Summary
holding that insurer not liable to injured third party under policy that had been cancelled prior to accident due to noncompliance with Motor Carrier Act filing requirements by insured motor carrier and insurer
Summary of this case from Sapp v. Canal InsuranceOpinion
CIVIL ACTION NO. 1:05-cv-0007-GET.
November 28, 2005
ORDER
The above-styled matter is presently before the court on plaintiff's motion for summary judgment [docket no. 21].
Plaintiff filed this action to recover on a judgment obtained against defendant's purported insured in the Superior Court of Cobb County, Georgia, as well as tort and consequential damages for defendant's alleged failure to comply with Georgia statutory requirements related to motor carriers. On May 23, 2005, plaintiff filed a motion for summary judgment on the grounds that the attempted cancellation of coverage alleged by defendant was legally ineffective and that plaintiff is entitled to extra-contractual damages from defendant. On June 9, 2005, defendant filed a motion to compel discovery and for sanctions, as well as a motion to extend time to respond to plaintiff's motion for summary judgment until after the court rules on its motion to compel.
On June 29, 2005, the court held a hearing on defendant's motion to compel/motion for sanctions. At the hearing, the court directed the defendant to respond to plaintiff's motion for summary judgment as to the cancellation issue only and stayed defendant's motion to compel pending this court's ruling on the cancellation issue. The cancellation issue is now ripe for consideration by the court.
Standard
Courts should grant summary judgment when "there is no genuine issue as to any material fact . . . and the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The moving party must "always bear the initial responsibility of informing the district court of the basis of its motion, and identifying those portions of `the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). That burden is `discharged by `showing' — that is, pointing out to the district court — that there is an absence of evidence to support the nonmoving party's case." Id. at 325; see also U.S. v. Four Parcels of Real Property, 941 F.2d 1428, 1437 (11th Cir. 1991).
Once the movant has met this burden, the opposing party must then present evidence establishing that there is a genuine issue of material fact. Celotex, 477 U.S. at 325. The nonmoving party must go beyond the pleadings and submit evidence such as affidavits, depositions and admissions that are sufficient to demonstrate that if allowed to proceed to trial, a jury might return a verdict in his favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257 (1986). If he does so, there is a genuine issue of fact that requires a trial. In making a determination of whether there is a material issue of fact, the evidence of the non-movant is to be believed and all justifiable inferences are to be drawn in his favor. Id. at 255; Rollins v. TechSouth, Inc., 833 F.2d 1525, 1529 (11th Cir. 1987). However, an issue is not genuine if it is unsupported by evidence or if it is created by evidence that is "merely colorable" or is "not significantly probative." Anderson, 477 U.S. at 249-50. Similarly, a fact is not material unless it is identified by the controlling substantive law as an essential element of the nonmoving party's case. Id. at 248. Thus, to create a genuine issue of material fact for trial, the party opposing the summary judgment must come forward with specific evidence of every element essential to his case with respect to which (1) he has the burden of proof, and (2) the summary judgment movant has made a plausible showing of the absence of evidence of the necessary element. Celotex, 477 U.S. at 323.
Facts
In light of the foregoing standard the court finds the following pertinent facts for the purpose of resolving this motion for summary judgment only. On or about September 25, 2002, defendant issued to Jerry Yarbrough, d/b/a J J Trucking and Excavation, a trucker's liability policy with the intended effective dates of September 25, 2002 through September 25, 2003. At the time, Mr. Yarbrough represented to defendant that he operated dump trucks. According to Yarbrough's application, his business "hauls dirt-road const" and he does not lease or rent his equipment to others.On August 27, 2003, plaintiff's wife was killed in a collision involving two commercial dump trucks owned and operated by Mr. Yarbrough. At the time of the accident, T.I. Wood Enterprises, Inc. was using these trucks provided by Yarbrough pursuant to a rental agreement to perform work for T.I. Wood Enterprises, Inc.'s client, HBW Development Company. T.I. Wood Enterprises, Inc., also operates its own dump trucks hauling gravel, sand, dirt and asphalt. T.I. Wood Enterprises, Inc. is registered with the Department of Motor Vehicle Safety ("DMVS").
As a result of the August 27 accident, plaintiff filed suit in the Superior Court of Cobb County, Georgia against Mr. Yarbrough and his two drivers, Darlene Sue Cleckner and Kenneth Burnham, and T.I. Wood Enterprises. Defendant received a copy of plaintiff's complaint in the underlying tort suit. On November 18, 2004, plaintiff obtained judgments against Jerry Yarbrough d/b/a J J Trucking and Excavation, Cleckner and Burnham.
