Thеse three related cases involve the much litigated question of the effect of a release given in settlement with fewer than all parties in an automobile personal injury action. Because the record contains evidence of a mutual mistake of law as to the effect of the release on a non-party to the agreement, we affirm the trial court’s denial of summary judgment as to that issue in Case No. A97A1582. We conclude, however, that the trial court erred in denying summary judgment to the parties tо the settlement and release, and we therefore reverse the trial court’s denial of summary judgment in Case Nos. A97A1580 and A97A1581.
Jane Dawkins was involved in an automobile accident with Quincy Jenkins. Dawkins’s husband handled negotiations on her behalf with Superior Insurance Compаny (“Superior”), the insurer for Jenkins and his mother, the car’s owner. Mr. Dawkins informed the insurance adjuster for Superior that Dawkins intended to pursue a claim against State Automobile Mutual Insurance Company (“State Auto”), her underinsured motorist carrier, because Dawkins’s medical expenses exceeded Superior’s available coverage.
According to the Dawkinses, the adjuster assured them that the Superior release would not affect their claim against State Auto. The adjuster sent a letter to the Dawkinses enclosing a release and a copy of a new legislative act, Ga. L. 1994, p. 1156, now OCGA § 33-24-41.1 as amended. 1 The letter stated: “Please review these documents. As we read the law we may settle with you for our policy limits, and this should not prevent you from persuing [sic] an underinsured motorist claim against your own insurance carrier. Please review these documents.”
Mr. Dawkins acknowledged that Superior’s adjuster never held herself out as an attorney and did not give legal advice. He discussed the release with his own insuranсe agent, who “said he didn’t know. He said, if you’ve got a law, it’s the law. He said, I don’t know everything.” Mr. Dawkins also admitted that he did not read the release “word for word,” that he knew the letter was only the adjuster’s opinion, and that he knew she was not acting on his behalf in any way but represented an adverse party. He testified that Superior’s adjuster did not withhold any information, did not try to deceive him, and tried to help. Finally, Mr. Dawkins acknowledged that under the settlement, he and Mrs. Dawkins would obtain all the insurance coverage available from Superior, and
The release provided by Superior and signed by the Dawkinses expressly states, howevеr, that it is a general “Release of All Claims” releasing the Jenkinses “and all other persons, firms, and corpora tions, of and from any and all claims” arising from the collision, rather than the limited release provided for by OCGA § 33-24-41.1 (a) and (b). Upon learning of this general rеlease, State Auto denied Dawkins’s underinsured motorist claim. Dawkins then brought this action making a tort claim against the Jenkinses, a claim against Superior for erroneous legal advice, and a claim against State Auto for underinsured motorist benefits as well as bаd faith reliance on the Superior release.. All three defendants moved for summary judgment. The trial court, without stating its reasons other than that genuine issues of material fact remained for trial, refused to grant summary judgment to the insurers or to the Jenkinses. We granted thе defendants’ application for interlocutory appeal.
1. State Auto contends that the general release given to the Jenkinses and Superior bars Dawkins’s underinsured motorist claim against it, relying on the principle that a general releasе in favor of an underinsured tortfeasor and his liability carrier operates to bar the claimant from recovering against an underinsured motorist policy.
Darby v. Mathis,
State Auto also relies on the general principle that “[n]o fiduciary relationship exists between one having a claim against an insured and the agent of a liability carrier who seeks settlement of the claim, and a release obtained by him from a party having a claim for damages is binding,
even if the statements and representations made by him relative to liability or nonliability for the damages were incorrect or based upon erroneous reasоns,
unless he has prevented the claimant from making investigation of his legal rights in the premises. [Cits.]” (Emphasis supplied.)
Wheat v. Montgomery,
We do not find applicable, however, the principle of mutual mistake of fact as set forth in
Eubanks v. CSX Transp.,
In contrast to the mistake of fact in Eubanks, which concerned the contents and scope of the release, the amount of damages, and whether the parties intended to include one incident or two, the claimed mutual mistake here appears to be purely a mistake of law. The parties do not disagree with the contents of the release, the incident to which it refers, the amount of the settlement, or other relevant facts. Instead, the disagreement centers around the parties’ understanding of an act of the General Assembly and its effect on the legal consequences of the release agreement.
