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Ohio Security Insurance Co. v. Newsome

United States District Court, S.D. Georgia, Augusta Division

March 27, 2015

OHIO SECURITY INSURANCE COMPANY, Plaintiff,
v.
JOSHUA A. NEWSOME; KODIAK EQUIPMENT, INC.; RAPID PREP, LLC; GAYNOR NEWSOME; V'DOLA GROVENSTEIN; LOWELL GROVENSTEIN, SR.; LOWELL GROVENSTEIN, JR.; and the HERTZ CORPORATION, Defendants.

ORDER

J. RANDAL HALL, District Judge.

This matter comes before the Court on two motions to intervene by Defendant Rapid Prep, LLC's ("Rapid Prep") primary and excess insurance carriers, Hartford Fire Insurance Company ("Hartford") and Great American Insurance Company ("Great American") (collectively, "the Movants"). (Docs. 12, 48.) For the reasons stated herein, the Movants' motions are GRANTED.

I. BACKGROUND

The Movants here seek to intervene in Ohio Security Insurance Company's ("Ohio Security") declaratory judgment action, which addresses an insurance dispute over a car accident in McDuffie County, Georgia. (Compl., Doc. 1, ¶ 33.) With the declaratory judgment action, Ohio Security seeks declaration of what, if any, insurance coverage it owes to its insured, Kodiak Equipment, Inc. ("Kodiak"). Ohio Security alleges, inter alia, that it does not owe coverage because Joshua Newsome ("Newsome") was not working in the course and scope of business with Kodiak at the time of the accident, but rather was conducting business for himself and Rapid Prep at that time. The Movants, on the other hand, claim that Newsome was not working on behalf of their insured - Rapid Prep - at the time of the accident. Accordingly, Newsome's employment status is of particular importance to both the declaratory judgment action and the present motions to intervene, and the Court briefly reviews those facts now.[1]

A. Defendant Newsome's Trip to Georgia and Employment Status

On April 29, 2013, Newsome traveled from Washington to Georgia. (Compl. ¶ 33; Newsome Dep., Doc. 39 Ex. C, at 70.) According to Newsome, his trip to Georgia served at least two purposes. (See Newsome Dep. at 21, 72.) For one, Newsome regularly traveled to Thomson, Georgia to see his doctor and renew his prescriptions, which he did on the morning of the accident. (Id. at 21, 79-80.) Additionally, Newsome claims to have been assessing future business opportunities for his employers, Kodiak and Rapid Prep, both of which were involved in the rental of large equipment. (Id. at 145-46.)

Because Newsome was employed by Kodiak and Rapid Prep at the time of the accident, a brief review of the interplay between the two companies is necessary. At all times relevant to the accident, Newsome was the sole owner and president of Kodiak. (Id. at 55-56.) Following some financial difficulties at Kodiak that arose well before the accident, [2] Newsome contacted Rapid Prep to set up an arrangement whereby Rapid Prep would take over Kodiak's territory in the Northwest. (Id. at 61-63.) All of Kodiak's employees - including Newsome - thereafter became Rapid Prep employees. (Id. at 63-64.) Kodiak, with Newsome as its sole employee, remained in operation until late 2013, when it dissolved. (Id. at 65.)

When Newsome decided to make the trip to Georgia, he informed Chris McNamara, co-owner of Rapid Prep, of his plans and McNamara neither prohibited nor affirmatively endorsed the trip. (Id. at 113-14.) At all times leading up to the accident it was Newsome's understanding that he was in Georgia to investigate business opportunities for both companies. (See id. at 149.)

For the trip, Newsome purchased the plane tickets with his corporate Rapid Prep credit card. (Id. at 116.) Then upon his arrival in Atlanta, Georgia, Newsome rented a car from Hertz, which he paid for with his personal credit card, and drove to Augusta, Georgia. (Id. at 79, 122.) When Newsome arrived in the Augusta area, he picked up his father from his childhood home, drove to the doctor, and then to the pharmacy to refill his prescriptions. (Id. at 79-80.) After he went to the pharmacy, Newsome stopped at a local Office Depot to purchase a printer and computer monitor to use for business purposes. (Id. at 83-85.) He then went to lunch and the grocery store, still with his father in tow. (Id. at 80.) It was during these errands that the accident with the Grovensteins occurred. (Compl. ¶ 35; Newsome Answer, Doc. 17, ¶ 35.) According to Newsome, he fell asleep at the wheel, went through a stop sign, and hit the Grovensteins' vehicle. (Doc. 39, Ex. F.) As a result of the accident, Newsome was charged with running a stop sign and driving under the influence ("DUI").[3] (Id.) On the Friday following the accident, McNamara fired Newsome[4] and informed him that Rapid Prep was uninterested in expanding into Georgia. (Newsome Dep. at 134, 140.)

Each of Rapid Prep's insurers - Hartford[5] and Great American - allege that following the accident the Grovensteins made demands for the policy limits. (Doc. 28, Ex. 3 at 5; Doc. 49, Ex. 1 at 5.) Thereafter, the Grovensteins filed suit in this Court for damages on February 7, 2014, which was dismissed for lack of subject matter jurisdiction on May 19, 2014. (Grovenstein et al. v. Newsome et al., No. 1:14-cv-00042, Doc. 1 (S.D. Ga. Feb. 7, 2014); Id. at Doc. 38 (S.D. Ga. May 19, 2014).) The Grovensteins then re-filed in the Superior Court of Glascock County on June 3, 2014, specifically alleging that Newsome was acting within the course and scope of his employment with both Kodiak and Rapid Prep at the time of the accident. (Doc. 49, Ex. 1.) The Grovensteins have since settled their claims against Newsome, Kodiak, Rapid Prep, and the insurers, and the Glascock County action will be dismissed with prejudice. (Doc. 64.) On March 26, 2015, the Grovenstein defendants were dismissed from this action. (Doc. 74.)

B. The Declaratory Judgment Action

On May 29, 2014, Ohio Security filed this action seeking a declaration that it has no duty to defend or provide coverage to Kodiak or Newsome because (1) Kodiak and Newsome were uncooperative in failing to provide documents relating to the accident and the purpose of the trip to Georgia (Compl. ¶¶ 82, 85); (2) Newsome was not an "insured" under the policy at the time of the accident because he was not acting in the course and scope of Kodiak's business (Id. ¶¶ 92-94); and (3) Newsome engaged in fraud by knowingly supplying false information[6] to Ohio Security regarding the accident and the purpose of his trip to Georgia (Id. ¶¶ 100, 105). Ohio Security additionally asks this Court to declare the policy void ab initio and award interest, attorney fees, and costs in its favor because Newsome's alleged misrepresentations, fraud, and false swearing constitute a breach of the "Concealment, Misrepresentation Or Fraud" provision in the insurance policy. (Id. ¶¶ 106-10.)

On August 13, 2014, Hartford filed its motion to intervene, to which the Grovensteins, Newsome, Kodiak, and Hertz all objected. Thereafter, Rapid Prep's excess insurer, Great American, filed its own motion to intervene, which garnered the same objections. Given the substantial overlap between the two motions to intervene - and ...


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