Georgia Court of Appeals
First Acceptance Ins. Co. of Georgia v. Watts
GA Court of Appeals, 3/18/24
No. A24A0588, 2024 WL 1151680
Judge Brown
Topics: Coverage, Declaratory Judgment
Full Take: This is a coverage/declaratory judgment case that also impacted the plaintiff in a motor vehicle accident case. Kimberly Glancy was driving when her car collided with a car driven by Angel Watts but owned by Angel’s mother, Sheril Adams.
Adams did not list her daughter, Watts, as a driver of her vehicle or resident of her household when she applied for coverage, and she was not listed on the policy.
A few days after the accident, First Acceptance notified Adams, the insured mother, that did not know if it was going to cover the accident due to the daughter not being listed on the policy, but it was going to handle the claim under a full reservation of rights to disclaim coverage. For the next several months, First Acceptance continued to investigate coverage, and it reminded the mother and daughter several times that it was still reserving its rights to deny coverage.
Glancy, the injured driver, filed a personal injury action against Watts, and First Acceptance continued to state that it would handle the claim and “defend you in the lawsuit” subject to a full reservation of rights.
At some point, a default judgment was entered in the underlying motor vehicle case.
First Acceptance then filed a declaratory judgment action, seeking a determination (1) that it has no duty to provide coverage, indemnity, or a defense (“Count I”), and, alternatively, (2) that Glancy's settlement offer pursuant to OCGA § 9-11-67.1 in the underlying action was void (“Count II”).
Watts and Adams filed a motion to open default, which was granted by the trial court. Glancy then filed a motion to refuse judgment pursuant to OCGA § 9-4-8,5 alleging that Count I was untenable because First Acceptance undertook a duty to settle her bodily injury claim and created tort exposure when it negligently failed to do so; the tort exposure moots the question of contractual obligations.
Glancy further alleged that Count II posed no uncertainty for First Acceptance, as argued in the previously filed motion to dismiss.
First Acceptance filed a motion for summary judgment, seeking a declaration that respondents were not entitled to coverage, indemnity, or a defense under Adams’ insurance policy because Watts did not qualify as an insured at the time of the accident. She was a “regular operator” under the policy that Adams should have listed on her policy. First Acceptance also filed a motion to reconsider the order opening default.
Following a hearing on April 19, 2023, the trial court denied First Acceptance's motions for reconsideration and summary judgment and granted Glancy's motions to dismiss and refuse judgment.
First Acceptance appealed. Soon after, the trial court in the underlying personal injury action entered a final judgment in favor of Glancy in the amount of $8,500,000, based on a consent judgment between Glancy and Watts.
On appeal, First Acceptance contended that the trial court made several erroneous rulings in its declaratory judgment action, including granting the motion to open default and granting Glancy's motion to refuse judgment.
Glancy moved to dismiss the appeal, alleging that in light of the consent final agreement settling the underlying tort action, the appeal in the declaratory judgment case was now moot.
No subject matter jurisdiction exists for a declaratory judgment action where judgment is entered in underlying damages action because the rights of the parties, at that point, become fixed, and the insurer, at that point, merely asserts defenses to a breach of contract action by the insured.
When an insurer is presented with notice of a claim and demand for a defense, the proper and safe course of action is to enter upon a defense under a reservation of rights and then proceed to seek a declaratory judgment in its favor. But where the rights of the parties have already accrued and there are no circumstances showing any necessity for a determination of the dispute to guide and protect the plaintiff from uncertainty and insecurity with regard to the propriety of some future act or conduct, the plaintiff is not entitled to a declaratory judgment. The declaratory judgment action makes no provision for a judgment which is advisory. Declaratory judgment is not available where a judgment cannot guide and protect the insurer with regard to some future act such as where the insurer has denied coverage, refused to provide a defense, or where a judgment has been entered in the underlying tort case. Declaratory judgment is not available to a party merely to test the viability of its defenses.
Glancy contended that the appeal should be dismissed because the underlying tort action had already proceeded to and reached a non-appealable, final judgment. Accordingly, the rights of the parties in the declaratory judgment action had already accrued and become fixed, and there was no uncertainty.
First Acceptance contends that fairness principles dictate that its appeal is not moot; and that while the consent judgment moots the duty to defend issue, its duty to indemnify Watts for that judgment remains a live controversy.
The appellate court disagreed. All rights had accrued; the insurer is either liable under the terms of its policies for the judgment entered against its insured or it is not. Filing of the declaratory judgment action before entry of the judgment did not change this rule. The issue (whether to defend) has become dead or academic. A decision would have no practical effect. That would occur when, for example as is the case here, the matter in dispute has already been resolved. The issue of whether it is liable for the judgment does not present an issue for declaratory judgment because that issue does not relate to future undirected action.
Given that a judgment has been entered in the underlying damages action, fixing the rights and obligations of the parties, any ruling on First Acceptance's action for declaratory judgment would be an impermissible advisory opinion. DISMISSED.
