Braner v. Southern Trust Insurance Company; and vice versa

Supreme Court of Georgia, Nos. 42284 and 42285, decided October 17, 1985; reconsideration denied November 5, 1985 (Hill, Chief Justice, for the court; all the Justices concurring, both on the opinion and on the denial of reconsideration). Counsel of record were Neville & Skene, William J. Neville, Jr., Mary L. Skene and George N. Skene for the appellant, and Karsman, Brooks, Painter & Callaway, Stanley Karsman and Dana F. Braun for the appellee. The complete opinion, including the supplemental opinion on motion for reconsideration, appears below. Our text comes from the Caselaw Access Project (case.law), Harvard Law School’s open archive of published U.S. case law, which supplies the opinion as printed in the official reporter at 255 Ga. 117. Here is the complete list of what we removed and repaired. The reporter’s head matter is only the docket numbers, the caption, and the parallel-cite line “(335 SE2d 547)”; the caption and a court-and-date line are reprinted above the opinion, and the parallel-cite line is dropped. The archive sets the reporter’s page-foot block — the “Decided October 17, 1985” and “Reconsideration denied November 5, 1985” lines and the two counsel listings — between the main opinion’s concurrence line and the supplemental opinion; that block has been lifted out and summarized in this paragraph instead. Two repairs were made to the remaining text: the judge’s name line was set in bold, and a stray apostrophe printed immediately after the citation “(229 SE2d 664) (1976).” in Division 3 was removed. One presentation note: the opinion’s four footnotes, which the archive prints as bare final paragraphs with no reference marks, carry an italic label below identifying them as footnotes. Nothing else was touched. No word of the court’s has been changed, condensed, reordered, or paraphrased.

The full opinion

BRANER v. SOUTHERN TRUST INSURANCE COMPANY; and vice versa.

Supreme Court of Georgia. Nos. 42284, 42285. Decided October 17, 1985. Reconsideration denied November 5, 1985.

Hill, Chief Justice.

The principal issues in this case, a suit on a fire insurance policy here on certiorari, Southern Trust Ins. Co. v. Braner, 174 Ga. App. 247 (329 SE2d 569) (1985), are whether it is error for a jury to make a separate award of prejudgment interest upon unliquidated claims of loss under the policy, and whether the existing rule as to proof of damage to personal property destroyed by fire should be relaxed.

Henry and Sue Braner purchased a vacation home on Colonels Island in Liberty County on January 1, 1982. At that time, fire insurance was purchased upon the dwelling for $40,000 from Southern Trust Insurance Company through Braner’s independent agent. After improvements were made and the home was furnished, the dwelling insurance was increased to $55,000 at the insurance agent’s suggestion, and unscheduled personal property, debris removal and loss of use coverages, among others, were added. On April 5, 1982, the house burned and was a total loss.

In addition to the $55,000 dwelling loss, Braner submitted a proof of loss form on June 25, 1982, for the $23,967.65 replacement value of the personal property, and $6,000 for debris removal and loss of use living expenses. When the 60-day statutory period to pay or deny a claim expired, see OCGA § 33-4-6, Southern Trust sought a 30-day extension from Braner. Braner responded by filing this suit.

Braner thereafter filed a motion for summary judgment as to liability (coverage) and the insurer responded that there were genuine issues of material fact as to its defense of arson. The trial court granted summary judgment as to liability to Braner and, in the first appeal in this case, the Court of Appeals affirmed. Southern Trust Ins. Co. v. Braner, 169 Ga. App. 567, 569 (314 SE2d 241) (1984).

At trial the jury returned a verdict for $16,000 for the unscheduled personal property with $3,280 interest, $3,000 for living expenses with $615 interest, $1,200 for debris removal with $246 interest, $11,327 in bad faith damages, and $15,000 in attorney fees, in addition to the $55,000 dwelling loss with $11,275 interest the parties agreed was owed.

