Cotton States Mutual Insurance v. State Farm Mutual Automobile Insurance , 235 Ga. App. 510 ( 1998 )

Beasley, Judge.

The appellants, all of whom are defendants in this declaratory judgment action, are would-be plaintiffs and their insurers in a tort action arising out of a motor vehicle collision. They appeal the grant of State Farm’s motion for partial summary judgment, in which the court ruled that State Farm had not waived its right to enforce the coverage provisions of its auto insurance policy by the payment of excess property damage claims. Defendants also appeal the denial of their motions for summary judgment.

“Summary judgment is proper when there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. OCGA § 9-11-56 (c). A de novo standard of review applies to an appeal from a grant of summary judgment, and we view the evidence, and all reasonable conclusions and inferences drawn from it, in the light most favorable to the nonmovant.”¹

On December 29, 1995, a truck driven by Elizabeth Winkler and owned by her fiancee and passenger, Scott Gray, crossed the center-line. It struck two other cars, killing not only Winkler and Gray but also William N. Padgett and William J. Padgett. Ruby Padgett and Sylvia Padgett were injured. Gray’s truck was insured for minimum limits by Midland Risk Insurance Company (a non-party), which limits were paid to the Padgetts. Their cars had uninsured/underinsured motorist coverage by defendants Cotton States, USF&G and Grange Mutual.

Because Winkler resided with her parents, she was a conditional insured under her father’s State Farm policy. The policy restricts coverage for any relative of the primary insured who resides in the household of such insured to vehicles which are not owned by any resident of such household. Conversely, coverage does not apply to a resident relative if the involved vehicle is owned by any other resident of the household, relative or not. The purpose of this condition is to preclude coverage of multiple vehicles in the same household under a single premium. The parties agreed that for the purposes of the motions for summary judgment, it is assumed that Gray resided in the Winkler household; whether he did or not was reserved for jury determination.

After Midland paid the limits of its property damage coverage, State Farm paid those property damage claims which exceeded Midland’s limits. State Farm then took a recorded statement from its insured, Elizabeth Winkler’s father Larry, and determined that Gray had been living in the Winkler household to some extent. So it sent a reservation of rights letter to its insured, the administrator of Elizabeth’s estate. It then filed this declaratory judgment action contending that because Gray was a non-relative living in the Winkler household, his vehicle would not qualify as a “non-owned car” and, as a result, the collision was not covered under State Farm’s policy.

Defendants countered that State Farm waived the defense of non-coverage (based on Gray’s residence in the Winkler household as an assumed fact) by payment of property damage without reservation of rights. The trial court rejected this contention and ruled that, as a matter of law, State Farm did not waive this defense because it had never undertaken the defense of any tort action without reserving its rights. In fact, no tort action for personal injuries had yet been filed when the court ruled.

One need not actually assume anything with respect to Gray’s residence in connection with this ruling. Waiver is the first question. If there was waiver, it matters not whether Gray was a resident. That is, if State Farm waived its right to show that Gray was a resident at the time of the fatal collisions, then it must proceed based on the fact that he was not because it in effect already accepted as fact that he was a non-resident and acted on this basis. The waiver would be a barrier to proving the fact of residence to be otherwise. That would mean there must be coverage because Gray’s truck would be, for this purpose, a “non-owned car”; it would not be excluded from the policy’s definition by virtue of the fact that Gray, a person who is not a relative of Larry Winkler, resided in the Winkler household. If, on the other hand, State Farm did not waive its right to prove that Gray was a resident, then it preserved the opportunity to deny coverage.

There was no waiver by payment of the excess of property damage.² There might have been waiver, if State Farm had undertaken a defense of a tort action without reserving its rights to contest coverage. As ruled in Prescott’s Altama Datsun v. Monarch Ins. Co.,³ the defense of noncoverage may be waived “where the insurer, without reserving its rights, assumes the defense of an action or continues such defense with knowledge, actual or constructive, of noncoverage. [Cits.]” But any such activity, which might have prejudiced its insureds, did not happen.

This appeal does not present a request for an advisory opinion, which of course would not be proper. It meets the criteria for a justiciable case.⁴

Judgment affirmed.

Andrews, C. J., Johnson, P. J., Smith, J., and Senior Appellate Judge Harold R. Banke concur. Blackburn and Eldridge, JJ, concur in part and dissent in part. McMurray, P. J., disqualified.

1 (Citation and punctuation omitted.) American Southern Ins. Co. v. Abbensett, 232 Ga. App. 16, 17-18 (501 SE2d 53) (1998).

2 Andrews v. Ga. Farm &c. Ins. Co., 226 Ga. App. 316 (487 SE2d 3) (1997); Cincinnati Ins. Co. v. Mullinax, 215 Ga. App. 331, 333 (2) (450 SE2d 336) (1994) (insurer’s payment of property damage benefits to its insureds did not waive its right to rely on exclusion of liability coverage regarding same accident).

3 253 Ga. 317, 318 (319 SE2d 445) (1984).

4 See In the Interest of I. B., 219 Ga. App. 268, 269-270 (464 SE2d 865) (1995) (physical precedent), cited with approval by the Supreme Court in Collins v. Lombard Corp., 270 Ga. 120 (508 SE2d 653) (1998).