This case involves a dispute over the payment of insurance proceeds due under a policy issued by Balboa Life and Casualty, LLC
On August 4, 2006, the insured residence was partially destroyed by fire. It is undisputed that in January 2007 the insurer аgreed to pay the full amount due under the policy — $103,000 in proceeds the insurer agreed was necessary to repair the damaged residence — by issuing two checks totaling $103,000 both made payable to the owner and the mortgagee. Although the checks were issued by the insurer directly to the owner with instructions to obtain the mortgagee’s endorsement, the owner forged the endorsement and absconded with the $103,000 without making any repairs on the insured residence. After the owner defaulted on his mortgage obligation, the mortgagee exercised power of sale provisions in the security deed and conducted a nonjudicial foreclosure sale on November 6, 2007. At the foreclosure sale, the mortgagee successfully bid $150,000 and took title to the residence. The amount owed on the mortgage as of the date of foreclosure was $285,081.43. The mortgagee did not obtain confirmation of the foreclosure sale. The mortgagee discovered during the foreclosure process that the owner had forged its endorsement on the insurance proceeds checks and absconded with the proceeds. Through the efforts of the mortgagee, the bank which issued payment to the owner on the forged endorsements eventually refunded the $103,000 to the insurer. After engaging in correspondence with the insurer about payment of the refunded insurance proceeds, the mortgagee filed suit against the insurer on June 20, 2008, seeking payment of the entire $103,000 of insurance proceeds plus bad faith penalties and attorney fees.
1. The insurer contends that the trial court erred by granting summary judgment in favor of the mortgagee for all of the insurance proceeds in thе amount of $103,000.
The policy provided for payment of insurance proceeds to the mortgagee under the loss payable provision as “its interests may appear,” and specifically provided that the mortgagee’s interests “shall not be invalidated nor suspended ... by the commencement of foreclosure prоceedings or the giving of notice of sale of any of the property covered by this policy by virtue of any mortgage.” After the fire loss, the mortgagee as loss payee under the policy was vested with an interest in the insurance proceeds as security for payment of the mortgage debt, and the owner’s interest in the prоceeds remained only to the extent the proceeds exceeded the mortgage debt.
Beasley v. Agricredit Acceptance Corp.,
Because insurance proceеds are an alternative source of payment on the mortgage debt, the mortgagee’s right to insurance proceeds is extinguished to the extent the debt is paid by other sources, including foreclosure by the mortgagee. See
Calvert Fire Ins. Co. v. Environs Dev. Corp.,
601 F2d 851, 856 (5th Cir. 1979). To prevent a double recovery by the mortgagee, “[e]quity requires that subsequent events such as payment of the underlying debt not be ignored when the court distributes the insurance
In the present case, the mortgagee acquired title to the residence with a foreclosure sale bid of $150,000, did not seek confirmation of the sale to establish the residence’s fair market value, and still has title to the residence. In the absence of evidence showing that the $150,000 bid at foreclosure was not the fair market value of the residence, we accept the bid as establishing the fair market value under the economic analysis adopted in Brewer, supra. On this record, we find that the mortgagee established a basis for an award of the entire $103,000 of insurance proceeds by showing that its net loss after foreclosure — the difference between the $285,081.43 mortgage debt at the time of foreclosure and the $150,000 value of the residence acquired at foreсlosure — exceeded the available $103,000 of insurance proceeds. The trial court correctly found, although for different reasons, that there was a basis to award the mortgagee $103,000 of insurance proceeds. Under the right for any reason rule, we affirm the trial court’s grant of summary judgment only as to the basis for awarding the mortgаgee $103,000 of insurance proceeds. The trial court’s grant of summary judgment is reversed to the extent it actually awarded the mortgagee $103,000 of insurance proceeds. Whether or not the mortgagee is entitled to the award of these proceeds is subject to a factual determination on the merits of the insurer’s pending defеnse that the mortgagee’s claim was barred by the policy provision requiring that suit be brought within one year after the date of loss. See Division 2, infra. The trial court did not err by denying the insurer’s motion for summary judgment seeking a ruling that the mortgagee was entitled to only a portion of the $103,000 of insurance proceeds.
2. Because a factual issue remains, the trial court correctly denied the insurer’s motion for summary judgment claiming that the mortgagee’s action was barred because it
The policy specifically provided that the mortgagee was bound by this provision. The insured loss occurred on August 4, 2006, and the mortgagee did not commence this action until June 20, 2008. Although a policy provision requiring that an action be commenced within one year of the insured loss is valid, it can be waived “where the [insurer] leads thе insured by its actions to rely on its promise to pay, express or implied.” (Citation and punctuation omitted.)
