Nat'l Cas. Co. v. Ga. Sch. Bds. Ass'n-Risk Mgmt. Fund

304 Ga. 224

818 S.E.2d 250

NATIONAL CASUALTY COMPANY

v.GEORGIA SCHOOL BOARDS ASSOCIATION–RISK MANAGEMENT FUND.

S18Q0757

Supreme Court of Georgia.

Decided: August 14, 2018

Jay Russell Sever, Katie Myers, Phelps Dunbar-LA, 365 Canal Street, Suite 2000, New Orleans, Louisiana 70130, Michael J. Rust, David Christopher Sawyer, Gray, Rust, St. Amand, Moffett & Brieske, LLP, 950 East Paces Ferry Road, 1700 Atlanta Plaza, Atlanta, Georgia 30326, for Appellant.

Thomas Kearney Wingfield, C. Michael Johnson, Hall Booth Smith, P.C.-ATL, 191 Peachtree Street, NE, Suite 2900, Atlanta, Georgia 30303, for Appellee.

HINES, Chief Justice.

This appeal is before this Court on a certified question from the United States District Court for the Northern District of Georgia¹ in this insurance coverage dispute between plaintiff National Casualty Company ("National"), a commercial insurer, and defendant Georgia School Boards Association–Risk Management Fund ("Risk Fund"), an interlocal risk management agency created pursuant to Article 29 of Chapter 2 of Title 20 of the Georgia Code, OCGA § 20-2-2001 et seq.² The gravamen of the question certified³ is whether Georgia law or public policy precludes a commercial insurance policy that is excess to coverage provided under OCGA § 20-2-2002.⁴ For the reasons which follow, we conclude that there is no such prohibition.

Factual Background

The facts as found by the District Court are the following. National and Risk Fund provide overlapping liability coverage to members of the Professional Association of Georgia Educators ("PAGE"), a professional association of teachers and administrators. National issued insurance policies to PAGE for the periods July 1, 2012, to July 1, 2013, and July 1, 2013, to July 1, 2014 (collectively the "Policies"). The Policies provide liability coverage to PAGE members:

Coverage A-Liability Coverage

The Company will pay on behalf of the insured all sums which the Insured shall become obligated to pay by reason of liability imposed by law or for monetary damages resulting from any CLAIM made against the insured arising out of an OCCURRENCE in the course of the activities of the insured in his/her professional capacity and caused by any acts or omissions of the insured or any other person for whose acts the insured is legally liable. The Company shall defend any suit seeking monetary damages which are payable under the terms of the policy, even if such suit be groundless, false or fraudulent; but the Company may make such investigation, negotiation and settlement of any CLAIM or suit as it may deem expedient.

The Policies also contain a provision limiting coverage for liabilities covered by "other insurance" ("Other Coverage Provision"):

Other Insurance

This policy is specifically excess if the insured has other insurance of any kind whatsoever, whether primary or excess, or if the insured is entitled to defense or indemnification from any other source whatsoever, including by way of example only, such sources as state statutory entitlements or provisions. Other insurance includes, but is not limited to, insurance policies, state pools, and programs of self-insurance, purchased or established by or on behalf of any EDUCATIONAL UNIT , to insure against CLAIMS arising from activities of the EDUCATIONAL UNIT or its employees, regardless of whether or not the policy or program provides primary, excess, umbrella or contingent coverage.

In addition, Coverage A [Liability Coverage] is specifically excess—over coverage provided by any EDUCATIONAL UNIT’S or school board’s errors and omissions or general liability policies, purchased by the insured’s employer or former employers, or self-insurance program or state pools, whether collectible or not, and it is specifically excess over coverage provided by any policy of insurance which purports to be excess to a policy issued to the insured.

Risk Fund’s risk-sharing arrangement is set forth in coverage agreements entered into by Risk Fund and its members ("Coverage Agreements"). Under the Coverage Agreements, Risk Fund provides liability coverage to members and their employees, including PAGE members. The coverage periods are July 1, 2012, to July 1, 2013, and July 1, 2013, to July 1, 2014. Risk Fund’s coverage includes liability coverage for personal injury, bodily injury, property damage, negligent acts, wrongful acts, and sexual abuse. Risk Fund is required to "pay [amounts a] Member becomes legally obligated to pay as damages" and to "defend ... Member[s] against any ‘suit’ seeking those damages." Risk Fund’s members are jointly and severally liable "for all legal obligations" arising under the Coverage Agreements.

