Court Opinion

ID: 9581765
Source: CourtListenerOpinion
Date Created: 2023-08-21 22:18:25.502578+00
Date Added: 2024-06-11T13:37:13.877958
License: Public Domain

Eldridge, Judge,
dissenting.
Jefferson Insurance Company of New York brought a declaratory judgment action and a bill in the nature of an interpleader against its insured, C. (Carmen) T. DeFranks d/b/a LaCosta Recovery Services, Inc. and others, to void ab initio its commercial line insurance policy for fraud, covering motor vehicles, because Jefferson averred that the insured had given the business address of a store, Fortner’s Discount Center, near rural Loganville, Walton County, Georgia, instead of the true business address in metropolitan Atlanta in order to get lower risk rates; was not a corporation as was represented; concealed that Jefferson also insured Official Towing, another trade name; concealed that the business was also engaged in the repossession of motor vehicles, which would increase its rates; and the tow truck was not covered under the LaCosta policy of insurance. Such inceptive fraud was so material to the insurance contract, because it constituted a fundamental basis for the establishment of the insurance risks for underwriting purposes; however, Jefferson cancelled the policy prior to instituting the declaratory judgment action. Thus, Jefferson’s action in cancelling the policy fixed everyone’s rights as of that date, and there existed no uncertainty of future course of conduct for a declaratory judgment action; thus, the action was properly pending only as a bill in the nature of an interpleader. Further, third party interests in the mandatory motor vehicle insurance coverage had already attached so that the policy could be cancelled only prospectively.
LaCosta Recovery Services, Inc. is a fictional trade name and is not a corporation; this name was used by DeFranks as one of many trade names, i.e., Official Towing of Atlanta and Atlanta Towing, that he used in the operation of a wrecker/towing business. DeFranks operated all of his wrecker/towing businesses, but as different named entities, from a single office located at 1632 Crescent Center Boulevard, Tucker, DeKalb County, Georgia, as a single business, using trucks and drivers interchangeably between these different *569names. There is only a store at 136 C. S. Floyd Road, Loganville, Walton County, used as the address for the insurance policy application at issue; however, DeFranks never conducted or garaged any insured trucks there. When DeFranks obtained the first Jefferson policy covering Official Towing, DeFranks used the business address of 2160 Huntington Drive, Loganville, Walton County, which was not a place of business or a place where his vehicles were garaged.
Jefferson rated the risk and premium on its policies of insurance based upon the county of a business’s operation; therefore, a business in Walton County would have different lower risk and premiums than the same business located in Fulton/DeKalb County. When Southern Insurance Underwriters discovered that 2160 Huntington Drive, Loganville, was a vacant lot, it required that Official Towing be rated at the correct Fulton/DeKalb rates.
Then, on December 5, 1995, DeFranks obtained coverage from Jefferson in policy no. JCV772121 for the trade name LaCosta Recovery Services, Inc. using the address 136 C. S. Floyd Road, Loganville, as the garaging location, but did not list the tow truck at issue as a covered vehicle. In both the LaCosta and Official Towing applications, DeFranks on specific inquiry denied that he was engaged in repossession work under either trade name, because repossession created a higher underwriting insurance risk with higher premiums.
In February 1996, DeFranks, acting as Official Towing, transferred the wrecker in question along with others to himself as LaCosta, which removed the vehicles from a different Jefferson policy. This lowered his insurance rates, since this trade name was listed as located in Walton County. Further, on February 23, 1996, DeFranks notified Jefferson that he wanted the white 1996 International S1600 tow truck, vehicle identification number IHTSCAAM8TH346393, added to the LaCosta policy. However, LaCosta did not execute a lease for this vehicle from Horton Truck & Equipment Company/Coast to Coast Leasing Corporation until March 26, 1996. Moreover, Jefferson on March 22, 1996, issued an insurance verification for this vehicle to Coast to Coast Leasing for this tow truck with coverage under this LaCosta policy number by Jefferson. The evidence in the record creates a material issue of fact that the truck in question was added to the LaCosta coverage prior to the occurrence, creating a jury question. Lau’s Corp. v. Haskins, 261 Ga. 491 (405 SE2d 474) (1991).
On July 21, 1996, at Snow & Red’s Tire Service, at 2387 Bank-head Highway, Atlanta, Georgia, Alray Goolsby, a LaCosta employee, while within the scope of his employment for DeFranks, lost control of his tow truck and struck a vehicle that in turn struck Timothy Johnson, husband of Patsy Johnson, David M. Wilder, the *570son of David and Ella Wilder, Festus Watts, and Anthony Jones, injuring them.
On October 25, 1996, Jefferson cancelled the LaCosta policy no. JCV772121 retroactively effective to December 5, 1995, because the policy was void from the inception for fraud. The cancellation notice stated: “By cancelling this policy, Jefferson Insurance Company of New York does not in any way concede that this policy was operating as written from its effective date of December 05, 1995, to the date of cancellation, and specifically reserves the right to litigate that issue in the above-referenced Declaratory judgment action.”