According to defendant, Yarbrough's policy had been cancelled pursuant to a power of attorney by A.I. Credit Corporation, a premium finance company, prior to the underlying accident. Therefore, defendant denied coverage to Yarbrough related to plaintiff's claims against Yarbrough and did not defend Yarbrough, Cleckner and Burnham in the underlying tort suit.
Defendant did not file a Form E (certificate of insurance) or a Form K (cancellation of insurance) with the DMVS. According to Jeanette Risper at the DMVS, the DMVS will not accept for filing a certificate of insurance relating to a carrier which has not applied for or obtained authority from the DMVS to operate as a motor carrier. Mr. Yarbrough never applied for or obtained authority from the DMVS to operate as a motor carrier in Georgia. Therefore, if Stratford had attempted to file a certificate of insurance on behalf of Mr. Yarbrough, the certificate of insurance would have been returned to defendant. Likewise, the DMVS would not have permitted defendant to file a Form K certificate of cancellation at the time the policy was cancelled.
Discussion
Plaintiff contends that the "attempted cancellation" of the policy was legally ineffective because: (1) the premium finance company failed to strictly comply with the requirements for legal cancellation of the policy under the Premium Finance Statute, and (2) defendant failed to notify the State of the cancellation.Premium Finance Statute
Under Georgia law, a premium finance company canceling an insurance contract pursuant to a power of attorney must adhere to the requirements of the premium finance statute which provides that
[n]ot less than ten days' written notice shall be delivered to the insured . . . of the intent of the premium finance company to cancel the insurance contract unless the default is cured within such ten-day period. A copy of said notice shall also be sent to the insurance agent or insurance broker indicated on the premium finance agreement.
After expiration of the ten-day period, the premium finance company may, in the name of the insured, cancel the insurance contract by mailing to the insurer a notice of cancellation. O.C.G.A. § 33-22-13(c) (1). The insurance contract then shall be canceled as if the notice of cancellation had been submitted by the insured. Id. The premium finance company also shall mail notice to the insured notifying him or her of the action taken.Id.
The receipt of the notice of cancellation by the insurer creates "a conclusive presumption" that the premium finance company has fully complied with all the requirements of the premium finance statute, that the insurer is entitled to rely on such presumption, and that the cancellation of the insurance contract or contracts is concurred in and authorized by the insured. O.C.G.A. § 33-22-13(c) (2).
It is undisputed that Yarbrough financed his insurance premiums for the policy at issue through AI Credit Corporation ("AI"). Yarbrough and AI entered a premium-finance agreement in which Yarbrough gave AI a power of attorney to unilaterally cancel the policy in the event Yarbrough failed to make his finance payments to AI.
On March 4, 2003, AI sent a Notice of Intent to Cancel to Yarbrough indicating that "unless payment is received in our office by [March 13, 2003], we will effect cancellation of your policy. . . ." Plaintiff argues that Yarbrough was not in default at the time he received a Notice of Intent to Cancel his policy and that the Premium Finance Statute setting forth the procedures for cancellation was not followed.
Plaintiff points to an amendment to the Premium Finance Agreement dated February 25, 2003 which indicates the first payment is due on March 24, 2003 and to an invoice dated February 28, 2003 indicating that payment in the amount of $2,784.79 was due on March 24, 2003. Plaintiff, therefore, contends that it was impossible for Yarbrough to be in default prior to the March 24 due date. According to the invoice, this total included a past due balance of $1,163.65 and a current installment of $1,621.14.
On March 26, 2003, AI sent its notice of cancellation with a cancellation effective date of March 27, 2003. Defendant also was notified. Furthermore, it is undisputed that Yarbrough's March 6, 2003 check to AI had been returned for insufficient funds prior to the notice of cancellation. Therefore, plaintiff fails to show as a matter of law that Yarbrough's account was current at the time of the notice of cancellation.
Even assuming that AI erred in sending the notice of cancellation, defendant can not be liable for coverage to the insured. The premium finance statute specifically provides that "[n]o liability of any nature whatsoever shall be imposed upon the insurer as a result of the failure by the insured to receive the notice of the action taken . . . or as a result of the failure of the insurance premium finance company to comply with any of the requirements of this Code section." Id. Therefore, plaintiff fails to show that defendant's reliance on AI's notice of cancellation was legally ineffective.
Notice to the State
Defendant acknowledges that the Premium Finance Statute provides that all "statutory, regulatory, and contractual restrictions providing that the insurance contract may not be canceled unless notice is given to a governmental agency, mortgagee, or other third party shall apply where cancellation is effected under this Code section." O.C.G.A. § 33-22-13(d). Plaintiff argues that because defendant failed to give notice of cancellation of the policy to the DMVS, the attempted cancellation was ineffective as to plaintiff and, therefore, defendant is liable for the Cobb County judgment. Defendant contends, however, that notice to the DMVS was not required and would have, in fact, been impossible to achieve.
