Opinion ID: 507880
Heading Depth: 2
Heading Rank: 1

Heading: Georgia's Contract Approach

Text: 4 In this diversity case, we must apply Georgia law. Richards v. Hanover Insurance Co., 250 Ga. 613, 299 S.E.2d 561 (1983), establishes the Georgia law governing the doctrine of innocent co-insureds. In Richards, Mrs. Betty Jo Richards sued to collect the proceeds from an insurance policy after her house burned down. Mrs. Richards held the policy with her husband. The insurance company, Hanover Insurance, refused to pay since Mr. Richards had been arrested for setting the house on fire. The trial judge instructed the jury to deny relief if either Mr. or Mrs. Richards intentionally burned the house. After the jury returned a verdict for Hanover Insurance, Mrs. Richards appealed. 5 In reversing the trial court, the Georgia Supreme Court noted the division among the states on whether the fraud of one co-insured spouse barred recovery by the innocent co-insured. Richards, 299 S.E.2d at 563; see Annotation, Right of Innocent Insured to Recover Under Fire Policy Covering Property Intentionally Burned by Another Insured, 11 A.L.R.4th 1228 (1987). The court decided that the answer should depend on the language of the insurance contract. Richards, 299 S.E.2d at 563. The Richards contract provided that Hanover Insurance would not be liable in the event of 'neglect of the insured to use all reasonable means to save and preserve property ...'  Id. (emphasis in contract). 6 The Supreme Court of Georgia determined that this neglect provision was ambiguous. The court stated that Mrs. Richards could read the language the insured as imposing an individual obligation to preserve the property which would void liability only to the insured who failed to comply with the provision. Id. at 563-64. Since the provision was ambiguous, Georgia law required the courts to interpret it in favor of the insured. Id. at 563. The court, therefore, held that Mrs. Richards' obligations were severable from Mr. Richards' obligations and that, consequently, Mrs. Richards could recover under the insurance contract if she had not participated in the arson. 7 From the Richards case, we discern two important points of Georgia law. First, whether or not Georgia courts will allow an innocent co-insured to recover depends upon the terms of the insurance contract. Second, if there are any ambiguities in the contract, the court will construe the language to allow recovery by the innocent co-insured.