On October 11, 1996, Jefferson filed this declaratory judgment action against the insured and all who had an interest in the coverage. The parties filed cross-motions for summary judgment, and on December 9, 1999, the trial court granted Jefferson’s and denied the defendants’ motions.1
1. The defendants contend that the trial court erred in granting summary judgment to Jefferson, because there were fact issues as to the fraud being material.
The defendants contend that there is no evidence that LaCosta made material misrepresentations in the policy application and that questions as to what constitutes material misrepresentations of fact are for a jury to decide.
In cases where the application for insurance is attached to and becomes a part of the policy, in order to avoid the policy for a misrepresentation of the applicant made in the application, the insurer need only show that the representation was false and that it was material in that it changed the nature, extent, or character of the risk. OCGA § 33-24-7 (b). This is true although the applicant may have acted in good faith, not knowing that a representation is untrue. A material representation is one that would influence a prudent insurer in determining whether or not to accept the risk, or in fixing the amount of the premium in the event of such acceptance. . . . While ordinarily the question as to the materiality of misrepresentations is for the jury, where the evidence, as [in this case], excludes every other reasonable inference except that they were material, no issue is presented on that point for consideration. . . . If a party to a contract seeks to avoid it on the ground of fraud or mistake, he must, upon discovery of the facts, at once announce his purpose and *571adhere to it. Otherwise, he can not avoid or rescind such contract.
(Citations and punctuation omitted.) Haugseth v. Cotton States Mut. Ins. Co., 192 Ga. App. 853, 854-855 (386 SE2d 725) (1989); see also Morris v. State Farm &c. Ins. Co., 143 Ga. App. 617, 618 (1) (239 SE2d 187) (1977); see generally Fla. Intl. Indem. Co. v. Osgood, 233 Ga. App. 111 (503 SE2d 371) (1998). The evidence of material fraud is plain, palpable, and undisputed. Thus, the policy was properly voided for fraud. Defendants failed to create a material issue of fact as to material fraud in the application by DeFranks.
2. The defendants contend that the trial court erred because the policy could be voided only prospectively, not retroactively, and that there was no issue for declaratory relief because Jefferson cancelled the policy prior to suit.
(a) Although the policy is void for material fraud in the application, the insurance policy, providing mandatory motor vehicle liability coverage, can be cancelled only prospectively as a matter of Georgia public policy, because injured third parties acquired an interest in the mandatory motor vehicle coverage after the occurrence and prior to the cancellation. Although Pearce v. Southern Guaranty Ins. Co., 246 Ga. 33 (268 8E2d 623) (1980), was decided under the compulsory coverage of no-fault motor vehicle insurance, since repealed, no-fault insurance was replaced by other mandatory minimum motor vehicle liability coverage. Thus, as a matter of public policy, “an automobile insurance policy providing basic third party liability insurance and basic personal injury protection benefits . . . issued pursuant to Georgia law cannot be voided retrospectively under [OCGA § 33-24-7].” Id. at 39; see also OCGA §§ 33-34-4; 40-5-71; Ga. Farm &c. Ins. Co. v. Phillips, 251 Ga. 244, 246 (304 SE2d 725) (1983); Sentry Indem. Co. v. Sharif, 248 Ga. 395, 397 (282 SE2d 907) (1981). Even a binder for motor vehicle liability coverage cannot be voided for fraud retroactively for the same reasons. Sentry Indem. Co. v. Sharif, supra at 396-397. Coverage in excess of the mandatory minimum can be voided only prospectively for fraud. Ga. Farm &c. Ins. Co. v. Phillips, supra at 245. Such public policy limitations extend to void or narrow coverage exclusions under the written terms of mandatory motor vehicle liability insurance policies, which further demonstrates such overriding public policy in this area.
The public policy considerations relating to . . . exclusion provisions in automobile liability insurance policies stem from the legislature’s enactment of the mandatory insurance statute. The purpose of the statute was to provide protection in the form of insurance. We have held that compulsory *572insurance is required for the protection of the innocent victims of the negligent members of the motoring public. We have also held that the legislature intended that Georgia’s compulsory insurance law protected the insured from unfair exposure to unanticipated liability. ... [I]n view of our overriding policy of complete liability coverage for the protection of the public and the insured, if the exclusion were broader than the tort immunity of this state, the exclusion would be against public policy.
