it i on t o [St o ]

an d t h ei r b ro k er.” An d al th o u g h Pa i g h t ’ s cl ai m s n o t es al s o i n d icat ed “ i s s ued N. I.

R.O.R.,” wh i ch h e ex p lai n e d s t a n d s fo r “ nam ed i n s u red res erv at io n o f ri g h t s to

2 Th e p art ies d o n o t p oi n t t o an y l et t er d at ed Sep t em b er 2 8

, 20 1 1 n o t i fy i n g St o

t h at ASIC wo u l d d efen d t h e cl ai m , an d we h av e fo u n d n on e.

3d efen d

, ” h e h ad n o reco l l ect i o n o f w h e t h er he i ss u ed a res erv at i on o f ri g h t s i n t h e

Cres cen t Sh o res Su i t

, n o r d i d h e recal l ev er tel l i n g an y o n e at St o t h at ASIC was

d efen d in g St o s u b

ject t o a res erv at i on o f ri g ht s

. Pai gh t ’ s reco rd s al s o i n cl u d ed a l et t er

ad d res s ed t o St o

, d at ed Sep t em b er 2 0

, 2 0 1 1

, w h i ch co n t ai ned a res erv at i o n o f ri g h t s

(t he “ Cres cen t Sh o res Res erv at i o n o f Ri g h t s Let t er ” )

, b u t St o cl ai m ed th at

, d es p i t e

s earch i n g i t s p ap er an d el ect ro n i c fi l es

, i t h ad n o reco rd o f ev er recei v i n g t h at l et t er. 3

ASIC co n t in ued t o d efen d t h e Cres cen t Sh o res Su i t un t i l A p r i l 16

, 20 1 3 wh en i t

u l t i m at el y wi t h d rew co v erag e, as s ert i n g t h at S t o h a d m is rep res en t ed wh en i t fi rs t

recei v ed n o t ice o f a cl ai m fo r t h e Cres cen t Sh ores co m p lex

.

(b ) Ca n a l Si d

e Lo ft s

. Can al Si de Lo ft s i s a r e s id en t i al co m p lex in Tex as

co m p l et ed i n 2 0 06

. In A p ri l 2 0 1 1

, St o t en d ered t o ASIC a laws u i t fi l ed b y t h e o wn er

o f Can al Si d e Lo ft s ag ai n s t St o an d o t h er d efen d an t s as s ert i n g cl ai m s ari s i n g fro m t h e

al l eg ed b l i s t eri n g an d d el am i nat i n g o f t he s t u cco fi n is h (“ Can al Si d e Su i t”). On M ay

1 8

, 2 0 11

, ASIC res p o nd ed wi t h a l et t er s eek in g ad d i t i o nal i n fo rm at i on an d s t at i n g

t h at ASIC wo u l d b e co n d u ct in g i ts “ i nv es t ig at io n an d ev a l u a t i o n ” un d er a fu l l

3 Up o n l at er l earn in g t h e ASIC cl ai m ed i t h ad s en t St o a res erv at i o n o f ri g h t s

l et t er, St o lo o k ed th ro u g h i t s d o cu m en t s an d s p o k e wi t h i t s i n s u ran ce bro k er an d i t s

o u t s i d e co un s el to see i f an y o ne el s e h ad recei v ed a co p y o f t h e l et t er. N o o n e h ad

recei v ed a co p y

.

4res erv at io n o f ri g h t s. 4 On J u ne 1 6

, 2 0 11

, St o pro v i ded A SIC wi t h d o cu m en ts d et ai l i n g

t h e hi s t o ry o f t h e Can al Si d e p ro ject

. On Au g us t 1

, 2 01 1

, aft er rev i ewi n g t h es e

m at eri al s

, ASIC d en i ed co v erag e fo r t h e cl ai m on t h e bas i s t h at St o was aware o f

p ro b lem s wi t h t he Can al Si d e Lo ft s i n 2 0 0 8, p ri or t o t h e a p p l i cab l e p ol i cy p eri o d.

Th i s l et t er al s o s et o u t i n d et ai l t h e g ro u nd s fo r den y i n g co v erag e u n d e r t h e p o l i cy

.

St o ag ai n res p on d e d

, ex p l ai n i n g t h at i t h ad n o t recei v ed no t i ce of t h e cl ai m

p ri o r t o th e ap p l i cab l e po l i cy p eri o d an d en cl o s i n g d o c u m e n t at i o n t o su p p o rt i t s

as s ert i o n

. Su b s eq u en tl y

, ASIC rev ers ed i t s d en i al an d ag reed t o tak e o v er th e d efen s e

o f t h e Can al Si d e Su i t u n d er t h e 2 0 0 9 St u cco Po l i cy

. An Au g u st 2 0

, 2 0 1 2 em ai l s en t

b y Pai g h t i n d i cat es th at t h i s d et erm i n at i o n was co n v ey ed o ral l y t o b o t h St o an d St o ’ s

o u t s i d e co u n sel

. Sev eral m o n th s lat er, Pai g h t p rep ared a d et ai l ed l et t er reg ard i n g

ASIC’ s ag reem en t t o d efen d St o t h at i n cl u d ed a res erv at i o n o f ri gh t s (t h e “ Can al Si d e

Res erv at i o n o f Ri g h t s Let t er”).

Ho wev er, as i n t h e Cres cen t Sh o res Su i t

, St o co n ten d s

, d es p i t e a s earch o f i t s

el ect ro ni c an d p ap er d o cu m en t s

, t h at i t d i d n o t recei ve t h i s l et ter. 5 In h i s d ep o s i t i o n,

4 Pai g h t co n ced ed t h at t h i s l et t er di d n o t res erv e AS I C’ s ri g ht s reg ard i n g

d efen s e o f t h e cl ai m

.

5 Ag ai n

, u p o n l earn i n g t h e ASIC cl ai m ed i t h ad se n t a r e s e r vat i on o f ri g h t s

l et t er, St o lo o k ed th ro u g h i t s d ocu m en t s an d s p ok e wi th i t s i n s u ran ce bro k er an d i t s

5Pai g h t ex p l ai n ed th at i n t h i s i n st an ce, aft er d raft i ng t h e l et t er, h e s en t i t t o a s y s t em

cal l ed “ as s i s t an t t as k s

, ” w h ere i t wo u l d hav e b e e n as s i g n ed t o an ad m in i s t rat i v e

as s i s tan t t o m ai l

. Bu t h e has n o way o f k n o wi n g ei t h er wh o recei v ed t h e as s i g n m en t

o r wh et h er t h at p ers o n act u al ly m ai l ed t h e l et t er. Pai g h t al s o d ep o s ed t h at he d o es n ot

recal l wh et h er he o ral l y co n v ey ed ASIC’ s res erv at i o n o f ri g h ts to St o

, 6 an d St o cl ai m s

t h at i t recei v ed n o s u ch o ral m es s ag e fro m ASIC. ASIC th en co n t in u ed t o d efen d St o

t h ro u g h ou t t h e t ri al

, wh i ch o n J u n e 1 3

, 2 0 1 3 res u l t ed i n a ju ry v erd ict o f $9 1 8 ,0 0 0 in

fa v o r o f t h e p l ai n t i ff ag ai n s t St o

. Th e m o rn i n g aft er t h e verd i ct

, Pai g h t o b t ai n ed

au t h o ri t y t o en g ag e co v erag e co u n s el t o ev al uat e wh et h er AS IC wo u l d b e ab le to

wi t h d raw co verag e at t h at p o in t

. Th en

, o n J u ly 3

, 2 0 1 3

, ASIC n o t i fi ed St o t h at i t was

d en y i n g co v erag e fo r t h e Can al Si d e Su i t

.