A motor carrier for hire must register with the State and obtain a permit of authority before being allowed to commercially operate in Georgia. O.C.G.A. § 46-7-3. Before authorization will be given, financial responsibility must be established. O.C.G.A. §§ 46-7-7(a) (1) and 46-7-12; Transportation Rules of Georgia Public Service Commission, Rule 7-2.1. Before a permit will be issued, there must be on file with the State a certificate of insurance. O.C.G.A. § 46-7-12. "The insurer shall file such certificate" on Form E. Id. See Transportation Rules of Georgia Public Service Commission, Rules 7-2.1, 7-2.6(c). "Certificates of insurance evidencing coverage shall be continuous and shall not be canceled or withdrawn until thirty (30) days' notice in writing by the insurance company" has been given using Form K. Transportation Rules of Georgia Public Service Commission, Rules 7-2.6(b) (c).
Georgia's direct action statute establishes an independent cause of action against the carrier's insurer on behalf of a member of the public injured by the carrier's negligence. O.C.G.A. § 46-7-12. See e.g. Jackson v. Sluder, 256 Ga. App. 812, 81 (2002); Thomas v. Bobby Stevens Hauling Contractors, 165 Ga. App. 710 (1983). When a Form E certificate of insurance filed with the state provides that an insurance company has issued its insured an insurance policy and the policy lapses before the incident giving rise to liability on the part of the insured, and before proper notice of the cancellation is given to the State, the policy remains in effect as to the injured third party. Progressive Preferred Ins. Co. v. Ramirez, 277 Ga. 392 (2003) (answering certified question from the Eleventh Circuit Court of Appeals).
It is undisputed that Yarbrough indicated to defendant that he had not made any filings for authority with the federal government or with any state government. Furthermore, there is no evidence that Yarbrough ever requested that a certificate of insurance be filed on his behalf.
Defendant points to the affidavit of Jeanette Risper, who states that "[b]etween September 2002 and August 2003, not all commercial motor carriers were required to apply for and secure registration permits with the DMVS. For instance, a commercial carrier operating under the independent authority of another carrier pursuant to a lease or rental agreement would not have been required to obtain its own separate authority with the DMVS."
At the time of this accident, Yarbrough was party to a truck rental agreement with T.I. Wood Enterprises.
Therefore, a question of fact exists as to whether Yarbrough was operating under the independent authority of T.I. Wood and thus was not required to obtain his own separate authority with the DMVS.
Even if Yarbrough should have been registered, the undisputed evidence shows that he did not register. While "[t]he failure to file any form required by the commission shall not diminish the rights of any person to pursue an action directly against a motor carrier's insurer," O.C.G.A. § 46-7-12(a), it is undisputed that if defendant had attempted to file a certificate of insurance on Yarbrough's behalf, the certificate would have been rejected and returned to defendant. Because no certificate of insurance was on file, defendant also could not have filed a Form K notice of cancellation.
Plaintiff fails to cite the court to any legal authority that, under such circumstances, defendant was required to attempt to file the certificate of insurance form. Likewise, plaintiff fails to cite the court to any authority that defendant was subsequently required to attempt to file a Form K notice of cancellation of the certificate of insurance where no registration or certificate of insurance previously had been filed. Cf. DeHart v. Liberty Mutual Ins. Co., 270 Ga. 381 (1998) (applying continuous coverage provision and finding coverage where insurer previously filed certificate of insurance but failed to give proper notice of cancellation prior to plaintiff's injury). Although the internal procedures of the DMVS regarding the filing of forms seem contrary to the desires and intentions of the legislature in amending the direct action statute, the law can not require an impossible act. See e.g. Giles v. Ireland, 742 F.2d 1366, 1376 (11th Cir. 1984).
Therefore, having considered the evidence and the arguments of the parties, the court finds that plaintiff (1) fails to establish that the cancellation of the policy was legally ineffective and (2) fails to establish that defendant is subject to the direct action statute. Accordingly, plaintiff's motion for summary judgment [docket no. 21] is DENIED.
Because of previous instructions directed to the parties, defendant may consider that it is under some restriction as to the filing of dispositive motions. If any such restriction exists, defendant is hereby relieved of the restriction and defendant is advised that it has thirty (30) days from the date of this order to file any such dispositive motions.
Summary
Plaintiff's motion for summary judgment [docket no. 21] is DENIED.
Because of previous instructions directed to the parties, defendant may consider that it is under some restriction as to the filing of dispositive motions. If any such restriction exists, defendant is hereby relieved of the restriction and defendant is advised that it has thirty (30) days from the date of this order to file any such dispositive motions.
SO ORDERED.