(Citations and punctuation omitted.) Stepho v. Allstate Ins. Co., 259 Ga. 475, 476 (1) (383 SE2d 887) (1989). See also Govt. Employees Ins. Co. v. Dickey, 255 Ga. 661, 662 (340 SE2d 595) (1986); Cotton States Mut. Ins. Co. v. Neese, 254 Ga. 335, 341 (1) (329 SE2d 136) (1985); Federated Mut. Ins. Co. v. Dunton, 213 Ga. App. 148, 149-150 (1) (444 SE2d 123) (1994); Jones v. Wortham, 201 Ga. App. 668, 670 (411 SE2d 716) (1991). Where there are policy exclusions as to motor vehicle liability coverage, such exclusions may limit liability in excess of the mandatory minimum coverage. See Ga. Farm &c. Ins. Co. v. Burch, 222 Ga. App. 749, 750 (476 SE2d 62) (1996). Thus, the coverage in this case could not be retroactively voided by the terms of the contract or by fraud, only prospectively voided.
(b) However, Jefferson’s rights and liabilities as to the defendants became fixed on October 25, 1996, when it issued the policy termination notice for fraud prior to filing its declaratory judgment action. The facts of this case are unlike Atlanta Cas. Co. v. Fountain, 262 Ga. 16, 17 (413 SE2d 450) (1992), where coverage was neither declined payment nor voided the policy by the insurer prior to the commencement of a declaratory judgment action. Jefferson could not void the policy and at the same time reserve rights under the policy to contest the policy; such would be to take inconsistent positions. Jefferson’s action of voiding the policy was an affirmative act fixing its and all interested parties’ rights and liabilities under the policy.
“Thus, when a claim for insurance has been made, and a legitimate question exists as to the propriety of denying coverage, the insurance company may file a declaratory judgment action before denying the claim. It is not necessary for the insurance company to wait for the insured to file a lawsuit against it.” Atlanta Cas. Co. v. Fountain, supra at 17-18. Declaratory judgment actions are appropriate to resolve and afford relief from uncertainty and insecurity as to actions not yet taken with respect to rights, status, and other legal relations before liability becomes fixed by act or omission. OCGA § 9-4-1; Burgess v. Burgess, 210 Ga. 380, 382-383 (2) (80 SE2d 280) (1954); see also Venable v. Dallas, 212 Ga. 595 (94 SE2d 416) (1956). When a party has already acted, fixing rights, and seeks confirma*573tion of the correctness of such action, declaratory judgment is not an appropriate remedy, because there no longer exists uncertainty of action. Norfolk &c. Ins. Co. v. Jones, 124 Ga. App. 761, 763-764 (2) (186 SE2d 119) (1971). Thus, “declaratory judgment is not available where a judgment cannot guide and protect the petitioner with regard to some future act — as where an insurance company has already denied a claim.” Atlanta Cas. Co. v. Fountain, supra at 18; see also Mayor &c. of Athens v. Gerdine, 202 Ga. 197 (1) (42 SE2d 567) (1947); Norfolk &c. Ins. Co. v. Jones, supra at 764. Declaratory judgment cannot be employed simply to test the viability of its defenses to an action that has already vested. Chattahoochee Bancorp v. Roberts, 203 Ga. App. 405, 406 (416 SE2d 875) (1992); Allstate Ins. Co. v. Shuman, 163 Ga. App. 313, 316 (4) (293 SE2d 868) (1982). Thus, the trial court should have denied the motion for summary judgment for a declaratory judgment and dismissed the declaratory judgment action.
Decided October 19, 2001
Reconsideration denied November 27, 2001
(c) Also, Jefferson brought this action as a bill in the nature of an interpleader and paid into court the premiums paid to determine what refund of the unearned premiums that it owed DeFranks. OCGA § 9-11-22; Algernon Blair, Inc. v. Trust Co. of Ga. Bank of DeKalb, 224 Ga. 118, 120-121 (160 SE2d 395) (1968). The trial court failed to determine what if any of the insurance premium should be refunded to DeFranks as unearned by Jefferson.
Where there exist multiple competing claims to liability insurance coverage proceeds, an insurer may protect itself by an inter-pleader action to determine the priorities of claims or liens to such coverage. See Holland v. State Farm &c. Ins. Co., 244 Ga. App. 583 (536 SE2d 270) (2000); Holland v. State Farm &c. Ins. Co., 236 Ga. App. 832 (513 SE2d 48) (1999).
Under OCGA § 9-12-90, where there has been a common disaster or occurrence, as in this case with multiple parties who have personal injuries, judgment liens stand in equal rank or priority if the actions were filed within 12 months of the occurrence giving rise to the tort action. Jefferson has limited coverage but has multiple claims for personal injury and a substantial judgment. Therefore, interpleader of the coverage is appropriate for judicial determination of the priorities of the claims on remand, if Jefferson chooses to pay the coverage into the trial court.
I am authorized to state that Judge Barnes and Judge Miller join in this dissent.
*574Wilson & Epstein, Norman S. Epstein, Holland & Knight, Sara L. Doyle, Jonathan P. Sexton, for appellants.
Drew, Eckl & Farnham, James M. Poe, James L. Creasy III, Catherine E. Diamond, for appellee.

 Notice of appeal was filed on January 7, 2000, in the Superior Court of Fulton County. This case was docketed in the Court of Appeals of Georgia on March 19, 2001.