McCoy v. Georgia Department of Administrative Services
326 Ga. App. 853
Ga. Ct. App.2014Background
- McCoy, a former DFCS employee, sued several DFCS employees in Rabun County for RICO, malicious prosecution, and intentional infliction of emotional distress; jury verdict and judgment totaled $35,829,340.35.
- McCoy notified the State; the State did not defend the DFCS employees. McCoy then demanded the $3,000,000 policy limit under a General Liability Agreement (the Agreement) between the Department of Administrative Services (the Department) and DFCS.
- The Department, which administered the State Employee Liability Trust Fund and executed the Agreement for 7/1/2003–6/30/2004, refused payment; McCoy sued the Department for breach of contract to collect coverage.
- The Agreement covers DFCS and "Covered Parties" (including employees acting in the course and scope of duties) and contains a no-third-party-beneficiaries clause.
- Trial court dismissed McCoy’s complaint on sovereign immunity grounds; McCoy appeals, arguing a constitutional waiver for written contracts and that she has standing as a judgment creditor of a covered party.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether sovereign immunity bars McCoy’s breach-of-contract claim against the State/Department | McCoy contends the constitutional waiver for breach of a written contract applies because she seeks to enforce the Agreement | Department contends sovereign immunity bars McCoy’s direct suit; Agreement is between Department and DFCS and McCoy is not a party | Reversed dismissal: McCoy may proceed because she alleged facts showing she is a judgment creditor of a Covered Party entitled to coverage, which confers standing |
| Whether McCoy is a party or Covered Party under the Agreement | McCoy says she qualifies as a Covered Party (was employed by DFCS at the time) and thus may enforce the Agreement | Department says Agreement is between Department and DFCS; McCoy is not a contracting party | Court: McCoy is not a party to the Agreement; at best a potential Covered Party/third-party beneficiary, so not a direct contracting party |
| Whether McCoy is a third-party beneficiary entitled to enforce the Agreement as an injured third party | McCoy argues the Agreement was intended to benefit citizens harmed by employees’ wrongful conduct | Department points to the Agreement’s no-third-party-beneficiaries clause and statutory scheme focusing on employee protection | Held: No basis to find McCoy a third-party beneficiary merely as an injured third party; Agreement and statute indicate focus on employee protection |
| Whether an unsatisfied judgment against a covered insured gives McCoy standing to sue the insurer/State administrator directly | McCoy argues she stands in the insured’s shoes as a judgment creditor and may sue to satisfy an unsatisfied judgment from available policy proceeds | Department preserved other defenses but argued sovereign immunity barred the suit | Held: Court recognizes the established exception: a judgment creditor of an insured with unsatisfied judgment has standing to sue insurer; McCoy’s allegations suffice at this stage to establish standing, so dismissal on sovereign immunity was error |
Key Cases Cited
- Pelham v. Bd. of Regents of Univ. System of Ga., 321 Ga. App. 791 (2013) (party asserting waiver of sovereign immunity bears burden)
- Cotton States Mut. Ins. Co. v. Starnes, 260 Ga. 235 (1990) (additional insured characterized as third-party beneficiary)
- Googe v. Florida Intl. Indent. Co., 262 Ga. 546 (1992) (general rule that liability claimants are not third-party beneficiaries of liability policies)
- Capitol Indem. Corp. v. Fraley, 266 Ga. App. 561 (2004) (injured party with unsatisfied judgment may sue insurer)
- State Farm Fire & Cas. Co. v. Bauman, 313 Ga. App. 771 (2012) (judgment creditor stands in shoes of insured to pursue policy proceeds)
- H. Y. Akers & Sons, Inc. v. St. Louis Fire & Marine Ins. Co., 120 Ga. App. 800 (1969) (judgment creditor derives rights under policy through insured)
- Hathaway Dev. Co. v. American Empire Surplus Lines Ins. Co., 301 Ga. App. 65 (2009) (judgment creditor entitled to recover under policy only if conditions precedent complied with)