It is an undisputed truth that insurance policies contain voluminous language explaining exactly what constitutes a covered claim. However, it is also true that whether a claim is covered may depend on when the insured calls his or her insurer to discuss whether a claim is covered. Insurance policies typically include a notice requirement, and failure to abide by the requirement – even potentially where no suit has yet been filed – may disqualify a claim from coverage.
Under Georgia law, when an insurance policy includes a notice requirement as a condition precedent to coverage, and when the insured unreasonably fails to timely comply with the notice requirement, the insurer is not obligated to provide a defense or coverage. See Federated Mut. Ins. Co. v. Ownbey Enterprises, 278 Ga. App. 1, 3, 627 S.E.2d 917 (2006). An insured is not “required to foresee every possible claim, no matter how remote,” that might arise from an event and give notice of it to the insurer. Instead, the law only requires an insured “to act reasonably under the circumstances.” Guaranty Nat. Ins. Co. v. Brock, 222 Ga. App. 294, 295(1), 474 S.E.2d 46 (1996); see also, Plantation Pipeline Co. v. Royal Indem. Co., 245 Ga. App. 23, 26(1), 537 S.E.2d 165 (2000). If a reasonable and ordinarily prudent person would conclude that an event forms no basis for a possible claim, the failure of the insured to give notice of the event is justified and no bar to coverage. Guaranty Nat. Ins. Co. v. Brock, 222 Ga. App. at 295(1), 474 S.E.2d 46. However, justification for failure to give notice as soon as practicable may not include the insured’s conclusion that it was free of fault and that there was no liability to the other party; that is the very issue which the insurance company must have reasonable opportunity to investigate with promptness. Plantation Pipeline Co. v. Royal Indem. Co., supra.
“[I]t is the nature and circumstances of ‘the accident’ or ‘the incident’ and the immediate conclusions an ordinarily prudent and reasonable person would draw therefrom that determine whether an insured has reasonably justified his decision not to notify the insurer.” Southern Guaranty Ins. Co. v. Miller, 183 Ga. App. 261, 263, 358 S.E.2d 611 (1987). Relevant circumstances include the nature of the event, the extent to which it would appear to a reasonable person in the circumstances of the insured that injuries or property damage resulted from the event, and the apparent severity of any such injuries or damage. See, e.g., State Farm Fire & Casualty Ins. Co. v. Walnut Avenue Partners, 296 Ga. App. at 653(2), 675 S.E.2d 534. A court also properly may consider whether anyone gave an indication that he intended to hold the insured responsible for the event and resulting injuries and the extent to which the insured acknowledged the likelihood that a claim could arise from the event, either by offering compensation to the injured person or asking him to sign a release. Id.
Georgia courts have also made clear that the insured’s duty to provide notice must be assessed without hindsight bias, considering only what the insured knew or reasonably should have known at the time of alleged notice of the potential claim. For example, in Forshee et al. v. Employers Mutual Cas. Co., 309 Ga. App. 621, 711 S.E.2d 28 (2011), the Georgia Court of Appeals reversed the trial court’s denial of coverage to the insureds for unreasonable delay in providing notice, ruling that the trial court improperly considered only the severity of the Plaintiff’s injury, rather than how severe the injuries actually appeared to the insureds or would have appeared to a reasonable person in the insured’s position. Forshee concerned a slip-and-fall accident at the insured’s gas station. At the time of the accident, the victim refused medical assistance, walked back to her own car, did not indicate that she held the insured at fault, and did not request the insured’s insurance information. Id., 309 Ga. App. at 626. The Court of Appeals held that the trial court should have considered this (and other) information to determine whether the insured acted reasonably in failing to notify the insurer at the time of the occurrence. Id. In reversing the trial court, the Court of Appeals noted that the “reasonableness of the failure of the Forshees to give notice sooner to Employers Mutual must be assessed from the perspective of a reasonable person in the circumstances in which the Forshees found themselves, not that of an omniscient being having the benefit of full and accurate information that emerged only later and the benefit of hindsight.” Id., 309 Ga. App. at 626.
In the context of commercial general liability policies, Georgia courts have found that an unexcused delay in notice of 12 months to be unreasonable as a matter of law, so as to breach the insurance contract and excuse the insurer from its duty to provide defense and indemnity. Kay-Lex
In the case of Kay-Lex Company v. Essex Insurance Company, et al., supra, two insurance carriers filed a declaratory judgment action to determine their responsibilities in connection with a lawsuit arising out of a forklift accident. On June 19, 2003, Mr. Benson lost control of a forklift and accidentally backed it out of a loading dock door and was tragically killed when the forklift fell on him, pinning him to the ground. On September 10, 2004, Mr. Benson’s mother filed a wrongful death action against Kay-Lex Company and others. At the time of the accident, Kay-Lex was insured pursuant to a commercial general liability policy issued by Essex Insurance Company. Kay-Lex moved for summary judgment on several grounds, including the insured Kay-Lex’s failure to provide notice of the incident “as soon as practicable” as required by the policy. The trial court granted summary judgment in favor of the insurer, and the Georgia Court of Appeals affirmed. The insured contended that it had notified its insurance agent on the date of the accident, but specifically denied personally notifying the insurance company, Essex. The insured also testified that the agent said he would take care of it and not to worry about it, to go be with the family. The court noted that the Essex policy required notification to Essex, and did not provide for notice to any agent. The court also noted that “independent insurance agents or brokers are generally considered the agent of the insured, not the insurer.” Southeastern Express Systems v. Southern Guaranty Insurance Company of Georgia, 224 Ga. App. 697, 700, 482 S.E.2d 433 (1997). Without an actual or apparent agency relationship between the agent and the carrier, the insured was not authorized to rely on any statements that the agent made in his initial call. Kinard v. National Indemnity Company, 225 Ga. App. 176, 177 (1), 483 S.E.2d 664 (1997). Thus, the Court found that Kay-Lex had failed to give notice of an occurrence to the insurer and had shown no justification for failing to do so. Kay-Lex Company, 286 Ga. App. at 490.
