This summer, in the case of Hoover v. Maxum (S11G1681, S11G16883, 2012) the Georgia Supreme Court ruled 4-3 against the insurer. First, the Court reaffirmed that an insurer cannot both deny coverage and reserve coverage at the same time. Then, the Court held that boilerplate reservations (e.g. “the right to disclaim coverage on any other basis that may become apparent”) fail to preserve coverage defenses. And finally, the Court even seemed to hold that an insurer can not later raise a defense it did not set forth in its initial coverage position.
This case involved an employee suing his employer for an on-the-job injury. The exclusive remedy (workers’ compensation bar) did not prohibit the lawsuit as the employer failed to carry workers’ compensation insurance. The employer’s liability insurer denied coverage pursuant to the Employer’s Liability Exclusion of the policy. In addition, the insurer attempted to reserve its rights with respect to the policy notice provision and further “on any other basis that may become apparent as this matter progresses . . . .” The insurer later filed a DJ action based only on the Employer’s Liability Exclusion; that DJ action was dismissed as improper.
Plaintiff obtained a $16 million dollar judgment; the policy limits were $1 million. Plaintiff then took an assignment from his insured employer and sued the liability insurer. Cross-motions for summary judgment were filed. Ultimately, the Supreme Court ruled against the insurer. What is left to litigate is how much of the $16 million judgment the liability insurer may have to pay.
While we agree with the dissenting justices that this decision is unreasonable, at least in part, in light of this decision we do recommend the following for consideration by liability insurers:
Please feel free to call us to discuss this matter further.
Matt Moffett & Jennifer M. Guerra – for the defense.