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Dunn v. Columbia National Insurance Co.

United States District Court, N.D. Georgia, Gainesville Division

September 30, 2019

AMY DUNN, individually and as the natural parent of DANIELLE DEMONBREUN, JAMES DUNN, and RONALD CURTIS PATTERSON, Plaintiffs,



         This case is before the Court on Plaintiff Ronald Curtis Patterson's Partial Motion for Summary Judgment [59]; the Dunn Plaintiffs' Motion for Summary Judgment [70]; and Defendant's Motion for Summary Judgment [85]. Also before the Court is a Motion for Leave to File Supplemental Brief Regarding Pending Motions [100], which was filed in support of Patterson's Motion for Summary Judgment. After reviewing the record, the Court enters the following Order.


         This is an insurance coverage dispute where the insurance company did not bring a declaratory judgment action. As a result, the Court must now determine coverage, as well as whether Columbia National Insurance Company (“Columbia”) breached its duty to defend and negligently failed to settle the underlying case. The below facts are undisputed.

         On June 7, 2013, Patterson hit members of the Dunn family with a truck as they were walking out of a Walmart in Gainesville, Georgia. (Patterson's SMF, Dkt. [59-28] ¶ 44.) Surveillance video recorded the events, Patterson was fully at fault, and each Dunn Plaintiff suffered bodily injury as a proximate result of the accident. (Id. ¶¶ 45-48.) At the time of the accident, Patterson was driving a Chevy pickup truck owned by Lawson Air Conditioning and Plumbing, Inc. (“Lawson”), his employer. (Id. ¶¶ 1, 49, 50.)

         Lawson was covered by two liability insurance policies with Columbia, a “Primary Policy” with limits of $1 million and an “Umbrella Policy” with limits of $3 million. (Id. ¶ 52.) Patterson's truck is a “covered auto” under the Primary Policy. (Id. ¶ 53.) The Primary and Umbrella Policies define an insured as “[a]nyone else while using with your permission a covered auto you own.” (Id. ¶ 54; Insurance Policy, Dkt. [24-4] at 47, 75.) The Primary Policy also provides that Columbia has “the right and duty to defend any ‘insured' against a ‘suit' asking for [] damages…” (Def.'s SMF, Dkt. [85-1] ¶ 16; Insurance Policy, Dkt. [24-4] p. 47.) Accordingly, Lawson promptly reported the accident to Columbia and otherwise complied with all conditions precedent to coverage. (Patterson's SMF, Dkt. [59-28] ¶ 54.) After opening an investigation into Lawson's claim on June 11, 2013, Columbia's adjuster sent a letter to Patterson on August 22, 2013, denying coverage on the sole basis that he was “not a permissive driver at the time of the accident.” (Id. ¶¶ 58, 80; August Denial of Coverage Letter, Dkt. [59-16].)

         On April 7, 2014, the Dunn family filed a lawsuit in the State Court of Hall County, Georgia against Patterson and Lawson (“underlying lawsuit”), of which Columbia received prompt and actual notice. (Id. ¶¶ 87-88.) In response, Columbia retained counsel to defend Lawson but did not retain counsel for Patterson or file a declaratory judgment action. (Id. ¶¶ 92-93.) Patterson went into default because he did not file an answer. (Def.'s SMF, Dkt. [85-1] ¶ 37.)

         After discovery was underway, on December 9, 2014, Columbia's outside coverage counsel filed a Motion for Entry of Appearance as Counsel for Columbia in the underlying lawsuit, which the trial court denied. (Patterson's SMF, Dkt. [59-28] ¶¶ 97, 99; Def's Resp. to Patterson's SMF, Dkt. [68-1] ¶ 97.) Thereafter, on January 22, 2015, Columbia moved to intervene in the underlying lawsuit, which the trial court also denied. (Id. ¶ 100, 102.) About a year later, the Dunn family settled their claim against Lawson for $125, 000 through mediation. (Id. ¶¶ 103-4; Def.'s SMF, Dkt. [85-1] ¶¶ 38-39.) At the mediation, Columbia considered settling the claims against Patterson but did not. (Def.'s SMF, Dkt. [85-1] ¶ 39.) Ultimately, the suit proceeded with Patterson as the sole defendant. (Patterson's SMF, Dkt. [59-28] ¶¶ 104.)

         Columbia then hired attorneys for Patterson in January 2016 and sent him two reservation of rights letters on February 26, 2016, and March 1, 2016. (Id. ¶¶ 105-6; Def.'s SMF, Dkt. [85-1] ¶ 42.) The letters reserved the right “to assert additional grounds for denial of coverage, should it be determined, at any time, for any reason, the policy does not provide coverage for you, ” and “to file a declaratory judgment action to obtain the judicial determination of the coverage issues involved.” (Id. ¶¶ 109, 111; ROR Letter, Dkt. [59-21].) They also stated that “[n]othing which Columbia National Insurance Company may have done prior to this Notice of Reservation of Rights, and nothing that Columbia National Insurance Company does hereafter should be construed as a waiver of any right or defense of Columbia National Insurance Company under the policy.” (Id. ¶ 113.) Attorneys filed an Entry of Appearance stating they were retained to defend Patterson on February 29, 2016. Patterson, however, rejected Columbia's defense and did not meet with the attorneys, as requested. (Id. ¶¶ 107, 119-120.)

