Lee T. Henderson v. Georgia Farm Bureau Mutual Insurance Company
328 Ga. App. 396
Ga. Ct. App.2014Background
- Jennifer and Lee Henderson sued Georgia Farm Bureau (GFB) seeking homeowners coverage for water damage, loss of use, statutory bad-faith penalties, and attorney fees after discovering hidden water and black mold in October 2010.
- Policy covered hidden seepage/condensation damage (limit $153,500) if unknown to insureds; Hendersons purchased an additional rider for ensuing mold (limit $32,675).
- GFB’s contractor initially found limited flooring damage; later inspections revealed extensive rot, floor joist failure, a "trough" in the crawlspace, and pervasive black mold; Hendersons vacated the home for about a year.
- GFB paid and tendered amounts under the mold endorsement up to its limit but denied additional recovery under the general water-damage coverage, contending remaining damage was mold-related and thus limited.
- A jury awarded Hendersons structural damage, loss-of-use, bad-faith penalty, and attorney fees; the trial court granted GFB’s JNOV, concluding only mold damage existed and the mold limit was exhausted; the Court of Appeals reversed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether evidence supported jury award for non-mold water damage beyond mold-endorsement limits | Hendersons: substantial structural damage (rotted subfloor, joists, crawlspace "trough") resulted from seepage and is distinct from mold, so general coverage applies | GFB: all damage was "ensuing mold" covered (and capped) by the mold rider; no evidence of water-only damage separate from mold | Reversed trial court; evidence could support jury verdict that some structural damage was water damage distinct from mold, so JNOV was improper |
| Proper construction of policy ambiguity re: mold vs. water damage | Hendersons: policy requires mold to "ensue" from a covered risk; mold can be an ensuing damage but does not absorb all water-damage coverage | GFB: paying mold limit precludes additional recovery because the loss was mold damage within the endorsement | Court: construed policy in insureds' favor; trial court erred in construing the policy to bar separate water-damage recovery |
| Whether insurer’s conduct justified bad-faith penalty and attorney fees | Hendersons: GFB’s handling (initial denial, later limited payment, refusal to pay under water coverage) supported bad faith and fees | GFB: had a bona fide dispute about whether additional coverage was owed; reasonable ground to contest claim | Court: jury verdict on bad faith must stand unless insurer’s defense was reasonable as a matter of law; majority found no such basis and reversed JNOV on bad-faith/fees (concurrence/dissent disagreed) |
| Whether partial summary judgment (denying loss-of-use bad-faith claim) was proper | Hendersons: denial of loss-of-use was part of bad-faith claim and should be for jury | GFB: there was no bad faith as a matter of law for loss-of-use denial | Court: reversed summary judgment as to bad faith; held genuine dispute did not foreclose jury determination (majority) |
Key Cases Cited
- Fertility Technology Resources v. Lifetek Med., 282 Ga. App. 148 (standard for JNOV and when conflicting evidence precludes JNOV)
- Mosley v. Warnock, 282 Ga. 488 (standard for appellate review of JNOV; view evidence for verdict winner)
- Fireman’s Fund Ins. Co. v. Univ. of Ga. Athletic Assn., 288 Ga. App. 355 (contract interpretation rules; construe ambiguity against insurer)
- Bartram, LLC v. Landmark American Ins. Co., 864 F. Supp. 2d 1229 (ensuing loss definition: proximate flow from underlying covered loss)
- Colonial Life & Accident Ins. Co. v. McClain, 243 Ga. 263 (insurer liable for bad-faith penalties unless reasonable defense exists as matter of law)
- Jimenez v. Chicago Title Ins. Co., 310 Ga. App. 9 (elements and strict construction of bad-faith penalty statute)