Opinion ID: 744193
Heading Depth: 2
Heading Rank: 1

Heading: The Negligent Procurement Claim

Text: 23 Under Georgia law, an insurance agent who negligently fails to procure insurance coverage may be liable to the insured. Atlanta Women's Club, Inc. v. Washburne (Atlanta Women's Club I ), 207 Ga.App. 3, 427 S.E.2d 18, 20 (1992). However, if the insured had a copy of the insurance policy in its possession and failed to read the policy so as to discover what risks are covered, the insurance agent is not liable because the insured is  'charged with the knowledge of the terms and conditions of the policy.'  England v. Georgia-Florida Co., 198 Ga.App. 704, 402 S.E.2d 783, 785 (1991) (quoting S & A Corp. v. Berger Co., Inc., 111 Ga.App. 39, 140 S.E.2d 509, 511 (1965)). See also Atlanta Women's Club I, 427 S.E.2d at 20. 24 An exception to this general rule applies to cases in which the insurance agent acted as an expert in procuring coverage, and the insured relied on the agent's expertise. Wright Body Works, Inc. v. Columbus Interstate Ins. Agency, 233 Ga. 268, 210 S.E.2d 801, 803 (1974); Atlanta Women's Club I, 427 S.E.2d at 20. Under such circumstances, the insurance agent may be liable for negligent procurement even if the insured has a copy of the insurance policy. An insured who relies on an expert insurance agent is not required to minutely examine the policy for coverage defects. Atlanta Women's Club I, 427 S.E.2d at 20. However, if an examination of the policy by the insured would have made it  'readily apparent' that the coverage requested was not issued, the agent who acted as an expert will escape liability. Jim Anderson & Co. v. ParTraining Corp., 216 Ga.App. 344, 454 S.E.2d 210, 212 (1995) (quoting Wright Body Works, 210 S.E.2d at 802). See also Atlanta Women's Club I, 427 S.E.2d at 20. In determining whether a defect is readily apparent, the policy should be read as a layman would read it, and not as an insurance expert would read it. Jim Anderson, 454 S.E.2d at 212; Atlanta Women's Club I, 427 S.E.2d at 20. 25 The threshold issue is whether A&A was acting as an expert, and if so, whether any defects in the policy were readily apparent. The district court granted summary judgment for A&A on Goodyear's negligent procurement claim. The district court determined that Goodyear's possession of the policy was dispositive because the district court concluded that A&A did not act as expert. 7 The district court indicated that A&A was not exercising expert discretion when it procured the U.S. Fire policy because Goodyear told A&A to obtain specific coverage. 26 A&A argues that the district court's order should be affirmed because A&A was not acting as an expert. A&A contends that Goodyear merely told A&A to obtain the same coverage and language as the Travelers policy. A&A argues that it was not required to exercise expert discretion because all it had to do was follow Goodyear's explicit instructions. 27 A&A cites England v. Georgia-Florida Co., 198 Ga.App. 704, 402 S.E.2d 783 (1991), in support of its argument. In England, the insured instructed its brokers to obtain a replacement insurance policy providing the  'same coverage'  as its former policy. 402 S.E.2d at 785. The Georgia Court of Appeals reasoned that these instructions allowed the brokers to exercise no discretion as to the types or amounts of coverage that they were to attempt to secure for [the insured]. Id. Because there was no exercise of expert discretion, the court held that the broker was entitled to a directed verdict on the claim for which the insured had possession of the policy. Id. 28 However, in Atlanta Women's Club I, the Georgia Court of Appeals held that summary judgment in favor of an insurance broker was improper in a case in which the insured told the broker to obtain the same amount of coverage as provided by the insured's prior policy. Atlanta Women's Club I, 427 S.E.2d at 19. The prior policy contained an 80 percent co-insurance clause, but also contained an endorsement negating the co-insurance clause. Id. The new policy procured by the broker contained the same 80 percent co-insurance clause, but failed to include the endorsement negating the co-insurance clause. Id. The Georgia Court of Appeals indicated that there was a genuine issue of material fact as to whether the broker was acting as an expert, and also concluded that there was a genuine issue of material fact as to whether the absence of the endorsement was readily apparent. Id. at 20. 