         Despite Patterson's rejection, Columbia continued to defend him until they were removed by the trial court for lack of authority to appear on behalf of Patterson on May 12, 2017. (State Court Order, Dkt. [68-8] (“Because the evidence before the Court suggests there is no authority for counsel's representation of [Patterson], and because counsel has been unable to produce or prove the authority under which they appear, Counsel for [Patterson] shall be removed.”)) In the meantime, on August 18, 2016, plaintiffs in the underlying action offered to settle the claims against Patterson for $1, 125, 000. (Def.'s SMF, Dkt. [85-1] ¶ 48.) Patterson was informed of the offer, but Columbia ultimately rejected it. (Id. ¶¶ 49, 53.)

         Trial did not proceed well for Patterson. As a sanction for failing to attend his deposition and a court-ordered hearing, Patterson was not “permitted to question witnesses, put forth argument, present an opening statement at trial, or otherwise oppose the Plaintiff's showing as to damages.” (Id. ¶¶ 55, 58; State Court Order, Dkt. [68-10] at 11.) The jury returned a verdict against Patterson for $11, 500, 000. (Def.'s SMF, Dkt. [85-1] ¶ 62.)

         Patterson now alleges Columbia breached its contractual duty to defend him in the underlying suit and negligently failed to settle the claims against him. As co-Plaintiffs, the Dunns bring a judgment creditors direct action claim against Columbia for payment on the judgment they hold against Patterson, whom they argue is an insured under Lawson's policies. As affirmative defenses, Columbia argues Patterson breached his contractual duty to cooperate and that he failed to mitigate damages. Patterson now moves for summary judgment on his breach of contract claim, as well as Columbia's mitigation and cooperation defenses. The Dunns move for summary judgment on their claim. Finally, Columbia moves for summary judgment on Patterson's breach of contract and failure to settle claims, as well as the Dunns' claim.


         I. Summary Judgment Standard

         Federal Rule of Civil Procedure 56 requires that summary judgment be granted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” “The moving party bears ‘the initial responsibility of informing the . . . court of the basis for its motion, and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact.'” Hickson Corp. v. N. Crossarm Co., 357 F.3d 1256, 1259 (11th Cir. 2004) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)). Where the moving party makes such a showing, the burden shifts to the non-movant, who must go beyond the pleadings and present affirmative evidence to show that a genuine issue of material fact does exist. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257 (1986).

         The applicable substantive law identifies which facts are material. Id. at 248. A fact is not material if a dispute over that fact will not affect the outcome of the suit under the governing law. Id. An issue is genuine when the evidence is such that a reasonable jury could return a verdict for the non-moving party. Id. at 249-50.

         Furthermore, in resolving a motion for summary judgment, the court must view all evidence and draw all reasonable inferences in the light most favorable to the non-moving party. Patton v. Triad Guar. Ins. Corp., 277 F.3d 1294, 1296 (11th Cir. 2002). But, the court is bound only to draw those inferences that are reasonable. “Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial.” Allen v. Tyson Foods, Inc., 121 F.3d 642, 646 (11th Cir. 1997) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)). “If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted.” Anderson, 477 U.S. at 249-50 (internal citations omitted); see also Matsushita, 475 U.S. at 586 (once the moving party has met its burden under Rule 56(a), the nonmoving party “must do more than simply show there is some metaphysical doubt as to the material facts”).

         Finally, the standard of review for cross-motions for summary judgment does not differ from the standard applied when only one party files a motion, but simply requires a determination of whether either of the parties deserves judgment as a matter of law on the facts that are not disputed. Am. Bankers Ins. Group v. United States, 408 F.3d 1328, 1331 (11th Cir. 2005). The Court must consider each motion on its own merits, resolving all reasonable inferences against the party whose motion is under consideration. Id. And while “[c]ross-motions for summary judgment will not, in themselves, warrant the court in granting summary judgment unless one of the parties is entitled to judgment as a matter of law on facts that are not genuinely disputed, ” cross-motions may be probative of the absence of a factual dispute where they reflect general agreement by the parties as to the controlling legal theories and material facts. United States v. Oakley, 744 F.2d 1553, 1555-56 (11th Cir. 1984).

         II. Breach of Contract (Count II)

         Under Georgia law, an insurer faced with a decision regarding how to handle a claim of coverage while a possible insured faces a lawsuit has three options: (1) defend the claim, thereby waiving its policy defenses and claims of non-coverage; (2) deny coverage and refuse to defend, avoiding the expense of litigation, but exposing the insurer to penalties for breach of contract; or (3) defend under a reservation of rights, preserving the option of litigating and ultimately denying coverage. See e.g., Hoover v. Maxum Indem. Co., 730 S.E.2d 413 (Ga.Ct.App. 2012).