(c) Th i s Li t i

g a t i on

. In Sep t em

b er 2 01 3

, St o fi l ed s u i t ag ai n s t ASIC, as s ert i n g

b reach o f co n tract

, d ecl arat o ry ju d g m en t

, an d b ad fai th cl ai m s

. ASIC co u n tercl ai m ed

,

s eek i n g t o res ci n d t h e p ol i c i e s b as ed o n al l eg ed m i s rep res en t at i o n s St o m ad e i n i t s

p o l i cy ap p li cat i o n s r e g a r d i n g t h e l os s h is t o ry o f St o ’ s Po werfl ex p ro du ct an d t h e

o u t s i d e co un s el t o s e e i f an y o n e el s e h ad recei v ed a co p y o f t h e l et t er. N o o n e h ad

recei v ed a co p y

.

6 He al s o co n ced ed t h at n o el s e at ASIC wo ul d h av e co n vey ed a res erv at i o n o f

ri gh t s t o St o

.

6i n t ro du ct i o n o f a refo rm ul at ed co at i n g p ro d u ct

. A ft er t h e p art i es fi l ed cro ss -m o t i on s

f o r s u m m ary ju d g m en t

, t h e t ri al co u rt i s s ued an ord er g ran t i n g St o ’ s m o ti o n o n i t s

cl ai m s fo r b reach of co n t ract an d d ecl arat o ry ju d g m en t aft er fi nd i n g t hat ASIC fai l ed

t o pro p erl y co n vey a res erv at i o n o f ri g h t s an d was t h erefo re es t o p p ed fro m d en y i n g

co v erag e as a m at t er o f l aw. In t h e s am e ord er, t h e t ri al co u rt al so g ran t ed s u m m ary

ju d g m en t t o St o o n ASIC’ s res ci s s i o n co u nt ercl ai m

, fi n d i n g t h at St o d i d n o t m ak e an y

m i s rep res en t at i o n s i n i t s ap p l i cat i o ns an d th at ASIC wai ved it s r i g h t t o res ci n d t h e

p o l i ci es

. An d fi n al l y

, t he tri al co u rt d en i ed ASIC’ s m o t i o n fo r s u m m ary ju d g m en t o n

St o ’ s cl ai m fo r b ad fai t h

, fi n d i n g t hat q u es t i o ns o f fact ex i s t as t o w h et h er ASIC

d en ied th e Cres cen t Sh o re an d Can al Si de cl ai m s i n b ad fai t h

. Th i s ap p eal fo l l o wed

.

2

. In i t s fi rs t en u m erat i o n o f erro r, ASIC as s ert s t h at t he t ri al co u rt erred in

g ran t i n g s u m

m ary j u d gm en t t o St o o n i t s co n t ract an d d ecl arat o ry ju d g m en t cl ai m s

b ecau s e ASIC’ s “ m

ul t i p l e res erv at i on s o f ri g h t s ” i s s u ed p ri or t o t h e d en i al o f

co v era g e w e re s u ffi ci en t as a m at t er of l aw t o av o i d es t o p p el

. 7 W h en an i ns u rer i s

faced wi t h a d eci s i o n reg ard i ng h o w t o h an d le a cl ai m o f co v erag e at t h e s am e t i m e

a l aws u i t i s p en d i n g ag ai n s t i ts i n s u red , t h e i n s urer h as t h ree o p t i o n s u n d er Geo rg i a

7 ASIC d o es n o t s eek a fi n d i n g o f n o n co v erag e u n d er th e t erm s o f t h e p o l i ci es

,

an d we d o n o t reach t h i s i s s u e.

7l aw. “ Fi rs t

, t he i n s u rer can ag ree t o d efen d t h e cl a i m

, t h ereb y wai vi n g i t s p o l i cy

d efen s es an d cl ai m s o f n o n-co v erag e.” (Ci t at io n o m it t ed .) Ho o ver v. Ma xu m In d em.

Co

. , 2 9 1 Ga. 40 2

, 4 0 4 (1 ) (7 3 0 SE2 d 4 1 3) (2 0 1 2 ). On t h e o t her en d o f t he sp ect ru m

,

“ t h e i n s urer can d en y co verag e an d refu s e t o defen d [t h e i n s u red ]

, l eav in g p o l i cy

d efen s es o p en fo r fu t u re l i t i g at i o n .” (Ci t at i on o m it t ed .) Id

. Or, u nd er t he t h i rd o p t i o n,

t h e i n su rer can defen d t h e cl ai m u n d er a “ res erv at i o n o f ri g h t s.” Id

. at 4 0 4-0 5 (1 ). A

res erv at io n o f ri gh t s i s a t erm o f art des i g n ed t o al l o w an i n s u rer to p ro v i d e a d efen s e

wh i le s t il l p res erv i n g t he o p t i o n t o l at er l i t i g at e an d u l ti m at el y den y co verag e. Id

. at

4 0 5 (1 ).

W h ere an i n s u rer fai l s t o p ro p erl y res erv e i t s ri gh t s, i t m ay b e es t o p p ed fro m

l at er d en y i n g co v erag e. It i s wel l es t ab l i s h ed u n der Geo rg i a l aw t h at

ri sk s n ot co v ered b y t h e t erm s of an i n s u ran ce p o l i cy

, o r ri s k s ex cl u d ed

t h erefro m

, w h i l e n orm al l y no t s u bject t o t h e d o ct ri n e of wai v er an d

es t o pp el

, m ay b e s ub

ject t o t h e d o ct ri n e wh ere t h e i n s u r e r

, w i t h o u t

res erv i n g it s ri g ht s, as s u m es t h e defen s e o f an act i o n or co nt i n u es s u ch

d efen s e wi t h k n owl ed g e, act u al o r co n s tru ct i ve, o f n o n co v erag e[.]

(Ci t at i o n s o m i t t ed .) Pr es co t t ’s Al t a ma Da t s u n

, In c. v. Mo n ar ch In s

. Co

. o f Oh i o

, 2 5 3

Ga. 3 17

, 3 1 8 (3 1 9 SE2 d 4 4 5 ) (1 9 8 4 ). “ T h e i n s u rer can av oi d es t o p p el by g i v i n g

t i m el y n o t i c e o f it s res erv at i o n o f ri g h t s wh i ch fai rl y in fo rm s t h e i n s u red o f t h e

8i n s u rer’ s p os i t i o n.” (Ci t at i o n s an d p u n ct u at i on o m i t t ed .) W o r ld H a r ves t Ch ur ch

, In c.

v. Gu i d eo n e Mu t . In s . Co

. , 2 8 7 Ga. 1 4 9 , 1 5 2 (1 ) (6 9 5 SE2 d 6 ) (2 01 0 ).

In d et erm i n i n g wh et h er a p art icu l ar no t i ce i s s u ffi ci en t

, o u r Su p rem e Co u rt h as

ex p lai n ed t h at

, “ [a] t a m in i m u m

, t h e res erv at i o n o f ri gh t s m u s t fai rl y i nfo rm t h e

i n s u red t hat

, n o t w i t hs t an d i n g t h e in s urer’ s d efen s e o f th e act io n

, i t d i s cl ai m s l i ab i l i t y

an d d oes n o t wai v e th e d efen s es av ai l ab l e t o it ag ai n s t t h e i n s u red .” (Ci t a t i o n an d

p u n ct u at i o n o m i t ted .) W

o r l d Ha r ves t Ch u r ch

, 2 8 7 Ga. at 1 5 2 (1 ). “ Th e res erv at i o n

o f ri gh t s s h o u l d al s o i n fo rm t h e i n s u red o f t h e s p eci fi c b as i s fo r t h e in s u rer’ s

res erv at io n s ab o u t co v erag e.” (Ci t at i o n an d p u n ct u at i on o m i t t ed .) Id

. (res erv at i o n o f

ri gh t s “ can n o t b e o nl y a s t at em en t o f fu t u re i n t e n t ”). Fu rt h erm o re, “ t h e res erv at i o n

m u st b e u n am

b i g u o u s ; i f i t i s am

b i g u o u s

, t h e p u rp o rt ed res erv at i o n o f ri g h t s m u s t b e

co n st ru ed s t ri ct l y ag ai ns t t h e i ns u rer an d li b eral l y i n fav o r of th e i n su red .” (Ci t at i o n

an d p u n ct u at i o n o m i t t ed .) Id . at 1 5 2 -5 3 (1 ).

