828 S.E.2d 455
Ga. Ct. App.2019Background
- Southern Trust issued a commercial liability policy to Mountain Express Oil Co. (MEX) that covered "personal and advertising injury" (including libel/slander) and stated the insurer "will have the right and duty to defend the insured against any ‘suit’" seeking covered damages.
- Empire Petroleum sued MEX asserting multiple claims including libel/slander and non-libel tort and contract claims; MEX promptly retained counsel and notified its agent and insurer.
- Southern Trust sent a December 29, 2014 letter denying coverage and defense for the non-libel/slander claims, reserving rights only for libel/slander, and retained defense counsel for that portion; the parties orally agreed MEX’s counsel could continue while Southern Trust reimbursed libel-related fees at its chosen firm’s rates.
- The parties never executed a written modification; Southern Trust reimbursed $40,360 for libel-related bills, MEX separately paid other attorneys, and later sought reimbursement of all litigation expenses (~$1.2M total), then sued Southern Trust for breach of contract and bad faith.
- The trial court granted partial summary judgment to MEX, holding Southern Trust breached its duty to defend the entire suit and, having failed to file a declaratory action after MEX objected, waived its coverage defenses; Southern Trust appealed.
Issues
| Issue | Plaintiff's Argument (MEX) | Defendant's Argument (Southern Trust) | Held |
|---|---|---|---|
| Whether insurer had duty to defend entire suit when one claim (libel) was potentially covered | Policy required insurer to defend the whole "suit" if any claim potentially covered; Southern Trust breached by denying defense to non-libel claims | Southern Trust argued it only had to defend libel claims and did so by reserving rights and retaining counsel for libel | Court: Duty to defend entire suit; term "suit" means if any claim potentially covered, insurer must defend all claims asserted in that suit |
| Whether Southern Trust’s December 29 reservation preserved its coverage defenses without further action | MEX argued the reservation was inadequate because MEX rejected the limited defense and demanded full defense, triggering insurer’s duty to seek declaratory relief | Southern Trust argued reservation plus partial payments and payment arrangement with MEX satisfied its obligations and MEX declined full defense | Court: Reservation alone was insufficient given MEX’s written objection; insurer had to file a declaratory action to preserve defenses and failed to do so |
| Whether parties’ course of conduct (payment of libel-related fees / agreement to pay Bondurant at Swift Currie rates) modified the Policy | MEX argued it never accepted limited defense and the course of conduct did not waive its right to full defense | Southern Trust argued the parties agreed (by conduct) to limit defense and MEX declined Southern Trust’s chosen counsel | Court: No enforceable contract modification; no meeting of the minds or signed endorsement, so Policy terms controlling; conduct did not relieve insurer of duty |
| Whether failure to file declaratory action estopped Southern Trust from contesting its obligation to pay full fees | MEX argued insurer’s failure to seek declaratory relief waived defenses and barred contesting fee obligation | Southern Trust argued declaratory action was not required under the circumstances | Court: Failure to timely seek declaratory relief after MEX’s rejection was fatal; insurer waived defenses and cannot now contest obligation to defend the suit |
Key Cases Cited
- Cowart v. Widener, 287 Ga. 622 (construction and summary judgment standards)
- Penn–America Ins. Co. v. Disabled American Veterans, Inc., 268 Ga. 564 (duty to defend arises when complaint potentially falls within coverage)
- Utica Mut. Ins. Co. v. Kelly & Cohen, Inc., 233 Ga. App. 555 (if insurer must defend a single claim, it must defend all claims in the suit)
- Hoover v. Maxum Indem. Co., 291 Ga. 402 (requirements and purpose of reservation of rights and insurer options)