         Patterson argues that by sending the August 22, 2013 denial of coverage letter, Columbia chose the second option-to deny coverage and refuse to defend. Thus, Patterson focuses his arguments on the duty to defend standard and urges the Court that in applying that standard, Columbia breached its duty. Columbia, on the other hand, argues it is entitled to summary judgment because, since Patterson never requested a defense, no duty arose. Next, Columbia argues that it had no duty under the duty to defend standard. Finally, Columbia argues, even if the duty was triggered, it was cured by Columbia's eventual attempt to defend Patterson.

         The Court finds Columbia breached its duty to defend Patterson for several reasons. First, the denial letter was effective because a permissive user under an automobile policy is not required to request a defense. Indeed, contrary to the non-automobile insurance cases cited by Defendant, the Georgia Court of Appeals has repeatedly held that under O.C.G.A § 33-7-15 an automobile liability insurer that receives actual notice of a lawsuit has a duty to defend a permissive user, even if the permissive user did not give notice or “request” a defense.[1] See Canal Indem. Co. v. Greene, 593 S.E.2d 41, 44 (Ga.Ct.App. 2003) (citing Mahone v. State Farm, 373 S.E.2d 809 (Ga.Ct.App. 1988)).

         This is consistent with the contract language in Lawson's insurance policies, which states that to trigger a duty to defend there must be full compliance with the duty to “[i]mmediately send [Columbia] copies of any request, demand, order, notice, summons or legal paper received concerning the claim or ‘suit.'” (Def.'s Resp. to Patterson's MSJ, Dkt. [68] at 7.) Nothing about that language requires Patterson to “elect” or “request” a defense. The contract does not require permissive users or additional insureds to notice Columbia. Similarly, it does not require each insured to notice Columbia.

         It is undisputed Columbia had actual notice of the Dunns' suit against Lawson and Patterson. In general, it is an undisputed fact that Lawson, the insured, “promptly reported the [a]ccident to Columbia and otherwise complied with all conditions precedent to coverage.” (Patterson's SMF, Dkt. [59-28] ¶ 55.) Likewise, it is undisputed that “Columbia received prompt and actual notice” of the underlying suit. (Id. ¶¶ 87-88.) Further, Columbia's executive acknowledged that the courtesy copy it received was sufficient to determine defense of the suit. (Hubbard Depo., Dkt. [77-1] at 55:19-57:12.) Accordingly, Columbia's notice argument fails, and any conditions precedent were satisfied.

         Turning to the contract's duty to defend provision, the Primary Policy provides that Columbia has “the right and duty to defend any ‘insured' against a ‘suit' asking for [] damages…” (Def.'s SMF, Dkt. [85-1] ¶ 16; Insurance Policy, Dkt. [24-4] at 47.) Defendant maintains Patterson is not an insured. The Primary Policy defines an insured as “[a]nyone else while using with your permission a covered ‘auto.'” (Insurance Policy, Dkt. [24-4] at 47.) The truck Patterson hit the Dunns with is a covered auto.

         Thus, coverage turns on whether Patterson had Lawson's permission to use the vehicle. At the time of the accident, both parties now agree Patterson was using his truck personally. While it is undisputed Patterson had permission to use the truck for work purposes, Columbia argues he did not have permission at the time of the accident because of Lawson's written policy that trucks “will not be used for personal use at any time, unless approval has been granted by Lawson Air Conditioning and Plumbing management.” (Lawson Manual, Dkt. [59-10] at 5.)

         Determination of Patterson's coverage, however, is not necessary for Columbia to have breached its duty to defend. Instead, Columbia had a duty to defend Patterson “[i]f the facts as alleged in the complaint even arguably bring the occurrence within the policy's coverage, the insurer has a duty to defend the action.” City of Atlanta v. St. Paul Fire & Marine Ins. Co., 498 S.E.2d 782, 784 (Ga.Ct.App. 1998). Indeed, “[t]o excuse the duty to defend the petition must unambiguously exclude coverage under the policy…Where the claim is one of potential coverage, doubt as to liability and insurer's duty to defend should be resolved in favor of the insured.” Penn-America Ins. Co. v. Disabled American Veterans, 490 S.E.2d 374, 376 (Ga. 1997).

         Here, the complaint in the underlying lawsuit alleges Lawson “entrusted” the truck to Patterson, who was operating the truck “within the scope and course of his employment with [Lawson]” at the time of the accident. (Underlying Lawsuit Complaint, Dkt. [59-17] ¶¶ 9, 46.) While it was ultimately concluded that Lawson was operating the truck outside the scope of his work duties, if he had been operating within his work duties, there would be no dispute that he was insured because Columbia's sole defense to coverage is that Patterson's personal use of the truck was not approved pursuant to Lawson's manual. Columbia attempts to narrow the scope of the inquiry to say that the permissive use language does not inquire into the employee's scope of employment. The ...

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