W e fo cu s o ur a n a l y s i s t h en o n t he t i m i n g an d co n t en t o f t h e v ari ou s

co m m u n icat io ns ASIC co n t en d s co n s t i t u t e a res erv at io n o f ri gh t s

. It i s u n d i s p u t ed

t h at ASIC, fo l l o w i n g i t s i n i t i al in v es t i g at i o n i n t o bo t h t h e Cres cen t Sh o res an d Can al

Si d e Su i t s

, d en i ed co v erag e. T h e p u rp o se o f a res erv at i o n o f ri g h t s i s “ to p ro t ect b o th

t h e i n s u rer an d t h e i n s u red by al l o wi n g an i n s u rer wh o i s u n cert ai n o f i t s o b li g at i on s

9u n d er t h e p o li cy t o u nd ert ak e a d efen s e wh i l e res erv i n g it s ri g h t s to u lt i m at el y d en y

c o v e rag e fo l l o w i n g i ts i n v es t i gat i o n .” (Ci t at i o n an d p u n ct u at i o n o m i t t ed .) Ho o ve r

,

2 9 1 Ga. at 4 0 6 (1 ). “ Th u s

, a res erv at i on o f ri g h t s i s on l y av ai l ab l e t o an i ns u rer wh o

u n d ert ak es a d efen s e wh i l e q u es t i on s rem ai n ab o u t t he v al i d i t y o f t he co verag e.” Id

.

at 4 0 5 (1 ). Fo r t h i s reas o n

, an i n s u rer can n o t b o t h d en y a cl ai m an d res erv e i t s ri g ht

t o as s ert o t h er d efen s es l at er. Id

. Rat h er, “ [w] h en an in s u rer i s p res en t ed wi th a n o t i ce

o f a cl ai m an d d em an d fo r a d efen s e, t h e p ro p er an d s afe co urs e o f act i o n i s t o en t er

u p o n a d efen se u n d er a res erv at i o n s of ri g h t s an d t h en p ro ceed t o s eek a d ecl arat o ry

ju d g m en t i n i t s fav o r.” (Ci t at i o n an d p u n ct u at i on o m i tt ed .) Id

.

Here, ASIC po i n t s t o s ev eral i n s t an ces wh ere i t res erv ed i t s ri g h ts b efo r e i t

d en ied co v erag e in t he Cres cen t S h o r e s an d Can al Si d e li t ig at io n

. H o wev er, u n d er

Ho o ver

, ASIC can n o t b o t h den y t h e cl ai m s an d as s ert a res erv at i o n o f ri g h ts

, an d we

fai l to see h o w a p rev i o u s res erv a t i o n o f ri g h t s i s s u ed wh i l e A SIC was s t i l l

i n v es t i g at i n g t h e cl ai m s w o ul d rem ai n effect iv e p o st -d en i al

. Ho o ver

, 2 9 1 Ga. at 4 0 5

(1 ). As o u r Su p rem e Co u rt has ex p l ai n ed

, wh ere an in s u rer h as d en i ed co v erag e fo r

t h e cl ai m at i s s u e, t h e i n s u r er i s n o l o ng er “ u n cert ai n n o r i n s ecu re i n reg ard t o i t s

ri gh t s, s t at u s o r leg al rel at i o n s .” Dr a wd y v. Di r ect Gen

. In s

. Co

. , 2 7 7 Ga. 1 0 7

, 1 0 9

(5 8 6 SE2 d 2 2 8 ) (2 0 0 3 ) (d ecl a r a t o ry ju dg m en t act i on n o t av ai l ab l e wh ere i n s u rer

10d en ied co v erag e). See al s o Ho o ver

, 2 9 1 Ga. at 4 0 6 (1 ) (“ res erv at i o n o f ri g h t s d o es n ot

ex i s t s o t h at an i n s u rer wh o had d en i ed co ver a ge m ay co n t in u e t o i n v es t i g at e t o co m e

u p w i t h a d d i t i o n al reas o ns o n wh ich t h e d en i al co u l d b e b as ed i f ch al l en g ed ”)

(em p h as i s i n o ri g i n al ).

In ad d i t i o n

, t o t he ex t en t ASIC as s ert s t h at Pai g ht

, w h o “ co u l d n o t recal l t h e

s p eci fi cs o r t i m i ng o f t h e co n v ers at i o n s ,” t es t i fi ed t h at “ co v erag e i s s u es ” were

d i s cu s s ed wi t h St o o n a qu art erl y b as i s

, we fi n d t hi s in s u ffi ci en t t o h av e

u n am b i g u o u s l y co n v ey ed a res erv at i o n o f ri g h t s t o St o fo l l owi n g ASIC’ s d en i al o f

co v erag e. 8 “ [A] m ere al l eg at i o n t h at t he i n su rer co n t en d ed t h at t h e i n s u r e d w as n ot

co v ered b y t h e p o li cy

, wi t h ou t m o re, d o es n o t s h o w an y res erv at i o n on i t s p art o f a

ri gh t t o i n s i s t t h at t h e co v erag e o f t he p o l i cy was n o t ex t en ded t o hi m .” (Ci tat i o n an d

p u n ct u at i o n o m i t t ed .) W

o rl d Ha r ves t Ch u r ch

, 28 7 Ga. at 1 5 2 (1 ). M o reo v er, we n o t e

t h at

[e] v en an in s ured wh o h as act u al k n o wl ed g e o f t h e co n t en t s o f h i s p o l i cy

an d t h e p o s s i b i l i t y t h at t h e co m p an y m i g ht d en y co v erag e wh en a cl ai m

i s fi rs t as s ert ed reas o n ab ly rel i es u p on th e p ro v i s i o n o f a d efen s e wi t h o u t

8 W e ack no wl ed g e, h o wev er, t h at “ [a] l t ho u g h wri t t en n ot i fi cat i o n i s

p referab l e,” t h e eq u i val en t o ral n ot i fi cat io n

, wh ere i t o t h erwi s e m eet s t h e m i n i m u m

req u i rem en t s u n d er Geo rg i a l aw, i s gen eral ly accep t ed

. W o r l d H a r ves t Ch ur ch

, 2 8 7

Ga. at 1 52 (1 ).

11res erv at i o n o f ri g ht s as an i n d i cat i o n t h at t h e co m p an y h as wai ved th e

co v erag e i s s u e.

(Ci t at i o n an d p u n ct u at i o n o m i t t ed .) Id

. at 1 5 3 (1 ). Acco rd i n g l y

, t h i s en u m erat i o n o f

erro r fai l s.

3

. In t h e al t ern at i v e, ASIC as s ert s t h at t h e t ri al co u rt erred i n g ran t i n g s u m m ary

ju d g m en t t o St o on it s cl ai m s fo r b reach o f co n t ract an d d ecl arat o ry j u d gm en t b ecau s e

a g en ui n e i s s ue o f fact rem ai n s reg ard i n g wh et h er ASIC lat er res erv ed i t s ri g h t s v i a

t h e Cres cen t Sh o res an d Can al Si d e Res erv at i o n o f Ri g h t s Let ters

. As n o t ed ab o ve,

St o m ai n t ai n s t h at n ei t h er it

, no r i t s ag en t o r o u t si de co u n s el

, ev er recei v ed t h es e

l et t ers

.

