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By Ronald D. Kent, Partner, SNR Denton
In Hoover v. Maxum Indemnity Co., the Georgia Supreme Court held that a liability insurance coverage disclaimer could not reserve a right to assert additional grounds later. If taken literally, this apparently places Georgia in a small minority of jurisdictions. This commentary argues that, if the decision means what it appears to say, it is unsound and should not be followed by other courts. Georgia courts should read it narrowly.
Hoover was seriously injured when he fell from a ladder. He spent two years pursuing a workers compensation claim, but his employer, EWES, had no workers compensation insurance. He then brought a negligence suit against his employer. Maxum claimed not to have received notice of the injury before the suit was brought, a disputed issue that was never resolved. Maxum disclaimed on the basis of an Employers Liability exclusion, also saying that it reserved the right to assert late notice. Hoover got a $16.4 million judgment against EWES, took an assignment of its rights, and sued Maxum. The trial court granted summary judgment to Maxum on late notice, but rejected its claim that the exclusion defeated coverage. The court of appeals agreed on late notice but also held the exclusion inapplicable. The supreme court held that Maxum could not assert the late notice defense because it had not relied on it in disclaiming coverage. It also concluded that the exclusion did not apply.
The commentary notes that the court described Georgia law as follows:
Under Georgia law, where an insurer is faced with a decision regarding how to handle a claim of coverage at the same time a lawsuit is pending against its insured, the insurer has three options. First, the insurer can defend the claim, thereby waiving its policy defenses and claims of non-coverage. Second, the insurer can deny coverage and refuse to defend, leaving policy defenses open for future litigation. Or, third, the insurer can defend under a reservation of rights. An insurer cannot both deny a claim outright and attempt to reserve the right to assert a different defense in the future.
Ronald D. Kent heads the Litigation Department in SNR Denton LLP's Los Angeles office. He is also Co-Chair of the Firm's National Insurance Litigation and Coverage Practice and is a member of the firm-wide Policy & Planning (Management) Committee. Since 2005, he has been named each year as a leading trial lawyer nationally and in California, based on peer and client evaluations, by Chambers USA: America's Leading Lawyers, the highly respected independent attorney rating organization. Mr. Kent has extensive experience representing major insurance companies on a wide variety of matters, including fraud and bad faith actions, class action and multiple plaintiff litigation, defense of toxic tort and other environmental claims, insurance coverage actions and general business disputes. Mr. Kent has tried matters in state and federal courts throughout California, and in other states, and has successfully handled in excess of 70 arbitrations to final resolution. In addition, he has briefed and argued numerous appellate matters in the California Supreme Court, nearly all California district courts of appeal and the Ninth Circuit Court of Appeals. Mr. Kent is the co-author of the second edition of New Appleman Insurance Bad Faith Litigation.
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