American Strategic Insurance Corp. v. Helm
Court of Appeals of Georgia, decided June 9, 2014 (McMillian, J.; Phipps, C.J., and Ellington, P.J., concurring). The complete opinion appears below, transcribed from the reported decision; only print artifacts have been removed.
The full opinion
AMERICAN STRATEGIC INSURANCE CORP. v. HELM et al. Court of Appeals of Georgia (Jun 9, 2014). Docket No. A14A0466. 327 Ga. App. 482, 759 S.E.2d 563.
Hillary Ann Shawkat, Ashley Nicole Gowder, Kevin Tannehill Shires, Atlanta, for Appellant. Samuel A. Murray Jr., Griffin, Darl Hilton Champion Jr., Blakely Holloway Frye, for Appellee.
McMILLIAN, Judge.
This case arises out of a May 26, 2012 accident in which a motorized golf cart driven by William Helm struck and injured Tracy Self. In July 2012, Tracy and Michael Self filed suit against Helm for alleged negligence in the operation of the golf cart. In August 2012, American Strategic Insurance Corp. (“ASI”) filed a declaratory judgment action, seeking a determination as to whether Helm’s insurance policy provided coverage for the accident. The parties filed cross-motions for summary judgment, and after a hearing on June 4, 2013, the trial court denied ASI’s motion and granted the Selfs’ motion. ASI now appeals, arguing that the trial court erred in determining that Helm’s policy did not exclude coverage for the accident.
We review the denial or grant of summary judgment de novo to determine whether there exists a genuine issue of material fact and whether the undisputed facts, viewed in the light most favorable to the nonmoving party, warrant judgment as a matter of law. Johnson v. Bartley, 321 Ga. App. 59, 59–60, 741 S.E.2d 275 (2013). The material facts of this case are not in dispute. At the time of the accident, Helm was driving his golf cart at the Frederick Brown Jr. Amphitheater within the master-planned community of Peachtree City, Georgia. The golf cart was a 2003 EZGO Freedom SE, designed by the manufacturer with four seats. ASI issued a homeowner’s policy to Helm, effective June 2, 2011 through June 2, 2012 (the “Policy”). Thus, ASI concedes that the accident at issue occurred during this effective policy term.
The Policy first identifies the types of coverage available, including in pertinent part:
SECTION II—LIABILITY COVERAGES
A. Coverage E—Personal Liability
If a claim is made or a suit is brought against an “insured” for damages because of “bodily injury” or “property damage” caused by an “occurrence” to which this coverage applies, we will:
Pay up to our limit of liability for the damages for which an “insured” is legally liable …; and
Provide a defense at our expense by counsel of our choice, even if the suit is groundless, false or fraudulent…
B. Coverage F—Medical Payments To Others
We will pay the necessary medical expenses that are incurred or medically ascertained within three years from the date of an accident causing “bodily injury.” … As to others, this coverage applies only: …
- To a person off the “insured location,” if the “bodily injury”:
…
b. Is caused by the activities of an “insured”
The Policy then identifies various exclusions, including the following relevant provision, which excludes coverage for all motor vehicles, except motorized golf carts designed to carry up to four persons:
SECTION II—EXCLUSIONS
A. “Motor Vehicle Liability”
…
- If Exclusion A.1 does not apply, there is still no coverage for “motor vehicle liability” unless the “motor vehicle” is:
…
e. A motorized golf cart that is owned by an “insured,” designed to carry up to 4 persons, not built or modified after manufacture to exceed a speed of 25 miles per hour on level ground …
In addition, Helm’s Policy included a “Georgia Special Provision Endorsement” (“Special Endorsement”), which by its terms superseded and modified certain other terms contained within the Policy, including the golf cart coverage. Thus, the Special Endorsement replaced the exclusion language in Section II(2)(e), above, with the following:
e. A motorized golf cart:
(1) Owned by an “insured”;
(2) Designed to carry up to 2 persons;
(3) Designed to carry 2 golf club bags;
(4) Not built or modified after manufacture; and
(5) Which does not exceed a speed of 25 miles per hour on level ground;
…
At the trial level, ASI asserted that the Policy did not provide coverage for the accident because Helm’s four-seater golf cart was excluded by the Special Endorsement as it was designed to carry more than the maximum of two persons. The Selfs, however, claimed that based on the language of the exclusion, a reasonable insured could understand the exclusion to mean that “up to 2 persons” instead imposed a minimum requirement that the golf cart must seat at least two people in order to be covered. In granting summary judgment in favor of the Selfs, the trial court found that the exclusion ASI attempts to rely on “does not clearly and unequivocally exclude from coverage the underlying personal injury claims the Selfs have asserted against Mr. Helm.” For the reasons set forth below, we affirm.