W e tu rn fi rs t to t h e Can al Si d e Su i t

. Reg ard l es s of wh et h er ASIC act u al l y

m ai l ed t h e Can al Si d e Res erv at i o n o f Ri g ht s Let t er

, s u c h an at t em pt m ad e s ev eral

m o nt h s aft er rev ers i n g i t s d e n i al o f co v erag e was n ot t i m el y

. A n i n su rer m u s t act

reas on ab l y p ro m

p t l y i n res erv i n g i t s ri g h t s

. See, e.g

., G a

. In ter l oca l Ri sk Mg mt

.

Ag en cy

, 3 3 7 Ga. Ap p

. 3 40

, 3 4 8 (2 ) (7 8 8 SE2 d 7 4) (2 0 1 6 ). A n d “ w h e r e, as h ere, an

i n s u rer as s u m es an d co nd u ct s an i ni t i al d efen s e w i t ho u t effect i v el y n ot i fy i n g t h e

i n s u red t h at i t is d o i n g so wi t h a res erv at i o n o f ri g h t s, t h e i n s urer i s d eem ed es t o p p ed

fro m as s ert i n g t h e defen s e o f n on co v er a ge r e g ard l es s o f w h et her t h e i n s u red can s h o w

12p reju d i ce.” W o r l d Ha r ves t Ch ur ch

, 2 8 7 G a. at 1 5 6 (2 ). “ T h e un d ert ak in g t o d efen d

m ay b e o f n o v al u e, b ut o f g reat d an g er, to t h e i n s u red i f, aft er ab an d o n i n g al l co n tro l

o f t he s u i t, h e m ay y et b e l i a b l e f o r a j u d gm en t ag ai n s t h im

. ” (Ci t at i o n an d

p u n ct u at i o n o m it t ed .) Id

.

W i t h res p ect t o t h e Cres cen t Sh o res Su i t

, t h e Res erv at i o n o f Ri g ht s Let t er was

d at ed s ev eral d a ys b e f

o r e ASIC rev ers ed co u rs e an d ag reed to p ro v id e co v erag e.

Pai g h t d ep o s ed t h at h e h ad n o reco l l ect io n o f ei t h er ad d r e s s i n g o r p ut t i n g t h e

Cres cen t Sh ores Res erv at i o n of Ri g h t s Let t er i n t h e m ai l b u t t h at h i s n o rm al p ract i ce

wo u l d h av e been to p ri n t t h e l et t er o u t

, pu t i t an en v el o p e, a n d th en p u t it i n t o t h e

co m p an y ’ s o u t g o in g m ai l

. He t h en s t at ed :

[ a ]n d t h en s o m eo ne el se wo u l d h av e act u al ly g ot ten t h e p o st ag e on i t

an d t ak en i t t o th e Po st Offi ce. Or I g u es s t h ey wo u ld hav e p i ck ed th em

u p . I d on ’ t real l y

k n o w h o w t h e m ai l was d o n e.

ASIC arg u es t h at t h is t es ti m o n y i s s u ffi ci en t t o creat e a g en u i n e is s u e o f m at eri al fact

reg ard i n g wh et h er t h e l et t er was s en t t o St o. W e d i s ag ree.

“ No p res u m

p t i o n ari s es t h at a l et t er h as b een recei v ed i n t h e m ai l u n l es s i t i s

s h o wn t h at t h e let t er (1 ) was wri t t en ; (2 ) was p ro perl y ad d res s ed to t h e p art y ; (3 )

c o nt ai n ed t h e co rrect p os t ag e; an d (4 ) was du l y m ai led i n t h e Un i t ed St at es Po s t

13Offi ce.” (Ci t at io n an d pu n ct uat i o n o m i t t ed .) Jo n es v. Ci t y of W il l aco o ch ee

, 2 9 9 Ga.

Ap p

. 7 4 1

, 7 4 3 (6 8 3 SE2 d 6 8 3) (2 0 0 9). Ev en co n s t ru i n g Pai gh t ’ s t es t i m on y i n fav o r

o f ASIC, i t i s cl ear t h at t h ere is n o ev i d en ce t h at h e p ro p erl y ad d res s ed th e en v el o pe,

t h at ei t her h e o r an ot h er i n d i vi d u al ad d ed t he co rre c t p o s t ag e, o r t h at h e or an o t h er

i n d i v i d u al p l aced t h e l et t er wi th t h e Un i t ed St at e s Po s t O ffi ce. Pai g ht ’ s t es t i m o ny

es t ab l i s h ed o n ly

h i s g en eral pract i ce o f p ri n ti n g s u ch let t ers an d p l aci n g t h em i n an

en v el o p e. See Jo n es v. O’Da y

, 3 0 3 Ga. Ap p

. 1 5 9

, 1 6 3 (6 9 2 SE2 d 7 7 4 ) (2 01 0 ) (t o t h e

ex t en t a p a r t y ’ s t es t i m o n y am o u n t s t o no m o re t h an an un s up p o rt ed co n cl u s i o n

, i t

can n ot be co n s i d ered i n ru l i n g u p o n a s u m m ary ju dg m en t m o t i o n ). T herefo re, ASIC

h as fai l ed t o creat e a g en u i n e is s u e o f m at e r i a l f a c t reg ard i n g wh et h er t h e Cres cen t

Sh o res Res erv at i o n o f Ri g h t s L e t t e r w a s s en t t o o r recei v ed b y St o

. See i d .; cf.

Bu r ns i d e v. GEICO Gen

. In s

. Co

. , 3 0 9 Ga. Ap p

. 8 9 7, 9 0 1 (2 ) (7 1 4 SE2 d 6 06 ) (2 0 1 1 )

(s u ffi ci en t ev i d en ce of m ai l in g wh ere i n s urer s u b m i t t ed affi dav i t fro m o ut pu t m an g er

fo r it s n at i o n al p ri n t m ai l cen t er wh o ex p l ai ned preci se m et ho d o f p ro v i d i n g su ffi ci en t

p o s t ag e an d m ai l i n g recei pt s ). Acco rd i n g l y

, ASIC fai l ed t o effec t i v e l y i s s u e a

14res erv at io n o f r i g h t s an d i s t h erefo re es to p p ed fro m as s ert i n g n o n co v erag e. 9 See

W o r l d Ha r ves t Ch u r ch

, 2 8 7 Ga. at 1 5 3 (2 ).

4

. I n i t s t h i rd en u m erat i o n of erro r, ASIC as s ert s t h at t h e t ri al co u rt erred i n

g ran t i n g s u m

m ary j u d gm en t i n fav o r of St o o n ASIC’ s co u n tercl ai m fo r res ci s s i o n.

“ In o rd er t o v o i d a p o l icy of i n su ran ce fo r a m i s rep res en t at io n i n t h e ap p l icat i o n

, t h e

i n s u rer m u s t s ho w t h at t h e rep res en t at i on was fal se an d t h at it was m at eri al i n t h at i t

ch an ged t h e n at u re, ex t en t, o r ch aract er o f t h e ri s k .” (Ci tat i on an d pu n ct u at i o n

o m it t ed .) Ja cks o n Na t

. Li f e In s

. Co

. v. S

n ea d

, 2 3 1 G a

. Ap p

. 4 0 6

, 4 1 0 (3 ) (a) (4 9 9

SE2 d 1 73 ) (1 99 8 ); s ee al s o O C G A § 3 3

- 2 4 -7 (b ). Th e i ss u e o f m at eri al i t y i s

o rd i n ari ly a q u es t io n fo r th e ju ry

. See Li vel y v. S o u t h er n Her it a g e In s . Co

. , 2 5 6 Ga.