This Code section has been applied by the Supreme Court of Georgia to a dispute between a claimant and multiple insurers with facts virtually identical to those here. In
Fulghum v. Kelly,
The evidence in this litigation suggests that Superior’s adjuster and claims manager misunderstood the law and its effect on the release signed by Dawkins. In her deposition, the аdjuster acknowledged that she believed the new law would supersede the release language and allow a partial settlement. Since the record suggests that State Auto would be fortuitously relieved of its contractual obligation to provide undеrinsured motorist coverage to its insured and Dawkins would be deprived of that coverage, some evidence has been presented of “gross injustice” and “unconscionable advantage” within the meaning of OCGA § 23-2-22. This evidence of a mutual mistake of law is sufficient to forestall summary judgment, and such a mistake of law, if proved clearly, unequivocally, and decisively, would warrant a reformation of the release under Fulghum with respect to its effect on the obligations of State Auto. Accordingly, the trial court’s denial of summary judgment to State Automobile Insurance Company in Case No. A97A1582 is affirmed.
2. While we find the denial of summary judgment appropriate regarding the effect of the release on State Auto, a nonparty to the agreement, we find that the trial court erred in denying summary judgment to the Jenkinses. If an alleged mutual mistake of law regarding the effect of the release on State Auto is proved, the proper remedy under Fulghum is reformation to reflect the intentions of the parties. Fulghum, supra at 654. The record shows without dispute that the Dawkinses intended to settle with Superior for its poliсy limits and release its insureds, the Jenkinses, from any further liability. There is no allegation of a mistake of fact or of law as to the effect of the release on the parties named in it, and as to them it remains binding. The trial court erred in denying summary judgment to the Jenkinses in Cаse No. A97A1581.
3. Because the release is effective as to the Jenkinses, it also releases their insurer, Superior, from any obligation on the underlying personal injury claim. “The general rule is that because there is no privity of contract, a party may not bring a direct
Dawkins’s contention that Superior must remain a party in order to determine the legal effect of the release is without merit. In Fulghum, supra, neither the insurer which prepared the release nor its adjuster was a рarty to the litigation, and their testimony, as here, was preserved in the record. The Supreme Court did not find their presence necessary to its decision.
Superior is also correct in its assertion that Dawkins’s purported claim for erroneous legal аdvice has no basis in fact or in the law. Mr. Dawkins testified that Superior’s adjuster did not hold herself out to him as an attorney or give him legal advice, and that he knew she was not acting on his behalf in any way but represented an adverse party. He also acknowledged that Superior’s adjuster did not withhold any information or try to deceive him, and he stated that she tried to help him. Under these undisputed facts, it is apparent that no legal advice was given to the Dawkinses by Superior’s adjuster.
Moreover, if a cause of action for erroneous legal advice indeed exists, it must be based upon some duty owed by Superior to Dawkins. Dawkins and Superior had no employment, contractual, or other relationship on which such a duty could be based; their only connection is the circumstances of the injury and Dawkins’s status as an injured person claiming under Superior’s policy. And “ ‘[i]t is clear that no fiduciary relationship exists between one having a claim against an insured and the agent of a liability carrier who seeks settlement of the claim.’ ”
Fincher v. Dempsey,
Judgment affirmed in Case No. A97A1582. Judgments reversed in Case Nos. A97A1580 andA97A1581.
Notes
This Code section allows claimants involved in a motor vehicle accident to execute a limited releаse in favor of a tortfeasor’s insurance carrier while preserving a claim against their own underinsured motorist carrier. See generally Chance & Middleton, Legislative Review, Insurance, 11 GSU L. Review 200 (1994).
OCGA § 23-2-27, relied upon by appellants, simply states that ignorance of the law by a party (not a mutual mistake by both) shall not authorize the intervention of equity. Like the Wheat decision, supra, this Code section has no application to a mutual mistake of law by both parties.
Fulghum
has been disapproved on other grounds,
Posey v. Med. Center-West,