In its sole enumeration of error, ASI argues that the trial court erred in determining that the Policy could be construed as covering the accident and granting summary judgment to the Selfs. Construction and interpretation of an insurance policy are matters of law for the court. Landmark American Ins. Co. v. Khan, 307 Ga. App. 609, 612 (1), 705 S.E.2d 707 (2011). An insurance policy is a contract and subject to the ordinary rules of contract construction, and the parties are bound by its plain and unambiguous terms. Hurst v. Grange Mut. Cas. Co., 266 Ga. 712, 716 (4), 470 S.E.2d 659 (1996). “However, if a provision of an insurance contract is susceptible of two or more constructions, even when the multiple constructions are all logical and reasonable, it is ambiguous, and the statutory rules of contract construction will be applied.” (Citations and punctuation omitted.) Fireman’s Fund Ins. Co. v. Univ. of Ga. Athletic Assn., Inc., 288 Ga. App. 355, 356–357, 654 S.E.2d 207 (2007).
The initial issue to be resolved then is whether the language of the exclusion is plain and unambiguous or subject to two or more interpretations. Beginning with the text of the Policy as it is originally issued, the exclusion provides that there is no coverage for motor vehicle liability unless the motor vehicle is a golf cart that is designed to carry up to four persons. By its express terms, the Policy appears to exclude coverage for any golf carts that are designed to seat only one to three persons. When the Policy is read as modified by the Special Endorsement, the applicable exclusion provides that there is no coverage for motor vehicle liability “unless” the motor vehicle is a golf cart that is designed to carry “up to two persons.” According to the Selfs, a reasonable reading of the Policy is that, although two-seater golf carts would not have been covered under the base Policy, once the Special Endorsement is added, a two-seater golf cart is covered, whereas a one-person cart remains excluded. And thus, the Special Endorsement, like the base policy, establishes a minimum, rather than a maximum. To support their interpretation, the Selfs point out other instances in which the phrase “up to” can be used to set a minimum, noting for example that if a job posting stated that applicants must be capable of lifting up to 40 pounds or typing up to 90 words per minutes, those applicants who are capable of lifting more or typing faster would not be excluded.
This interpretation is supported by the fact that several manufacturers distribute various types of single-person golf carts.
ASI argues, in turn, that it clearly meant for the exclusion to set a maximum number of persons by using the phrase “up to,” also giving examples of when the phrase is used to set a maximum number. However, “the test is not what the insurer intended its words to mean, but rather what a reasonable person in the insured’s position would understand them to mean.” (Citation and punctuation omitted.) Kerr–McGee Corp. v. Ga. Cas. & Sur. Co., 256 Ga. App. 458, 460, 568 S.E.2d 484 (2002); see also Fidelity Nat. Title Ins. Co. v. Keyingham Investments, LLC, 288 Ga. 312, 313 (1), 702 S.E.2d 851 (2010) (“it is the understanding of the average policyholder which is to be accepted as a court’s guide to the meaning of words, with the help of the established rule that ambiguities and uncertainties are to be resolved against the insurance company”) (citation and punctuation omitted). Moreover, “an insurer seeking to invoke a policy exclusion carries the burden of proving its applicability in a given case,” with the exclusion to be strictly construed against the insurer. (Citation and punctuation omitted.) Nationwide Mut. Fire Ins. Co. v. Kim, 294 Ga. App. 548, 552 (1), 669 S.E.2d 517 (2008); see also Ga. Farm Bureau Mut. Ins. Co. v. Meyers, 249 Ga. App. 322, 324, 548 S.E.2d 67 (2001) (“The insurer, in preparing the language of its policy, has the burden of using language that is clear and precise.”).
To the extent ASI raises new arguments in its reply brief, those arguments are waived and will not be considered. See Vann v. Finley, 313 Ga. App. 153, 154, n. 2, 721 S.E.2d 156 (2011).
