Flynt v. Life of the South Insurance Co.
312 Ga. App. 430
| Ga. Ct. App. | 2011Background
- Widow, as executrix, sues Life of the South for proceeds on three 2007 credit life certificates under a 2006 group policy.
- Decedent had three long-standing bank loans with Pelham Banking Company; certificates issued under Life of the South policy for each loan.
- In 2006, the application included diabetes; decedent, however, had Type II diabetes diagnosed in the late 1990s.
- Incontestability clauses in the certificates and 2006 policy stated the insurer could not contest after two years of coverage.
- Trial court granted Life of the South summary judgment, refusing benefits and prejudgment interest; found misrepresentation and lack of bad faith were insufficient.
- Court of Appeals held the incontestability clause operated; benefits owed to widow and prejudgment interest awarded, but bad faith penalties affirmed for insurer.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did incontestability bar denial of coverage? | Flynt contends the clause precludes denial after two years. | Life of the South asserts restored/renewed certificates reset the period. | Incontestability began at first coverage, precluding denial. |
| Is prejudgment interest warranted on liquidated life proceeds? | Widow entitled to prejudgment interest as liquidated amount. | Interest not due under policy terms. | Prejudgment interest awarded as a matter of law. |
| Whether bad faith penalties and attorney fees were proper? | Insurer acted in bad faith denying claim. | Position not frivolous or unreasonable; no penalties. | Insurer's conduct not frivolous; penalties denied. |
| Were the misrepresentations material and the incontestability interpretation ambiguous? | Misrepresentation of health was material; clause ambiguous favoring widow. | Mistruths were material; insurer acted reasonably on policy terms. | Division 1 controls; incontestability operative, limiting ambiguity concerns. |
Key Cases Cited
- Richards v. Hanover Ins. Co., 250 Ga. 613 (1983) (contract construction; read policy as layperson)
- Municipal Elec. Auth. of Ga. v. Gold-Arrow Farms, 276 Ga. App. 862 (2005) (intent of parties; prefer contract as a whole)
- York Ins. Co. v. Williams Seafood of Albany, 273 Ga. App. 710 (2001) (read insurance contracts against drafter; ambiguities resolved against insurer)
- VATACS Group v. Homeside Lending, 276 Ga. App. 386 (2005) (avoid neutralizing contract provisions; interpretive coherence)
- Guaranty Nat. Ins. Co. v. Brock, 222 Ga. App. 294 (1996) (ambiguities construed against insurer)
- Resource Life Ins. Co. v. Buckner, 304 Ga. App. 719 (2010) (interpretation of group policies; certificates treated together)
- Osgood v. Florida, 233 Ga. App. 111 (1998) (prejudgment interest on liquidated claims; statutory basis)
- Founders Life Assurance Co. v. Poe, 242 Ga. 748 (1978) (incontestability framework in Georgia)