The insurance company appealed, urging (a) that the trial court erred in overruling its motion for directed verdict as to unscheduled personal property loss because the insured proved only its replacement cost value, not its actual cash value as insured by the policy, (b) that the trial court erred in overruling its motion for directed verdict as to bad faith damages and attorney fees, and (c) that, because they constituted unliquidated damages, the trial court erred in instructing the jury that it was authorized to award interest at 12% on the unscheduled personal property loss, debris removal and additional living expenses.

The Court of Appeals reversed, quoting Atlantic Coast-Line R. Co. v. Henderson Elevator Co., 18 Ga. App. 279 (6) (88 SE 101) (1916), for the proposition that “The demand being unliquidated, the allowance of interest was within the discretion of the jury, and, while they may have increased the damages by an allowance of interest, the amount so allowed should have been included in one gross sum as damages, and not separately specified by the verdict.” Braner II, 174 Ga. App. 247, supra.

Finding that interest could not be separately stated by the jury, the Court of Appeals granted a new trial and did not reach the other issues raised by the insurance company. Braner sought certiorari, complaining that the jury verdict in his favor totaling $116,943 was to be entirely retried over $4,141 in interest, when there is no dispute whatsoever that $70,475 in damages was due and unpaid, and no decision had been rendered as to the $42,327 remaining in issue. The insurer sought certiorari pointing out that the Court of Appeals failed to address the major issues involving the larger sums, to wit: unscheduled personal property loss, bad faith damages and attorney fees. We granted the certiorari applications of both parties.

1. Two Code sections allow prejudgment interest to be awarded. OCGA § 7-4-15 applies to liquidated demands and is inapplicable here. In a suit on a property damage insurance policy (e.g., fire, lightning, windstorm, etc.), where liability is not disputed but where the amount of damage is disputed, the amount is unliquidated. Fireman’s Ins. Co. v. Oliver, 182 Ga. 212 (184 SE 858) (1936).

OCGA § 13-6-13 provides for prejudgment interest in breach of contract cases, as follows: “In all cases where an amount ascertained would be the damages at the time of the breach, it may be increased by the addition of legal interest from that time until the recovery.” This Code section is applicable to unliquidated damages. Norair Eng. Corp. v. St. Joseph’s Hosp., 147 Ga. App. 595 (6) (249 SE2d 642) (1978).

In Western &c. R. Co. v. Brown, 102 Ga. 13, 14-15 (29 SE 130) (1897), this contract Code section was cited to support, by analogy, the existing rule that, in a suit in tort, the jury could award interest not as such but as part of the damages. See Central R. v. Sears, 66 Ga. 499 (1881); Western &c. R. Co. v. McCauley, 68 Ga. 818 (2) (1882); Ga. R. &c. Co. v. Crawley, 87 Ga. 191, 192 (13 SE 508) (1891).

In Tifton R. Co. v. Butler, 4 Ga. App. 191 (1) (2) (60 SE 1087) (1908), the Court of Appeals applied the rule applicable in tort cases, that a jury may include interest not as such but as damages, in a breach of contract case. The Tifton R. case, supra, was followed in Atlantic Coast-Line R. Co. v. Henderson Elevator Co., supra, and the Court of Appeals in the case now before us followed the Atlantic Coast-Line case, quoting it as set forth above.

Thus, the question before us is whether it is error, in a breach of contract case where the damages are unliquidated, for the court to instruct the jury that it may return a verdict stating interest separately, rather than including it as part of the damages awarded.

OCGA § 13-6-13, supra, provides for the allowance of prejudgment interest in breach of contract cases and we find no error in allowing such interest to be found by the jury as a separate item of the award, even where the damages are not liquidated. Division 1 and that part of Division 2 of Tifton R. Co. v. Butler, supra; that part of Division 6 of Atlantic Coast-Line R. Co. v. Henderson Elevator Co., supra; and so much of Merchants Ins. Co. v. Lilgeomont, 84 F2d 685, 689-690 (5th Cir. 1936), which is contrary to this holding, should not be followed.

