337 Ga. App. 588
Ga. Ct. App.2016Background
- R&G Investments owned a multi-building residential apartment complex insured by American Family; R&G purchased the property in Dec 2011 and undertook renovations.
- In Feb 2012 several unoccupied buildings, including Building S, were vandalized while renovations were ongoing in parts of the complex; R&G submitted a claim for vandalism losses.
- In Nov 2012 a pipe burst in Building T after renovations there were completed but only one of eight units was leased; R&G submitted a water-damage claim for Building T.
- American Family denied coverage in part based on the policy’s vacancy exclusion (which excludes vandalism/water damage where a building was vacant more than 60 consecutive days, but excepts buildings under renovation), and also asserted R&G’s failure to cooperate as a defense.
- R&G moved for partial summary judgment on coverage for Building S and Building T and on several of American Family’s defenses; the trial court denied R&G’s motion as to Building S and granted American Family summary judgment on Building T. R&G appealed.
- The Court of Appeals held that (1) the vacancy exclusion applies to residential apartment buildings, (2) uncontroverted evidence showed Building S was under renovation when vandalized (so vacancy exclusion did not bar coverage for S), and (3) summary judgment for Defendant on Building T and most other rulings were affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the vacancy exclusion applies to residential apartment buildings | Vacancy exclusion contemplates "customary business operations" and thus is inapplicable to residential rentals; it should not apply to apartments | Vacancy exclusion is contractual and applies unless a building is under renovation or ≥31% used for owner’s customary operations (leasing) | Vacancy exclusion applies to residential apartment buildings |
| Whether Building S was "under renovation" (thus not vacant) when vandalized | Uncontroverted affidavit and testimony from R&G’s resident manager show Building S was under renovation in Feb 2012 | American Family relied on its senior field adjuster’s affidavit and attached site report to dispute renovation status | Building S was under renovation as a matter of law; adjuster affidavit/report were inadmissible hearsay and insufficient to create a factual dispute; reversal for R&G on this point |
| Admissibility of senior field adjuster affidavit and attached report/photographs | R&G: affidavit contains inadmissible hearsay and the report/photographs lack proper foundation/authentication | American Family: relied on adjuster affidavit and attached report to show renovations were not completed | Court: adjuster’s recitation of another’s statements was hearsay; attached report lacked foundation/self-authentication and could not be considered on summary judgment |
| Whether R&G’s alleged failure to cooperate (examination under oath, document production, corporate rep) bars recovery and whether insurer waived the defense | R&G: American Family never properly demanded examination under oath; insurer waived/was estopped from raising cooperation defense; no prejudice because vacancy exclusion inapplicable | American Family: made demands and investigation was proper; proceeding with investigation does not waive coverage defenses; factual dispute exists on cooperation | Trial court correctly denied summary judgment on cooperation and bad faith; factual disputes remain so bad faith penalties not shown as matter of law |
Key Cases Cited
- Richards v. Hanover Ins. Co., 250 Ga. 613 (insurance contracts are matters of contract and construed by plain terms)
- Cincinnati Ins. Co. v. Magnolia Estates, Inc., 286 Ga. App. 183 (ambiguities construed against insurer; avoid rendering provisions meaningless)
- Sorema N. Am. Reins. Co. v. Johnson, 258 Ga. App. 304 (vacancy exclusions protect insurer from higher risk of unattended property; contemplate customary operations)
- Bogart v. Wisconsin Institute for Torah Study, 321 Ga. App. 492 (opposing affidavits must set forth admissible facts showing genuine issues)
- Smith v. Dill’s Builders, 332 Ga. App. 491 (hearsay and unsupported conclusions must be struck in summary judgment proceedings)
- Holcomb v. Norfolk Southern R. Co., 295 Ga. App. 821 (rules on admissibility apply in summary judgment; affidavits must show affiant competent to testify)