Auto-Owners Ins. Co. v. Ogden,
If the insurer never denied liability, but continually discussed the loss with its insured with a view toward negotiation and settlement without the intervention of a suit, whether or not this lulled the insured into a belief that the 12-month clause in the contract was waived by the insurer сan become a disputed question of fact for the jury.
(Punctuation omitted.)
Ogden,
3. The insurer claims that the trial court erred by denying its motion for summary judgment seeking dismissal of the mortgagee’s claims for bad faith damages under OCGA § 33-4-6 and litigation еxpenses under OCGA § 13-6-11.
Under OCGA § 33-4-6 (a), an insurer is liable for a bad faith penalty and reasonable attorney fees “[i]n the event of a loss which is covered by a policy of insurance and the refusal of the insurer to pay the same within 60 days after a demand has been made by the holder of the policy and a finding has been made that such refusаl was in bad faith. ...” Accordingly, to prevail on a claim under OCGA § 33-4-6 (a), the insured has the burden of proving: (1) that the loss is covered by the policy; (2) that after the insured demanded payment, the insurer refused to pay the covered loss for more than 60 days prior to suit being filed; and (3) that the insurer acted in bad faith in refusing to pay.
Bayrock Mtg. Corp. v. Chicago Title Ins. Co.,
In support of its claim that the insurer acted in bad faith in refusing to pay the entire $103,000 of insurance proceeds, the mortgagee points to three letters it sent more than sixty days before it filed suit for all the proceeds. The first letter was sent to the insurer on June 19, 2007, “demanding payment with regard to this insurance policy.” This letter was sent to the insurer after the insurer had issued checks jointly payable to the owner and the mortgagee for the entire amount of the insurance proceeds; apparently before the parties learned that the owner had forged the mortgagee’s endorsement on the checks and absconded with the proceeds; and prior to the mortgagee’s decision to foreclose on and take title to the insured residence. The letter did not specify the interest in or the amount of the proceeds the mortgagee was demanding. The second letter was sent to the insurer on March 12, 2008, shortly after the insurer had recovered the insurance proceeds from the bank which paid the forged insurance checks, and after the mortgagee foreclosed on and took title to the insured residence. This letter recognized that the insurer had previously paid all the insurance proceeds and that the owner had abscondеd with the proceeds; stated that the mortgagee was informed that the insurer had recently received a refund of the insurance proceeds from the bank; and
The mortgagee ultimately showed that, after foreclosing on and obtaining title to the residence, it incurred a net loss which gave it a right to the entire $103,000 of insurance proceeds. But the record shows that the information necessary for the insurer to conclude that the mortgagee had a right to claim the entire $103,000 of insurance proceeds was provided to the insurer less than 60 days before suit was filed, and that the mortgagee made no demand for payment of all the insurance proceeds after that information was provided. “Bad faith is shown [under OCGA § 33-4-6 (a)] by evidence that under the terms of the policy upon which the demand is mаde and under the facts surrounding the response to that demand, the insurer had no good cause for resisting and delaying payment.” (Citation, punctuation and emphasis omitted.)
Lawyers Title Ins. Corp. v. Griffin,
The mortgagee’s claim for expenses of litigation, including attorney fees, under OCGA § 13-6-11 was not authorized because “[t]he penalties contained in OCGA § 33-4-6 are the exclusive remedies for an insurer’s bad faith refusal to pay insurance proceeds.”
Howell v. Southern Heritage Ins. Co.,
4. The trial court erred by granting the mortgagee’s motion to enforce an alleged settlement agreement reached between the insurer’s attorney and the mortgagee’s attorney to pay the entire $103,000 of insurance proceeds.
Correspondence from the insurer’s attorney to the mortgagee’s attorney indicated that the insurer had mailed a check to the mortgagee for the $103,000 of insurance proceeds. The mortgagee’s attorney responded by letter that no check had been received and that $103,000 would not be sufficient. The insurer’s attorney responded by letter that the $103,000 check was in the mail and that
it was understood the mortgagee did not accept it as full satisfaction of the claim. The letter further stated: “However, if you do receive the check, it is agreed that you may negotiate it without prejudiсe to your client’s claim for additional sums as you referenced in your most recent correspondence.” It is undisputed that no check from the insurer was ever received by the mortgagee or the mortgagee’s attorney. We have no difficulty in concluding that the correspondence regarding the phantom check in the mail did not constitute a settlement agreement. See
Butler v. Household Mtg.
Svcs.,
Judgment affirmed in part and reversed in part.