Thus, while ASI’s interpretation of the Policy as excluding coverage may be reasonable, the language does not unambiguously compel this interpretation. Rather, we find that although the language at issue “appears at first blush to be plain and unambiguous,” when properly examined within the context of the Policy as a whole, the exclusion is ambiguous and subject to at least two reasonable interpretations, one providing coverage for the accident and one excluding coverage. Kerr–McGee Corp., 256 Ga. App. at 459, 568 S.E.2d 484 (“Such language … causes a reasonable person to be unsure of what appears at first blush to be plain and unambiguous but, upon examination under the facts of this case, is ambiguous.”); see also Meyers, 249 Ga. App. at 324, 548 S.E.2d 67 (“Ambiguity in an insurance contract is duplicity, indistinctiveness, uncertainty of meaning of expression, and words or phrases which cause uncertainty of meaning and may be fairly construed in more than one way.”).
Our holding in this regard does not mean that the use of the phrase “up to” is always, or even often, ambiguous. However, within the context of this specific exclusion, a reasonable insured could find that the phrase, as used here, sets a minimum.
Our finding is supported by—but by no means dependent on—the deposition testimony of ASI’s director of underwriting:
Q: All right. I’m just reading here the language. It says, There is still no coverage for motor vehicle liability unless the motor vehicle is a motorized golf cart designed to carry up to four persons. So unless it’s a motorized golf cart designed to carry up to four persons, that could be read to not cover a two-seater golf cart?
A: A two person? I could see that.
…
Q: … So e(2) where it says, Designed to carry up [to] two persons, ASI reads that as designed to carry no more than two persons—
A: Correct.
Q:—is that correct? All right. As with the—the other provision that we just talked about, there’s no coverage unless the golf cart is designed to carry up to two persons under this provision. So if it was a one-seater golf cart, it would not be covered under this provision?
A: Correct.
See Certain Underwriters at Lloyd’s of London v. Rucker Constr., 285 Ga. App. 844, 849 (2), 648 S.E.2d 170 (2007) (“If this is how the insurance adjuster understood it, certainly this is what a reasonable insured could expect it to mean.”).
Because the exclusion is susceptible to two reasonable interpretations and is thus ambiguous, we apply three well known rules:
any ambiguities in the contract are strictly construed against the insurer as drafter of the document; any exclusion from coverage sought to be invoked by the insurer is likewise strictly construed; and the insurance contract is to be read in accordance with the reasonable expectations of the insured where possible.
(Citation and punctuation omitted.) Fireman’s Fund Ins. Co., 288 Ga. App. at 357, 654 S.E.2d 207. When applying these rules, the policy must be considered as a whole and each provision is to be given effect and interpreted so as to harmonize with the others. See ALEA London Ltd. v. Woodcock, 286 Ga. App. 572, 576 (2), 649 S.E.2d 740 (2007).
When the ambiguity is resolved against ASI as the drafter and in favor of coverage, the exclusion does not apply. Accordingly, we adopt the interpretation in accordance with the insured’s reasonable expectations and find that the Policy provides coverage. See Hurst, 266 Ga. at 716–717 (4), 470 S.E.2d 659; Kerr–McGee Corp., 256 Ga. App. at 460, 568 S.E.2d 484 (“Policies of insurance will be liberally construed in favor of the object to be accomplished, and conditions and provisions therein will be strictly construed against the insurer, as they are issued upon printed forms, prepared by experts at the insurer’s instance, in the preparation of which the insured has no voice.”) (citations omitted).
Judgment affirmed. PHIPPS, C.J., and ELLINGTON, P.J., concur.
What it decided
William Helm’s four-seat golf cart struck and injured Tracy Self in Peachtree City. His homeowner’s insurer, American Strategic (ASI), went to court asking for a declaration that it owed nothing: the policy excluded motor-vehicle liability, and its golf-cart carve-back — as rewritten by a “Georgia Special Provision Endorsement” — reached only carts “designed to carry up to 2 persons.” A four-seater, ASI argued, was therefore excluded.
The injured party read the same words differently: “up to” can set a floor as easily as a ceiling (a job posting requiring applicants to lift “up to 40 pounds” does not disqualify someone who can lift more), so a reasonable insured could understand the endorsement to mean a cart must seat at least two people to be covered. The trial court granted summary judgment for coverage, and the Court of Appeals affirmed.