Ap p . 1 9 5 , 1 9 6 (1 ) (5 6 8 SE2 d 9 8 ) (2 00 2 ).

In ad d i t i o n

, u n d er Geo rg i a law, an i n s u rer s eek i n g t o r e s ci n d a p o l i cy m u s t

m ak e “ [a] n an n o u n cem en t o f t h e i n t en t t o res ci n d t he co n tract

. . . i n a t i m el y fas h i o n,

as s o o n as t h e fact s s u p p o rt i n g t h e cl ai m fo r res ci s si o n are d i s co v ered .” Ho l l o ma n v

D. R. Ho r t o n

, In c.

, 2 4 1 Ga Ap p

. 1 4 1

, 1 4 6 (3 ) (5 2 4 SE2 d 7 90 ) (1 9 9 9 ). M o reo v er, aft er

9 M oreo v er, as n o ted i n Di v i s i o n 2

, A SIC i s u n ab l e t o r e l y on an y o ral

res erv at io n o f ri g h t s b ecau se Pai g h t co u l d n o t r e c a l l t h e s p eci fi cs or ti m i n g o f h i s

co n vers at i on s w i t h St o an d k n ew o n l y t h at “ co v erag e i s s ues ” w e r e d i s cu s s ed

. See

W o r l d Ha r ves t Ch u r ch

, 2 8 7 Ga. at 1 5 2 (1 ) ( m ere al l eg at i o n t h at i n s u rer co n t en d ed

i n s u red was n o t co v ered b y p o l i cy i s n o t s u ffi ci en t t o s h ow a res erv at io n o f ri g h t s ).

15an n ou n ci n g it s i n t en t, t h e i n s u rer “ m u s t ad h ere t o t h e i n ten t t o res ci n d an d m ay wai v e

an y cl ai m fo r r e s c i s s i o n b y fai l i n g to d o s o .” Id

. An d “ [o ] n ce a cl ai m fo r res ci s s i o n

i s wai v ed

, [i t ] can n o t b e rev iv ed .” Id . (co u rt s are q u i ck t o s ei ze u p o n an y wai v er o f

a fo rfei t u re).

Here, A SIC b as es i ts cl ai m fo r res ci s s i o n o n res p o n s es St o s u bm i t ted wh en i t

ap p li ed fo r t h e St u cco an d Co at i n g s Po l i ci es

, wh i ch ASIC n o w cl ai m s m i s rep res en t ed

wh et h er St o h ad n o ti ce o f an y cl ai m s rel at ed t o i t s pro d u ct s

. In th e s t u cco

ap p li cat io n s

, St o s tat ed t h at t h ere were “ no cl ai m s t o d at e.” Th e ap p l i cat i o n al s o

i n cl u d ed t h e o pt i o n t o at t ach a “ l o s s su m m ary ,” wh i ch St o p ro v i d ed

. A SIC co n ced es

t h at St o al s o l at er am en d ed it s ap p l icat i o n t o g i v e n ot i ce o f a l aws u i t fi l ed d u ri n g t h e

ap p li cat io n p ro ces s an d ten d ered t o St o’ s pri o r i n s uran ce c a r ri er. As p art o f t h e

ap p li cat io n p ro ces s , St o al s o res p o n d ed t h at i t h ad n o n ew p ro d u ct s p l an ned

.

Bas ed o n th es e rep res en t at i o n s

, ASIC i ss u ed t h e 2 0 0 9 St u cco Po l i cy

. In 2 0 1 0,

S to ap p l i ed to ren ew i t s St u cco Po l i cy an d al s o ap pl i ed fo r a s ep arat e p o l i c y f o r i t s

co at i ng p ro d u ct s

, i n cl ud in g Po werfl ex . In t h e Co at i ng Po l i cy ap p l i cat i o n

, St o ag ai n

o p t ed t o at t ach a l o s s s u m m ary

, wh i ch d i s cl o s ed a cl ai m m ad e un d er i t s p ri o r

i n s u ran ce carri er. Ag ai n

, as p art o f t h e ap pl i cat io n p ro ces s, St o co m p l et ed a p ro d u ct

q u es ti o n n ai re. St o ch eck ed “ No ” wh en as k ed wh et h er i t had recen t ly d i s co n t i n u ed o r

16was co n s i d eri ng d i s co n t i n u in g an y o f i t s p ro d u ct s

. ASIC t h en ren ewed St o ’ s St u cco

P o l i c y an d i s su ed t he fi rs t Co at i n g s Po l i cy

. Th es e p o l i ci es were ren ewed each y e a r

t h ro u g h 2 0 1 2

.

ASIC cl ai m s

, h o wev er, t h at i t l at er l earn ed St o h ad recei v ed n um ero u s cl ai m s

o f b l i st eri n g as we l l a s c u s to m er d em an d s t h at St o rep l ace o r rep ai r i t s p ro d u ct s

. 1 0

Acco rd in g t o ASIC, i t d i d n o t d i s co v er t h e ex t en t o f St o ’ s m i srep res en t at io n s u n t i l t h e

Can al Si d e Lo ft s t ri al i n J u n e 2 0 1 3 wh ere t h e ev i d en ce p u rp o rt ed l y s h o wed t h at St o

h ad a h is t o ry

o f cl ai m s an d k n ew t h at t h e s o urce o f t h e p ro b lem was a b ad p o l y m er

i n i ts Po werfl ex p ro d u ct

.

Ev en a s s u m i n g arg u en d o fo r p u rp o s es of s u m m ary ju dg m en t t h at St o m ad e

m at eri al m i s rep res en t at i o n s o n t h e i n s u ran ce ap p l icat i o n s an d t h at ASIC “ d i d n ot

u n d ers t an d t h e ex t en t o r s i g n ifi can ce o f t h e m i s rep res en t at i o n s ” u n t il J u n e 2 0 1 3

, we

fi nd t h at s u m

m ary ju d g m en t i s req u i r e d f o r St o o n t hi s i s s u e. A SIC offers n o

ex p lan at i o n fo r wh y i t fai l ed t o an n o un ce i ts i n t en t t o res ci n d t h e St u cco an d Co at i n g

Po l i ci es 1 1 u n t i l Decem

ber 2 0 1 3

, i n res p on s e t o St o ’ s s u i t fi l ed ag ai ns t i t

. Geo rg i a l aw

1 0 A SIC al s o co n ten d s St o fai l ed t o d i s cl o se t h e n o n r e n ewal o f i t s p rev i ou s

co at i ng p ro d u ct s i n su ran ce p o li cy

.

1 1 St o as s ert s t h at t h e t wo cl ai m s at i s s u e h ere a r e c o v e r e d u nd er th e 2 0 1 0

St u cco Po l i cy

.

17i s cl ear t h at “ i f a p art y t o a co n t r a c t s eek s t o av o i d it o n t h e g ro u n d o f frau d o r

m i s t ak e, h e m

us t

, up o n d i s co v ery o f t h e fact s, at o n ce an no u nce h i s p u r p o s e an d

ad h ere t o i t .” Mi n n es o t a La wyer s Mu t

. In s

. Co

. v. Go r d

on

, 3 1 5 Ga. Ap p

. 7 2

, 7 4 (7 2 6

SE2 d 5 62 ) (2 0 1 2 ). Here, u p o n l earn i n g o f t h e “ ex t en t o r s i g n i fi can ce” o f t h e al l eg ed

m i s rep res en t at i o n s

, ASIC d i d n o t at on ce an n o u nce i t s in t en t t o res ci n d t he p o l i ci es

,

b u t rat h er ch o s e t o is s u e a d en i al of co v erag e. In ad d i t i o n

, Pai g h t t es t i fi ed i n Au g u s t

2 0 1 4 t h at ASIC co n t i n u ed t o t reat t he Po l i ci es as i f t h ey rem ai n ed i n fo rce wi th

res p ect t o o t her cl ai m s b ei n g h an d l ed u n d er th o s e Po l i c i e s

. Th us

, p ret erm i t t i n g

wh et h er St o ’ s ap p l i cat i o n s i n c l u d e d m at eri al m i srep res en t at io n s

, 1 2 t h e t ri al co u rt

c o r rect l y co n cl u d ed t h at ASIC h as wai v ed t h i s d efen s e as a m at t er o f l aw. Se e C

.