The Coverage Agreements contain a provision limiting coverage where insurance is available from another source:

4. Insurance.

If valid and collectible insurance is available to the Member for a loss covered by [Risk Fund] under any coverage parts within this Coverage Document, the obligations of [Risk Fund] are excess over the available and collectible insurance.

From 2014 to 2016, several lawsuits were filed against PAGE members covered under the Policies and the Coverage Agreements ("Covered Members"). National refused to defend or indemnify these Covered Members until coverage under the Coverage Agreements was exhausted. National contended that the Other Coverage Provision in the Policies made it only an excess insurer. Risk Fund contended that National is the primary insurer and that Risk Fund is required only to provide excess coverage. Because of National’s refusal to provide primary coverage, Risk Fund defended, indemnified and paid settlement amounts on behalf of the Covered Members, pending resolution of the present amended complaint for declaratory judgment filed by National.

Procedural History

The amended complaint sought a declaration that Risk Fund has "the primary duty to defend and indemnify" Covered Members against whom suits have been filed. Risk Fund filed a counterclaim for breach of contract, contribution, unjust enrichment, and declaratory judgment. National moved for summary judgment on its claim for declaratory relief and on Risk Fund’s counterclaim for declaratory relief. Risk Fund moved for partial summary judgment, seeking a declaration that (1) "coverage owed to jointly covered persons under [National’s Policies] is primary to coverage provided under" Risk Fund’s Coverage Agreements, or (2) the parties "must share coverage owed to jointly covered individuals on a pro rata basis." The District Court found that Risk Fund was entitled to summary judgment on its request for a declaration that National’s Other Coverage Provision is irreconcilable with Risk Fund’s Other Coverage Provision, and that the parties "must share defense and indemnity coverage on a pro rata basis." Consequently, it denied National’s motion for summary judgment and granted Risk Fund’s motion for partial summary judgment. Both National and Risk Fund moved for reconsideration. Upon reconsideration, the District Court issued the present "opinion and order" certifying its question to this Court. It did so after finding that the irreconcilable provisions rule as set forth in State Farm Fire & Cas. Co. v. Holton , 131 Ga. App. 247, 205 S.E.2d 872 (1974), has developed only in cases involving conflicts between commercial insurance policy provisions, and so it questioned whether that rule applies to coverage provided by an entity entrusted with public funds, thereby implicating Georgia public policy and the interpretation of Georgia law.

Discussion

As was explained in Holton , in the circumstances in which two insurance policies provide overlapping coverage, i.e., they insure the same risk during the same time frame, resolution of the issue of insurance liability requires examination of the policies’ "Other Insurance" provisions, which describe at which point each policy’s coverage attaches. And, if the two entities providing insurance,

attempt to limit their liability to excess coverage if there is other insurance, then the clauses are irreconcilable, cancel each other out, and the liability is to be divided equally between them.

Id. at 248–249 (3), 205 S.E.2d 872 (internal cites and quotation marks omitted).

Of necessity, the initial inquiry is the meaning of the insurance policy provisions at issue. The interpretation of an insurance policy is subject to the relevant general rules of contract construction, the cardinal rule being to determine and carry out the intent of the parties. Bell v. Liberty Mut. Fire Ins. Co. , 319 Ga. App. 302, 305 (1), 734 S.E.2d 894 (2012). In making the determination of intent, a court is to consider the insurance policy as a whole, and a preferred construction will give effect to each provision, attempt to harmonize the provisions with each other, and not render any of the policy provisions meaningless or mere surplusage. York Ins. Co. v. Williams Seafood of Albany, Inc. , 273 Ga. 710, 712 (1), 544 S.E.2d 156 (2001). Furthermore, "[t]he policy should be read as a layman would read it. Additionally, exclusions will be strictly construed against the insurer and in favor of coverage." Id. Finally, Georgia law provides that "insurance companies are generally free to set the terms of their policies as they see fit so long as they do not violate the law or judicially cognizable public policy." Reed v. Auto-Owners Ins. Co. , 284 Ga. 286, 287 (2), 667 S.E.2d 90 (2008).

As noted, the District Court has already determined that National’s Other Coverage Provision is in direct conflict with Risk Fund’s Other Coverage Provision, and the correctness of that determination is not now at issue before this Court. The question becomes whether there is any Georgia law or public policy justifying a departure from the basic rules of insurance contract construction and abandonment of the analysis set forth in Holton . Risk Fund has argued that the traditional analysis is not applicable when an interlocal risk management fund is involved...