The Court of Appeals in Kay-Lex also noted that “Absent some justification, failure to provide timely notice of an occurrence can defeat coverage under such a policy: it is well established that a notice provision expressly made a condition precedent to coverage is valid and must be complied with, absent a showing of justification. Where an insured has not demonstrated justification for failure to give notice according to the terms of the policy . . . then the insurer is not obligated to provide either a defense or coverage.” Federated Mutual Ins. Co. v. Ownbey Enterprises, 278 Ga. App. 1, 3, 617 S.E.2d 917 (2006).
In light of the controlling case law in Georgia, it behooves insurers and their insureds to pay special attention to the notice provision, as it may potentially be determinative as to whether the insured is afforded coverage under their policy. The requirement to provide notice to the insurer may be triggered well before any formal legal action is taken – so insureds would be wise to keep their insurers in the loop regarding any developing situations that could trigger future coverage. Company v. Essex Insurance Company, et al., 286 Ga. App. 484, 649 S.E.2d 602 (2007) Company, et al., 286 Ga. App. 484, 649 S.E.2d 602 (2007); See also, Southeastern Exp. Systems, Inc. v. Southern Guar. Ins. Co. of Georgia, 482 S.E.2d 433 (1997) (18 months delay unreasonable), Hoover v. Maxum Indem. Co., 2011 WL 2506455 (two years’ delay unreasonable).
In the case of Kay-Lex Company v. Essex Insurance Company, et al., supra, two insurance carriers filed a declaratory judgment action to determine their responsibilities in connection with a lawsuit arising out of a forklift accident. On June 19, 2003, Mr. Benson lost control of a forklift and accidentally backed it out of a loading dock door and was tragically killed when the forklift fell on him, pinning him to the ground. On September 10, 2004, Mr. Benson’s mother filed a wrongful death action against Kay-Lex Company and others. At the time of the accident, Kay-Lex was insured pursuant to a commercial general liability policy issued by Essex Insurance Company. Kay-Lex moved for summary judgment on several grounds, including the insured Kay-Lex’s failure to provide notice of the incident “as soon as practicable” as required by the policy. The trial court granted summary judgment in favor of the insurer, and the Georgia Court of Appeals affirmed.
The insured Kay-Lex contended that it had notified its insurance agent on the date of the accident, but specifically denied personally notifying the insurance company, Essex. The insured also testified that the agent said he would take care of it and not to worry about it, to go be with the family. The court noted that the Essex policy required notification to Essex, and did not provide for notice to any agent. The court also noted that “independent insurance agents or brokers are generally considered the agent of the insured, not the insurer.” Southeastern Express Systems v. Southern Guaranty Insurance Company of Georgia, 224 Ga. App. 697, 700, 482 S.E.2d 433 (1997). Without an actual or apparent agency relationship between the agent and the carrier, the insured was not authorized to rely on any statements that the agent made in his initial call. Kinard v. National Indemnity Company, 225 Ga. App. 176, 177 (1), 483 S.E.2d 664 (1997). Thus, the Court found that Kay-Lex had failed to give notice of an occurrence to the insurer and had shown no justification for failing to do so. Kay-Lex Company, 286 Ga. App. at 490.
The Court of Appeals in Kay-Lex also noted that “Absent some justification, failure to provide timely notice of an occurrence can defeat coverage under such a policy: it is well established that a notice provision expressly made a condition precedent to coverage is valid and must be complied with, absent a showing of justification. Where an insured has not demonstrated justification for failure to give notice according to the terms of the policy . . . then the insurer is not obligated to provide either a defense or coverage.” Federated Mutual Ins. Co. v. Ownbey Enterprises, 278 Ga. App. 1, 3, 617 S.E.2d 917 (2006).
In light of the controlling case law in Georgia, it behooves insurers and their insureds to pay special attention to the notice provision, as it may potentially be determinative as to whether the insured is afforded coverage under their policy. The requirement to provide notice to the insurer may be triggered well before any formal legal action is taken – so insureds would be wise to keep their insurers in the loop regarding any developing situations that could trigger future coverage.
Nick A. Hinson
678-365-4004
nhinson@m-mlegal.com