In g r a m C o

. v

. P h i l a del

p h i a In d em. In s

. Co

. , 3 0 3 Ga. Ap p

. 5 4 8

, 5 5 2 (2 ) (6 9 4 SE2 d

1 8 1 ) (2 0 1 0 ) (wh ere i n su rer d i d n o t res ci nd p o l i cy b u t i ns t ead d en i ed co verag e, t ri al

co u rt d id n ot err i n g ran t i n g s u m m ary ju d g m en t t o i n s u red ). See al so Go rd o n

, 3 1 5 Ga.

Ap p

. at 76 (an i n s urer, h av i n g tak en a fi rm p os i t i o n as t o i t s ri g h t s

, i s n ot en t i t l ed to

d ecl arat ory ju d g m en t fo r p urp o s e o f s eek i n g co n fi rm at i o n o f it s act i o n s ); Th o mp so n

1 2 W e al s o n o t e t h at

, ev en i f St o m ad e m at eri al m i s rep res en tat i o n s i n t h e

Co at in g Po l i ci es ap pl i cat i on s

, t h ere i s n o ev id en ce t h at S t o ’s rep res en t at i on s

reg ard i n g i t s co at in g p ro d u ct s i n t h o s e ap p l i cat i o n s wo ul d s e r v e a s g ro u n d s t o al s o

v o i d t h e St u cco Po l i ci es

.

18v. Per ma n en t G en

. A s s u r

. Co rp

. , 2 3 8 G a

. A pp

. 45 0

, 4 5 2 (5 1 9 SE2 d 24 9 ) (1 9 9 9 )

(i ns u rer wai v es d efen s e t h at m i s rep res en t at io n v o i d ed p o li cy i f i t t reat s p o l i cy as v al id

an d b i n d i n g ). A cco rd i n g l y

, t he t ri al co urt d i d no t err i n g ran ti n g s u m m ary ju d g m en t

t o St o o n ASIC’ s co u n t ercl ai m

.

5

. In i ts fi n al en u m erat i o n o f erro r, ASIC as s ert s t h e t ri al co u rt erred i n d en y i n g

s u m m ary ju d g m en t on St o ’ s b ad fai t h cl ai m b ecau s e (1 ) St o fai l ed to co m p l y wi t h t h e

s t ri ct req u i rem en t s o f OCGA § 3 3 -4 -6 an d (2 ) a reas o n ab l e b as i s ex is ted t o d en y t h e

cla im s. Pret erm i t t i n g wh et h er St o co m p l i ed w i t h t h e req u i rem en t s o f OCGA § 3 3 -4 -6

,

we fi nd t hat ASIC h ad a reas o n ab l e fact u al an d l eg al b as i s fo r d en y in g co v erag e s u ch

t h at b ad fai t h p en al t i es are n o t al l owed

.

OCGA § 3 3 -4 -6 p ro v i des t h e ex cl u s i v e rem ed y fo r an i n s u red ’ s cl ai m

o f b ad

fai t h fai l ure t o p ay p o l i cy pro ceed s

. See An d er so n v. G a

. Fa rm Bu r ea u Mu t

. In s

. , 2 5 5

G a

. A p p

. 7 3 4

, 7 3 7 (2 ) (5 6 6 SE2 d 3 4 2 ) (2 0 0 2 ). Un d er t h i s s t at u t e, “ an in s u rer i s

s u b ject t o i m po s i t io n o f a p en al t y an d at t orn ey fees i f i t refu s es i n b ad fai t h t o p ay a

co v ered lo s s w i t hi n 60 d ay s aft er a d em an d h as b een m ad e b y t h e h o ld er o f t h e

p o l i cy .” (Ci t at io n an d p unc t ua tion om i t t ed .) Jo n es v. S t a t e Fa r m Mu t

. Au t o mo b i l e In s

.

C o

. , 22 8 Ga. Ap p

. 3 4 7

, 3 5 0 (3 ) (4 91 SE2 d 8 3 0 ) (1 9 9 7 ). To p rev ai l on it s cl ai m fo r

b ad fai t h

, St o m

u s t p ro v e t hat (1 ) t h e cl ai m s are co v ered ; (2 ) a d em an d fo r p ay m en t

19was m ad e ag ai n s t ASIC wi th in 6 0 d ay s pri o r t o fi l in g s u it ; an d (3 ) ASIC’ s fai l u re to

p ay was m o t i v at ed b y b a d fai t h

. See Ba yr o ck Mt g

. Co r p. v. Ch i ca go Ti t l e In s

. Co

. ,

2 8 6 Ga. Ap p

. 1 8

, 1 9 ( 6 4 8 SE2 d 4 3 3 ) (2 0 0 7 ). Becau s e OCGA § 33 -4 -6 i m p o s es a

p en al t y

, i t s req u irem en t s a r e s t ri ct l y co n s t ru ed

. Id

. “ Pen al t ies fo r b ad fai t h are n ot

au t h o ri zed

. . . wh ere t h e i n s uran ce co m p an y h as an y reas o n ab l e g ro u nd t o co n t es t t h e

cl ai m an d wh ere t her e i s a d i sp u t ed q ues t i o n o f fact .” (Ci tat i o n an d pu n ct u at i o n

o m it t ed .) La wyer

s Ti t le In s

. Co r

p

. v. Gr i f f i n

, 3 0 2 Ga. A p p

. 7 2 6

, 7 3 1 (2 ) (6 9 1 SE2 d

6 3 3 ) (2 0 1 0 ).

Ord i n ari l y

, t h e q u es t i o n o f b ad fai t h i s o n e fo r t h e ju ry

. See, e.g

., Ami ca Mu t

.

In s

. Co

. v. Sa nd

er s

, 3 3 5 Ga. Ap p

. 2 4 5

, 25 0 (7 7 9 SE2 d 4 5 9) (2 0 1 5). H o wev er, “ wh en

t h ere i s n o e v i d en ce o f u n fo u n d ed reas o n fo r th e n o n p ay m en t

, or i f t h e i s s u e o f

l i ab i l i t y i s cl o s e, t h e co u rt s ho u l d d i s al l o w i m p os i t i o n o f b ad fai th p en al t i es .”