The holding is about how Georgia construes exclusions, and the court laid the rules out plainly:
- “[T]he test is not what the insurer intended its words to mean, but rather what a reasonable person in the insured’s position would understand them to mean.”
- “[A]n insurer seeking to invoke a policy exclusion carries the burden of proving its applicability in a given case,” and the exclusion is strictly construed against the insurer.
- Where a provision “is susceptible of two or more constructions, even when the multiple constructions are all logical and reasonable, it is ambiguous” — and ambiguities are resolved against the drafter and in favor of coverage, in line with the insured’s reasonable expectations.
It did not help ASI that its own director of underwriting, reading the base policy’s parallel wording at deposition, conceded the alternate reading (“A two person? I could see that.”). The court quoted earlier authority: if that is how the insurer’s own people can read it, “certainly this is what a reasonable insured could expect it to mean.”
The panel was equally plain about the limit of its holding: “up to” is not “always, or even often, ambiguous.” The ambiguity was found in the context of this specific exclusion, read against the policy as a whole. Helm is not a rule that any strained reading defeats an exclusion — both readings here had to be genuinely reasonable before the tie went to the insured.
What it did NOT decide
- It did not hold that “up to” is an ambiguous phrase. The court built its own fence: “Our holding in this regard does not mean that the use of the phrase ‘up to’ is always, or even often, ambiguous. However, within the context of this specific exclusion, a reasonable insured could find that the phrase, as used here, sets a minimum.” The ambiguity came from reading the Special Endorsement’s “up to 2 persons” against the base form’s “up to 4 persons,” inside a policy read as a whole. A different policy may offer no such comparison.
- It did not weaken the rule that plain language controls. The opinion states that rule before it does anything else: an insurance policy “is a contract and subject to the ordinary rules of contract construction, and the parties are bound by its plain and unambiguous terms.” The tie went to the insured only after the court found two readings that were each reasonable — and it said ASI’s reading “may be reasonable.” What defeated the exclusion was that the words did not compel it, not that the insured preferred otherwise.
- It did not settle how much weight an insurer’s own witness carries. The court flagged the deposition concession as support it did not need: “Our finding is supported by—but by no means dependent on—the deposition testimony of ASI’s director of underwriting.” Whether such testimony could establish ambiguity on its own is not resolved here.
- It did not reach ASI’s late arguments. “To the extent ASI raises new arguments in its reply brief, those arguments are waived and will not be considered.” Whatever those arguments were, they went undecided rather than rejected.
- It answered one question about one exclusion. The appeal came up on ASI’s “sole enumeration of error.” The opinion does not reach Helm’s alleged negligence, the amount of any damages, the limits available, or how Coverage E and Coverage F each apply to these injuries — the court held only that the exclusion does not bar coverage. And the setting is the liability section of a homeowner’s policy; nothing here construes a first-party property exclusion, or decides who bears what burden in a damage claim on a building. For that ground, see Nationwide v. Kim and York v. Williams Seafood.
Why it matters to policyholders
Helm is a liability-coverage case about a golf cart, not a storm claim. Its value to property policyholders is that the rules it applies are the same rules that govern every exclusion argument in a Georgia homeowner or business property claim — the anti-concurrent-causation clause, the wear-and-tear exclusion, the water exclusions, all of it:
- The insurer wrote the policy, so the insurer owns the uncertainty. Georgia courts read exclusions through the eyes of “the average policyholder,” not the underwriting department. The same drafter-owns-it logic runs through Royal Capital v. Maryland Casualty, where the Supreme Court of Georgia held the insurer’s drafted promise to pay for “loss” includes lost value.
- The burden on an exclusion belongs to the carrier. When a denial letter cites an exclusion, the policyholder does not have to disprove it; the insurer has to prove it applies, under a standard that construes the words strictly against it.
- Fair warning cuts both ways. Helm does not make every exclusion ambiguous, and carriers fairly point that out. Plain, unambiguous language binds the policyholder — the court said exactly that. The case rewards policyholders who can articulate a genuinely reasonable alternative reading of the actual words, not wishful thinking.
The practical use: when a Georgia adjuster reads an exclusion one way and the words honestly bear another reading, Helm is the citation that says the choice between those readings is not the adjuster’s to make.
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