Gary Wayne Coker v. American Guarantee and Liability Insurance Company, 825 F.3d 1287

Background

Gary Coker was severely injured in a 2007 automobile collision; he and his wife obtained a $5.5 million consent judgment against the at-fault (underinsured) driver.
Coker was driving an employer-owned truck; Ansco carried a layered insurance program: Liberty Mutual (primary, $5M), Westchester (umbrella, $10M), then three excess insurers: Great American ($10M), American Guarantee ($25M), and Endurance ($25M).
Liberty Mutual had a written rejection of uninsured/underinsured motorist (UM) coverage for Ansco; the excess carriers did not obtain written UM rejections.
The Cokers settled confidentially with Liberty Mutual and Westchester for less than policy limits and then sued the three excess carriers for breach of contract and bad faith for refusing to pay on the consent judgment.
The district court granted partial summary judgment for the Cokers, holding Georgia’s UM statute grafted UM coverage into the excess policies and barred vertical exhaustion; the Eleventh Circuit reversed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Georgia’s UM statute applies to excess/umbrella policies	Coker: §33-7-11 requires each automobile/related policy to provide UM unless rejected, so excess policies must provide UM coverage	Defendants: acknowledge statute applies but assert policy terms control when excess coverage is triggered	Held: Statute applies—excess policies are subject to §33-7-11 because no written rejections were obtained
Whether excess policies contain vertical exhaustion conditions	Coker: exhaustion provisions should be void to the extent they limit UM recovery	Defendants: policies unambiguously condition coverage on exhaustion of underlying limits	Held: Excess policies unambiguously contain vertical exhaustion requirements; those provisions are valid
Whether §33-7-11 voids vertical exhaustion in excess policies	Coker: remedial purpose of UM statute forbids any limitation that reduces UM recovery, so exhaustion is void	Defendants: allowing exhaustion preserves an excess market and does not defeat the statute’s remedial purpose	Held: §33-7-11 does not void vertical exhaustion; enforcing exhaustion does not defeat UM statute’s remedial aim
Effect of claimant’s settlement with underlying carriers on excess carrier obligations	Coker: settlements with underlying carriers should not preclude recovery from excess UM carriers	Defendants: because insured settled for less than underlying limits and did not exhaust, excess carriers have no duty to pay	Held: Because underlying Westchester limits were not exhausted, excess carriers had no obligation to pay and are entitled to judgment

Key Cases Cited

Abrohams v. Atl. Mut. Ins. Agency, 638 S.E.2d 330 (Ga. Ct. App. 2006) (statute grafts UM coverage into policies absent written rejection)
Flewellen v. Atlanta Cas. Co., 300 S.E.2d 673 (Ga. 1983) (statutory noncompliance causes statute’s provisions to be grafted into policy)
U.S. Fire Ins. Co. v. Capital Ford Truck Sales, Inc., 355 S.E.2d 428 (Ga. 1987) (excess coverage obligates only after primary limits exhausted)
Garmany v. Mission Ins. Co., 785 F.2d 941 (11th Cir. 1986) (clear exhaustion thresholds in excess policies are enforceable)
State Farm Mut. Auto. Ins. Co. v. Adams, 702 S.E.2d 898 (Ga. 2010) (explaining UM statute’s remedial purpose)