(Ci t at i o n an d p u n ct u at i o n o m it t ed ; em p h a s i s s up p l i ed .) Id

. (an i n su rer h av i n g an y

reas on ab l e fact u al o r l e g a l g r o u n d fo r co n t es t i n g cl ai m i s en ti t l ed t o s u m m ary

ju d g m en t u n d er OCGA § 3 3 -4 -6 ). “ M oreo v er, t h e m ere f a c t o f n o np ay m en t i s n ot

ev i d en ce o f bad fai t h

, n or i s an y b u rd en t h ereb y cas t o n th e i n s u r e r t o p ro v e g o o d

fai t h

. ” (Ci t at i o n a n d pu n ct uat i o n om i t t ed

. ) Ol d Rep ub l i c Na t l

. Ti t l e In s

. Co

. v. RM

Ki d s, LLC , 3 3 7 Ga. Ap p . 6 3 8 , 6 5 0 (6 ) (7 8 8 SE2 d 5 4 2 ) (2 0 1 6 ). “ Rat her, b ad fai t h i s

20s h o wn b y ev i d en ce t h at u n d er t he t er ms o f t h e p ol i cy u p o n wh i ch th e d em an d i s m ad e

an d u nd er t h e fact s s u rro u n di ng t h e res p o ns e t o t h at d em an d

, t h e i ns u rer h ad n o g o o d

ca u s e fo r res is t i n g an d d el ay i n g p ay m en t .” (Ci t at io n an d p un ct u at io n o m i t t ed ;

em ph as i s i n ori g i n al .) Id

. In ad d i t i o n

, “ a d efen s e g o i n g far en o u g h t o s h o w reas o n ab l e

an d p ro b ab l e cau s e fo r m ak i n g i t wo u l d v i n d i cat e t h e g oo d fai t h o f t h e co m p an y as

effect u al l y as wo u l d a co m p l et e d efen s e to t h e act io n .” (Ci t at i o n a n d p u n ct u at i o n

o m it t ed .) Ch o a t e C o n s t r

. Co

. v. Au t o -Own er s In s

. Co

. , 3 3 5 Ga. Ap p

. 3 3 1

, 3 4 0 (2 )

(7 7 9 SE2 d 4 6 5 ) (2 0 1 5 ).

Bas ed o n t h e reco rd b efo re u s

, we co n cl u d e t h at ASIC was en t i t led t o s u m m ary

ju d g m en t o n St o ’ s b ad fai t h cl ai m

. Th e q ues t i o n o f wh et h er t h e p rev i o u s res erv at i on s

o f ri g h t s were s ti l l effect i v e h ad n o t b een s q u arel y an s wered in Geo rg ia, an d i t m ay

h av e ap p eared fro m a rev i ew o f ASIC’ s reco rd s t h at res erv at i o n o f ri gh t s l et t ers h ad

b e e n s u b s eq u en t l y s en t o u t o n ce ASIC ag reed t o co v er t h e l i t i g at i o n

. 1 3 See Gr i f f i n

,

3 0 2 Ga. Ap p

. at 7 3 1 (2 ) (rev ers in g tr i a l c ou rt ’ s den i al o f i n s u rer’ s m o t i o n fo r

s u m m ary ju d g m en t o n b ad fai th cl ai m wh ere n o n p ay m en t was b as ed o n i ts co n t en t i o n

1 3 E v en i f, a s t h e d i ss en t arg u es

, St o has pres en t ed s o m e ev i d en ce t h at ASIC

w a s i n p art m o t i v at ed by i t s o wn eco n o m i c s el f-i n teres t

, o u r l aw i s cl ear t h a t

“ p en al t ies fo r b ad fai t h are n o t au t h o ri zed wh ere t h e i n s u r a n ce co m pan y h as an y

reas on ab l e g ro u nd to co n t es t t h e cl ai m .” (Ci t at i o n an d p u n ct u at i o n o m it t ed .) Au t o

Own er s In s . Co . v. Nei s l er , 3 34 Ga. Ap p . 2 8 4 , 2 9 0 (2 ) (7 79 SE2 d 5 5 ) (2 0 1 5 ).

21t h at cl ai m

was n o t a co v ered l o s s ); Fl yn t v. Li f e o f t he S o u t h In s. Co

. , 3 1 2 Ga. Ap p.

4 3 0

, 4 31 (7 1 8 SE2 d 3 4 3 ) (2 01 1 ) (wh ere i n s u re r ’ s reas on s fo r refu s in g t o p ay were

erro neo u s b u t n o t fri v o l o u s o r u n reas o n ab l e, s um m ary ju dg m en t i n fav o r o f i n s u rer

i s p ro p er). Acco rd i n g l y

, w e r e v e r s e t h at p o rt io n of t h e t ri al co u rt ’ s o rd er d en y i n g

s u m m ary ju d g m en t t o ASIC o n St o’ s b ad fai t h cl ai m

.

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

s ed i n p a r t

. Do

yl e, C. J., El l in g to n

, P. J.,

An d rews

, Ri ckma n, Mer ci er

, a nd Rees e, JJ., co n cu r

. Ba r n es

, P. J., co ncu r s i n p a r t in

Di vi s i o n s 1

, 2

, 3

, a n d 4 a n d di s sen t s a s t o Di vi s io n 5

. Mi l ler

, P. J., co n cu r

s i n p a r t in

Di vi s i o n s 1 , 2 , 3 , a nd

4 an d i n j u d g men t o n ly wi th t h e d i s sen t

i n Di vi si o n 5

.

22A1 7 A0 45 3

. AM ERICAN SAFETY INDEM NITY COM PANY v

.

STO CORP. x x -0 2 3

B A R N E S , Pres i d i n g J ud g e, co n cu rri n g i n p art an d d i s s en ti n g i n p art

.

I res p ect fu l l y d i s s en t t o D i vi s io n 5 o f t he m ajo ri t y o p i ni o n t h at ad d res s es St o

Co rp .’ s b ad fai t h cl ai m

. 1 Gi v en t h e reco rd b efo re us

, t h e q u es t i o n w h et h er Am eri can

Safet y In d em

n i t y Co m p an y (“ ASIC”) act ed i n b ad fai t h u n d er OCGA § 3 3 -4 -6 by

refu si n g to p ay i n s u ran ce p o li cy p ro ceed s t o St o s h o u l d b e res o l v ed b y a ju ry rat h er

1 I co n cu r fu l l y

i n Di vi s io n s 1 -4 o f t he m ajo ri t y o p i n i o n

.t h an b y t h i s Co u rt

. Co n s eq u en t l y

, t h e tri al co urt ’ s d e n i a l o f s um m ary ju d g m en t to

ASIC o n St o ’ s b ad fai t h cl ai m s h o u ld b e affi rm ed

.

“ It i s u s u al ly a q u es t i o n fo r t h e ju ry wh et h er an in s u ran ce co m p an y

, i n refu s i n g

t o p ay a l o s s

, act ed in b ad fai t h ” u n d er OCGA § 3 3-4 -6

, an d “ b a d fai t h” i n t h i s

co n tex t d o es n ot req u i re a s h o wi n g of act u al frau d by t he i n s u rer. Pa l a t i n e In s

. Co

.

v. G i l lel a n d

, 7 9 G a. A p p

. 1 8

, 2 3 (3 ) (5 2 SE2 d 5 37 ) (1 9 4 9). Rat h er, an in s u rer’ s

“ co m p l et e fai l u re t o p ro v e an y d efen s e t o an act i o n o n t h e p o l i cy i s ev i d en ce o f t h e

b ad fai t h co n t em

p l at ed b y OCGA § 3 3-4 -6 , an d s u b ject s t h e i n su rer t o a v erd i ct fo r

t h e s tat u t o r y p en al t y an d at t orn ey ’ s fees .” (Pu n ct u at i o n an d fo o t n o t e o m i t t ed .)

Au t o -Own er

s In s

. Co

. v. Nei s l er

, 3 3 4 Ga. Ap p

. 28 4

, 2 9 0 (2 ) (7 7 9 SE2 d 5 5 ) (2 0 1 5 ),

q u o t i n g Res er ve Li

fe In s

. Co

. v. Ayer

s

, 2 1 7 G a. 2 0 6, 2 1 3 (3 ) (1 2 1 SE2 d 64 9 (1 9 6 1 ).

