Exclusion Does Not Invalidate Policy
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Post 4822
THE DISPUTE
Jerquavius Berry purchased a vehicle from Gerald Jones Ford, LLC. The Dealership sued General Security and Berry, seeking a declaratory judgment regarding General Security’s insurance coverage.
In General Security Indemnity Company Of Arizona v. Gerald Jones Ford, LLC. No. A24A0477, Court of Appeals of Georgia, Fifth Division (June 18, 2024) the Georgia Court of Appeals read the policy and ruled based on its wording.
Both moved for summary judgment. The trial court granted the Dealership’s motion and denied General Security’s motion. General Security appealed. The Court of Appeals decision turned on whether a denied claim renders an insurance policy “invalid.”
FACTS
In order to purchase the vehicle, Berry presented evidence of an insurance policy with Falls Lake National Insurance Company (“Falls Lake”) to the Dealership. Three days after he purchased the vehicle, while fleeing police in Virginia, Berry crashed the vehicle, causing a total loss. Berry was later found guilty of crimes.
Perhaps because Berry was in jail and did not respond to Exeter’s inquiry it rejected the note and returned it to the Dealership. The Dealership made a claim for the vehicle under Berry’s Falls Lake insurance policy. The Falls Lake policy provided that claims for Berry’s property damage were excluded from coverage because Berry was fleeing police when the vehicle sustained a total loss.
The Dealership submitted a claim for Berry’s vehicle to General Security, but General Security denied the claim, stating that the loss did not fall within the policy’s coverage. The Dealership filed the underlying declaratory judgment action against General Security. The Dealership’s insurance policy with General Security provided coverage for insured vehicles until the vehicle was sold or leased by the Dealership or if the buyer’s insurance proved to be invalid at the time of loss to the covered vehicle.
DISCUSSION
Since Berry provided evidence of insurance and the Dealership was not fully paid the only dispute at issue was whether Berry’s Falls Lake policy was invalid at the time of the loss.
The Court of Appeals undertook a three-step process in the construction of the contract:
1. The first of which is to determine if the instrument’s language is clear and unambiguous,
2. If the language is unambiguous, the court simply enforces the contract according to the terms and
3. Looks to the contract alone for the meaning.
When a contract term is not expressly defined, the court looks to the usual and common meaning of the term. A policy is invalid when coverage applies but becomes invalidated through the actions of the insured.
The Falls Lake insurance policy does not contain a coverage exclusion for fleeing police for a bodily or property injury to others only damage to the vehicle. Had Berry caused a bodily or property injury to another while fleeing the police, that third party’s claim would not have been excluded. The Falls Lake policy was in full force and effect at the time of the occurrence and coverage was not invalidated; it simply did not apply.
ZALMA OPINION
Where the language of an insurance policy unambiguously governs the factual scenario before the court, the court need only to apply the terms of the contract as written. The General Security policy language unambiguously does not cover such claims unless the purchaser’s insurance policy was invalid at the time of the loss. Since Berry’s policy with Falls Lake was not invalid at the time of the loss the trial court erred by granting summary judgment to the Dealership. Accordingly, the Court of Appeals reversed the trial court.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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When I finished my three year enlistment in the US Army as a Special Agent of US Army Intelligence in 1967, I sought employment where I could use the investigative skills I learned in the Army. After some searching I was hired as a claims trainee by the Fireman’s Fund American Insurance Company. For five years, while attending law school at night while working full time as an insurance adjuster I became familiar with every aspect of the commercial insurance industry.
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