Summary
In Gardenhire, the insurer, Atlanta Casualty, had refused to provide a defense to its insured, Westbrook, in an automobile-accident case on the ground that an excluded driver, Westbrook's roommate McKinney, was driving.
Summary of this case from Liberty Mut. Ins. Co. v. W. W. Tr. Co.Opinion
A00A1890.
DECIDED: FEBRUARY 14, 2001
DECIDED FEBRUARY 14, 2001.
Action on policy. Richmond Superior Court. Before Judge Fleming.
Allgood, Childs Mehrhof, Richard R. Mehrhof, Jr., for appellant.
Bell Bell, David B. Bell, for appellee.
Wanda Gardenhire was injured on October 28, 1997 when a 1993 Dodge Spirit ran into the rear of her vehicle. After the collision, the Dodge left the scene. Two eyewitnesses told police that a man was driving the car at the time of the collision, and one of the witnesses identified Michael D. McKinney as the driver. Further investigation revealed that the Dodge was owned by McKinney's roommate, Bridgett Westbrook, and insured by Atlanta Casualty Insurance Company. McKinney was an excluded driver under the policy pursuant to a "Named Driver Exclusion Agreement" Westbrook signed in connection with her insurance application. Despite the eyewitness testimony, Bridgett Westbrook came forward to identify herself as the driver and subsequently entered a plea of nolo contendre to charges of driving too closely and leaving the scene of the accident. Atlanta Casualty asserts that Westbrook's plea was an attempt to "take the fall" for McKinney and notes that at one point a warrant for obstruction of law enforcement was taken out against her.
After receiving notice of the collision, Atlanta Casualty undertook its own investigation pursuant to the policy's reservation of rights provision. The insurance company denied coverage, stating that its investigation revealed that McKinney was the driver and he was specifically excluded from coverage. It also denied coverage to Westbrook on the ground that she had made fraudulent statements and engaged in fraudulent conduct when she said she was driving the car at the time of the collision. And when Gardenhire subsequently sued Westbrook and McKinney for her injuries, Atlanta Casualty notified McKinney that it would not provide her with a defense to the lawsuit.
Gardenhire's suit asserted alternative claims against both possible drivers, McKinney and Westbrook. On September 15, 1999, a jury returned a verdict against only Westbrook in the amount of $45,000, plus interest. The jury affirmatively found that Westbrook, and not McKinney, was driving the car at the time of the collision.
Following the jury verdict, Westbrook assigned her claims against Atlanta Casualty to Gardenhire. Gardenhire filed suit directly against Atlanta Casualty, seeking recovery of damages in the amount of $45,000, and moved for summary judgment. The trial court granted Gardenhire's motion and Atlanta Casualty appeals.
1. Atlanta Casualty enumerates a number of errors with regard to the grant of summary judgment. In essence, it asserts that it should be entitled to litigate its defenses to coverage under Westbrook's policy, and thus summary judgment was improper. We agree that Atlanta Casualty is not prevented from asserting defenses to coverage merely by deciding not to defend Westbrook in Gardenhire's action. See Colonial Oil Indus. v. Underwriters Subscribing to Policy Nos. TO31504670 and TO31504671, 268 Ga. 561, 563 (4) ( 491 S.E.2d 337) (1997). But because we conclude that Atlanta Casualty cannot successfully assert its defenses to coverage, we affirm the trial court's grant of summary judgment to Gardenhire.
Atlanta Casualty asserts two bases for denying coverage: 1) that McKinney was an excluded driver under the policy and 2) that its insured, Westbrook, attempted to defraud them by claiming that she, and not McKinney, was driving the car. But to succeed on either one of these defenses, Atlanta Casualty must necessarily prove that McKinney, and not Westbrook, was driving. And a jury has already found that Westbrook was driving the car at the time of the accident, and that finding was incorporated into the final judgment of Gardenhire's claim against Westbrook. Because Atlanta Casualty stands in privity with Westbrook as to that claim, it is bound by the prior factual finding and judgment. American States Ins. Co. v. Walker, 223 Ga. App. 194, 195 (1) (b) ( 477 S.E.2d 360) (1996).
The doctrine of collateral estoppel precludes the readjudication of an issue of law or fact already adjudicated between the parties or their privies, where that issue is essential to the judgment. Kent v. Kent, 265 Ga. 211 (1) ( 452 S.E.2d 764) (1995). It cannot be disputed that the issue of who was driving the car was essential to the judgment in Gardenhire's suit against Westbrook and McKinney, as it determined which of the two defendants was liable. "[W]hen an issue of ultimate fact has once been determined by a valid and final judgment, that issue cannot again be litigated between the same parties (or their privies) in any future lawsuit." (Citation and punctuation omitted.) Sullivan v. State, 235 Ga. App. 768, 769 ( 510 S.E.2d 136) (1998).
Atlanta Casualty argues that its defense of fraud has never been adjudicated and thus asserts that it should be allowed to present evidence regarding that issue. But the crucial underlying fact to support the defense has been adjudicated, and the jury found in Gardenhire's favor. Atlanta Casualty, therefore, is estopped from re-litigating the issue:
[C]ollateral estoppel does not require identity of the claim — so long as the issue was determined in the previous action and there is identity of the parties, that issue may not be re-litigated, even as a part of a different claim.
(Citation and punctuation omitted.) General Elec. Capital Computer Services v. Gwinnett County Bd. of Tax Assessors, 240 Ga. App. 629, 630-631 (1) ( 523 S.E.2d 651) (1999). See also Great Atlantic Ins. Co. v. Morgan, 161 Ga. App. 680, 682 ( 288 S.E.2d 287) (1982) (insurance company precluded from asserting insured's fraud in subsequent action).
To avoid this result, Atlanta Casualty could have followed the "`procedurally safe course' of providing a defense under a reservation of rights and filing a declaratory judgment action to determine its obligations." Colonial Oil, 268 Ga. at 562. Because it chose not to do so, however, it is bound by the prior judgment. "A judgment of a court having jurisdiction of both the parties and the subject-matter, however, irregular or erroneous, is binding until set aside." (Punctuation and citation omitted.) Matthews Group Assoc. v. Wages, 180 Ga. App. 151, 152 (2) ( 348 S.E.2d 695) (1986). See also OCGA § 9-11-60.
2. Atlanta Casualty argued below and also before this court that its liability does not extend to the full amount of the judgment against Westbrook. The insurance company asserts that its exposure is limited to the costs Westbrook incurred in defending against Gardenhire's claim, and certainly cannot extend beyond the policy limits.
But because Atlanta Casualty can assert no valid defense to coverage, it necessarily is liable to Gardenhire at least to the extent of the policy limits. And under circumstances such as this, where an insurance company fails to offer a defense, it may be liable to its insured beyond the policy limits to the full amount of the judgment. See Leader Nat. Ins. Co. v. Kemp Son, 259 Ga. 329, 330 ( 380 S.E.2d 458) (1989); Leader Nat. Ins. Co. v. Smith, 177 Ga. App. 267, 278-279 (2) ( 339 S.E.2d 321) (1985). Here, Gardenhire stands in the shoes of the insured and thus may be entitled to recover an amount in excess of the policy limits. Nevertheless, we agree with Atlanta Casualty that a jury question exists as to the extent of its liability. Accordingly, we reverse the trial court's grant of summary judgment on this ground, and remand for further proceedings on this issue.
Judgment affirmed in part and reversed in part. Miller and Mikell, JJ., concur.