A Catholic "priest, youth leader, and counselor" was the cause of a lawsuit for alleged sexual molestation which was filed against the Catholic Diocese of Savannah in South Carolina State Court. The Diocese settled this underlying case before verdict. It claimed insurance coverage under policies it purchased from Commercial Union Insurance Company. Onebeacon America Insurance Co., as successor to Commercial Union v. Catholic Diocese of Savannah, 2011 WL 3878337 *1 (S.D. Ga. September 2, 2011)(authorized password required to access Westlaw).
Commercial Union/OneBeacon filed suit over coverage before the Diocese did. It requested a declaration of no insurance coverage. The Diocese counterclaimed for alleged Bad Faith, in pertinent part, under OCGA ยง 33-4-6.
As interpreted by a Federal Judge in this case in the Southern District of Georgia, "[u]nder that statute, if an insurer refuses in bad faith to pay a loss within an allotted time after demand has been made by the insured, the insurer becomes potentially liable for the loss, an additional percentage as a penalty, and attorney's fees." Id. at *8.
In this third-party Bad Faith case, there was no underlying verdict, and for that reason alone the Georgia Statute did not apply under the holding of this Federal Court. Id.
Moreover, Georgia law allows for a complete defense to Insurance Bad Faith where "'there is [sic] any reasonable grounds for an insurer to contest the claim'". Id. at *9. The U.S. District Judge concluded that that rule applied here. For reasons discussed below, Commercial Union had no liability for insurance coverage in the underlying case.
Further, there was no prejudice to the Insured from a 'delayed Declaratory Judgment Action'. Id. at *3. But even if the Insured in this case had been the victim of such prejudice, there still would have been no insurance coverage as a result of the prejudice and there was no waiver of the Insurance Company's defenses to coverage even if -- for the sake of argument, said the Federal Court in this case -- it had breached its duty to defend the Insured in the underlying liability case. Id. at *5.
Finally, the notice provisions in the policy at bar which established timely notice as a condition precedent to a valid claim to coverage, were violated as a matter of law in this case. Id. at *6. Delayed notice of 21 months was a greater period than any delay previously found unreasonable as a matter of Georgia law in any case. Id. at *7. The delay of 21 months to provide notice simply could not be excused by the Federal Court.
The 22nd Annual Bad Faith Litigation Conference of the American Conference Institute is being held in 2011 in Orlando, Florida. The author will be speaking including about recent cases involving issues surrounding Insurance Coverage Declaratory Judgment Actions. Here is a link to the American Conference Institute Website Page which features this Conference including registration, if you or someone you know would like to attend.
The link to the Georgia Statute was provided through www.georgiainsurancedefenselawyer.com.
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