An d wh i l e “ [a] d efen se go i n g far en o u g h t o s h o w reas o n ab l e an d p ro b ab le cau s e fo r

m ak i n g i t

, wo u l d v i n d i cat e t he g o o d fai t h o f t h e [i n s uran ce] co m p an y [,] [a] n y d efen s e

n o t m an i fes t i n g s u ch reas o nab l e an d p ro b ab l e cau s e, wo u ld ex p o s e t h e co m p an y t o

t h e i m pu t at i o n o f bad fai t h .” (Ci t at i o n an d p un ct u at i o n o m i t t ed .) Sa wyer v. Ci t i z en s

& S

. Na t

. Ba n k

, 1 6 4 Ga

. A p p

. 1 7 7

, 1 8 3 (2 ) (c) (2 9 6 SE2 d 1 34 ) (1 9 8 2 ), q u o t i n g

I n t e r s t a t e Li f e & Acc. In s

. Co

. v. W

i l l i a ms o n

, 2 2 0 Ga. 3 2 3

, 3 2 5 -3 26 (2 ) (1 3 8 SE2 d

6 6 8 ) (1 9 6 4 ). If “ i t can no t b e s ai d as a m at t er o f l aw t h at [t h e in s u rer’ s ] d efen s e was

2a reas on ab l e defen s e w h ich v i n d i cat es t h e g o o d fai t h o f t h e i n s u rer,” th en t h e i n s u rer

i s n o t en t i t led to s u m

m ary ju d g m en t o n t he is su e o f b ad fai th p en al t i es u n d er OCGA

§ 3 3 -4 -6

. Id

., q u o t i ng Co l o n i a l Li f e & Acc. In s. Co

. v. McCl a i n

, 2 4 3 Ga. 2 6 3, 2 6 5 (1 )

(2 5 3 SE2 d 7 4 5 ) (1 9 7 9 ). See Cer t a i n U n d er wr i t er s a t Ll o yd ’s o f L o n d o n v. Ru cker

Co n s t r

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

Here, as t h e m ajo ri ty t h o ro u g h l y ex pl ai ns i n Di v i s io n s 1 -4 o f i t s o p in i o n , t h e

u n co nt ro v ert ed ev i d en ce of reco rd s ho ws t h at A SIC wai v ed its co verag e d efen s es an d

i t s ri g h t t o res ci n d t h e p o l i ci es as a m at t er o f law an d t h u s h ad n o b as i s fo r d en y i n g

St o ’ s cl ai m s

. Gi ven t hat t he u n co nt ro v ert ed reco rd s h o ws t h at ASIC was n o t en t i t l ed

t o d e n y co v erag e t o St o

, “ i t can n o t be sai d a s a ma t t er o f la w t h at [ASIC] h a d a

reas on ab l e d efen s e o r p ro b ab le cau s e t o d en y [St o ’ s cl ai m s ] .” (Em p h as i s i n o ri g i n al .)

Au t o -Own er

s In s

. Co

. , 3 3 4 Ga. Ap p

. at 2 9 1 (2 ). See S a wyer

, 1 6 4 G a

. Ap p

. at 1 8 3

-

1 8 4 (2 ) (c) (co n cl u d i n g t h at ju ry i s s ue ex i s t ed as t o wh et h e r t h e i n s u r e r rai s ed a

“ reas o nab l e d efen se” t o co v erag e an d t h u s as t o wh et h er i ts n o n pay m en t o f cl ai m was

i n b ad fai t h

, wh ere s u m

m ary ju dg m en t w as g ran t ed t o th e i n s u red o n t h e i ss u e o f t h e

i n s u rer’ s l i ab i l it y

fo r l os s o f v eh i cl e u n d er t h e p o l icy ).

Fu rt herm o re, St o p res en t ed s om e ev i d en ce, co n s t ru ed i n i t s fav o r as t h e n o n

m o van t o n s u m

m ary ju d g m en t, t h at ASIC’ s u l ti m at e d eci s i o n t o d en y co v erag e was

3b as ed o n i t s o w n eco n o m i c s el f-i n t e r e s t rat h er t h an a v al i d po l i cy d efen s e.

Sp eci fi cal l y

, St o p res en t ed ev i d en ce t h at al t h o ug h A SIC rev ers ed i t s i n i t i al d eci s i o n

an d ch o se t o d efen d St o in t he Can al Si de Lo ft s l i ti g at i o n

, ASIC rev ers ed co u rs e y et

ag ai n an d i m

m ed i at el y en g ag ed o u t s i d e co u n s el t o ex p l o re av oi d i n g an y p ay m en t o f

p o l i cy p ro ceed s t o St o t h e d ay aft er t h e j u ry ret u rn ed a $ 9 18 ,7 0 0 v erd i ct ag ai n s t St o.

St o al s o p res en t ed ev i d en ce t h at A SIC t o o k co n t ro l o f t h e Cr e s c e n t S h o res

Co n d o m i n i u m l i t i g at io n aft er in i t i al l y den y i n g co verag e, b u t t h en rev ers ed co u rs e

ag ai n an d d en i ed co v erag e on ly aft er t h e l i t i g at i o n h ad co n t in u ed fo r an o t h er y ear an d

a h al f. In l i g h t o f t h e t i m i ng o f ASIC’ s rev ers al s o f i t s d eci s i o n s t o d efen d t h e Can al

Si d e an d Cres cen t Sh o res cl ai m s

, wh en co m b i n ed wi t h t h e un co n t ro v ert ed ev i d en ce

s h o wi n g t h at ASIC was n o t en ti t l ed t o d en y co verag e, a ju ry co u l d fi n d t h at ASIC’ s

refu sal t o p ro v i d e co v erag e was f r i vo l o us an d u n fo u nd ed an d t hu s ro s e t o t h e l ev el

o f b ad fai t h

. See Ki n g v. At l a n ta Ca s

. In s

. Co

. , 2 7 9 Ga. Ap p

. 5 5 4

, 5 5 6 (1 ) (6 3 1 SE2 d

7 8 6 ) (2 00 6) (“ Bad fai t h fo r pu rp o s es o f OCGA § 3 3 -4 -6 i s an y fri vo l o u s an d

u n fo un d ed refu s al i n l aw o r i n fact t o p ay acco rd i n g t o t h e t erm s o f t h e p o l i cy .”).

Un d er t h es e ci rcu m st an ces

, a ju ry s h o u l d res o lv e wh et her A SIC act ed i n b ad

fai t h

, an d we t h erefo re s h o u ld affi rm t he t ri al co urt ’ s den i al o f s u m m ary ju d g m en t to

4ASIC o n St o ’ s bad fai t h cl a i m u n d er OCGA § 3 3 -4 -6

. 2 Becau s e t h e m ajo ri t y

co n cl u d es o th erwi s e, I res p ect fu l l y d i s s en t

.

I a m a ut h o ri zed t o s tat e t h at Pres i d i n g J u d g e M il l er jo i n s i n th i s d i s s en t in

ju d g m en t o n l y

.

2 ASIC al s o arg u es t h at i t was en ti t l ed t o s um m ary ju dg m en t o n St o ’ s b ad fai th

cl ai m u n d er OCGA § 3 3 -4 -6 b ecau s e St o ’ s d em an d l et t ers di d n o t as k A SIC t o p ay

a “ s u m cert ai n .” Bu t w hen an i ns u red m ak es a d em an d to t he i n s u rer un d er OCGA §

3 3 -4 -6

, “ [n ] o s p eci fi c lan g u ag e i s req u i red .” Ba yRo c k M t g

. Co r p

. v. Ch i ca g o Ti t l e

In s

. Co

. , 2 8 6 Ga. Ap p

. 1 8

, 2 0 (6 4 8 SE2 d 4 3 3 ) (2 0 0 7 ). Rat h er, t h e l an g u ag e o f t h e

d em an d need o n l y “ b e s uffi ci en t t o al ert t h e i n s u rer th at i t i s faci n g a bad fai t h cl ai m

fo r a s peci fi c refu s al t o p ay s o th at i t m a y d e ci d e wh et h er t o p ay t h e cl ai m .”

(Ci t at i o n s an d p u nc t u at i o n o m i t t ed .) Id

. St o’ s d em an d let t ers m et t h at n o t i ce

req u i rem en t

.

5