29 England and Atlanta Women's Club I appear to be in some tension with each other regarding the issue of when an insurance agent acts as an expert. See Atlanta Women's Club I, 427 S.E.2d at 21 (Andrews, J., dissenting). However, both opinions indicate that a key question in this type of case is whether the insurance agent performed expert services or exercised expert discretion in procuring the requested coverage. See id. at 20; England, 402 S.E.2d at 785. See also Jim Anderson, 454 S.E.2d at 212 (explaining that an issue of fact exists as to whether the insured relied on [its agent] to provide expertise or exercise discretion in procuring coverage). The answer to this question will necessarily vary depending on the unique facts and circumstances of each case. 30 We conclude that the evidence submitted to the district court in this case indicates that there is a genuine issue of material fact as to whether A&A was acting as an expert. A&A contends that it was told to duplicate exactly the verbiage of the Travelers policy, but the evidence submitted to the district court contains numerous indications that Goodyear may have told A&A to procure coverage that would be the same as or better than the coverage provided by the Travelers policy, without regard to the exact wording used. 8 If Goodyear in fact instructed A&A to obtain the same (or better) coverage, without regard to the exact words used in the policy, then A&A may have been acting as an expert. 9 Our review of the summary judgment record persuades us that there is a genuine issue of material fact as to whether Goodyear engaged A&A as an expert to exercise drafting expertise to ensure that the terms and wording needed to achieve Goodyear's coverage goals were properly negotiated and included in the new policy. 10 31 As noted above, even if A&A is an expert, A&A would still prevail if an examination of the policy, which Goodyear had in its possession, would have made it readily apparent that the policy was deficient with respect to the requested coverage. To resolve this issue, we first address whether the policy is ambiguous with respect to whether it covers defense costs. The district court concluded that the policy was ambiguous. We agree. 32 Insuring Agreement II indicates that defense costs would be covered [w]ith respect to any claim ... insurance for which is not afforded by self-insurance. 11 However, the indication of coverage in Insuring Agreement II is rendered ambiguous by Endorsement No. 2. Endorsement No. 2, entitled Deductible Amount, sets out the $1,500,000 self-insurance figure, and also states: 33 For the purposes of Insuring Agreement II the provisions of this paragraph shall be deemed self insurance and the Insured shall have the obligation to provide at his own expense adequate defense and investigation of any claim.... 34 (emphasis added). Of course, if all of the provisions of this paragraph, including the provision that the insured shall pay defense costs at its own expense, are deemed self insurance, then defense costs would not be covered by the insurance companies. Rather, such costs would be part of the self-insurance. This construction is bolstered somewhat by the language of Endorsement No. 2 stating: For the purposes of Insuring Agreement II. Insuring Agreement II constitutes the definition, in the policy's main body, of those defense costs for which the insurance companies will provide coverage. That definition expressly excludes claims insurance for which is afforded by self-insurance. Thus, if defense costs are deemed self-insured, then they would not be covered by the insurance companies, but rather would be paid at [the insured's] own expense. 35 The foregoing argues that defense costs are not covered. On the other hand, there is an even stronger argument that Endorsement No. 2 means that defense costs are not covered only to the extent that they are incurred by Goodyear in defending the portion of the liability for which Goodyear is responsible, i.e., up to $1,500,000. There being strong arguments for both interpretations of the insurance agreement, we agree with the district court that the policy is ambiguous on the issue of whether the policy covers defense costs. 36 We turn next to whether this deficiency in the policy is readily apparent. We conclude that the deficiency is not readily apparent. Goodyear would have had to minutely examine the policy to determine that there was a substantial question as to coverage for defense costs. Thus, if on remand the factfinder finds that A&A was an expert and was instructed to procure coverage for defense costs, we hold that the defect in the policy was not readily apparent. There is no need to submit the readily apparent issue to the factfinder. 37 To summarize, we conclude that there are genuine issues of material fact as to whether A&A acted as an expert. If A&A is an expert, we hold that the defect in the policy was not readily apparent. Accordingly, we reverse the district court's grant of summary judgment for A&A on Goodyear's negligent procurement claim, and we remand the negligent procurement claim for further proceedings.