This disposes of the issue of interest.

2. The insurer contends that the trial court erred in overruling its motion for directed verdict as to plaintiff’s claim for bad faith penalty and attorney fees because (a) it had a reasonable defense, to wit: arson, and (b) there was a bona fide dispute as to the amount of the unscheduled personal property loss.

(a) The grant of plaintiff’s motion for summary judgment as to liability, notwithstanding the insurer’s claim of arson, affirmed by the Court of Appeals, determined that the insurer had no viable arson defense. As the Court of Appeals found: “… the evidence in the instant case was insufficient to raise even an inference of arson caused or procured by [the insured].” Braner I, supra, 169 Ga. App. at 569.

The purpose of granting summary judgment as to liability (coverage) is to remove that issue from the trial of the case. Once liability is established by summary judgment, liability is no longer in issue. The trial court did not err in overruling the insurer’s motion for directed verdict as to bad faith penalty and attorney fees based on its claim that it had a reasonable defense, to wit: arson.

(b) The insured’s proof of loss claimed $23,967.65 as the replacement cost of unscheduled personal property. The insurer points to the jury finding that the value of this property was $16,000 to demonstrate that there was a bona fide dispute as to the amount of this loss.

However, the insurer’s agent testified that he instructed the insured to list replacement cost and date of purchase, and that he, using a depreciation formula, would reduce replacement cost to actual cash value as called for by the insurance policy. Under these circumstances the insurer will not be heard to assert that the insured’s proof of claim was inflated and that a bona fide dispute existed as to the value of the property. Therefore the trial court did not err in overruling the insurer’s motion for directed verdict as to bad faith penalty and attorney fees.

3. The insurer contends that the trial court erred in overruling its motion for directed verdict as to unscheduled personal property loss because the insured proved replacement cost and did not prove actual cash value as insured by the policy.

The existing rule as to proof of damages to personal property which has been destroyed is that a witness’ opinion as to the value of such property based solely on purchase price lacks probative value, whereas a witness’ opinion as to value based upon purchase price plus a showing of the condition of the property at time of purchase and its condition immediately before its destruction has probative value. Hoard v. Wiley, 113 Ga. App. 328, 334 (147 SE2d 782) (1966); Cunningham v. Hodges, 150 Ga. App. 827 (1) (4) (258 SE2d 631) (1979), and cases cited.

We find this rule to be too stringent under the circumstances of this case and others similar to it for several practical reasons. In cases involving fires, the evidence of the purchase prices of the destroyed property (receipts, bills, cancelled checks, etc.) may also have been destroyed by the fire. Testimony as to the condition of each item of property immediately before its destruction (drapes, curtains, rugs, furniture of all sorts, dishes, glasses, cooking utensils, food supplies, condiments, mattresses, pillows, bedspreads, blankets, sheets, towels, shirts, pants, dresses, underwear, socks, sweaters, coats, swim wear and other items of clothing, to mention only a few) is unnecessarily time consuming. Moreover, under the existing rule, it benefits a defendant not to cross-examine the owner of the property as to any particular item which might be suspect, because by exercising the right of cross-examination the defendant runs the risk that the witness may reveal its condition. Instead, a defendant elects not to object to the testimony as to value and not to move to strike it as being insufficient, but to move for a directed verdict after the evidence is closed, notwithstanding the fact that liability has been proved and the destruction of property has been established.

For the foregoing reasons, we adopt the following rule: Where a homeowner or homeowner’s spouse testifies as to either the purchase price or replacement cost of household furnishings, items of personal clothing and other commonly used personal property destroyed by fire, and as to the approximate date of purchase or acquisition of each such item, the evidence is sufficient for the jury to find the actual cash values of such common and familiar property. See Atlanta &c Builders v. Polinsky, 148 Ga. App. 181, 182 (250 SE2d 781) (1978); Marco Publications v. Southern Airways, 139 Ga. App. 808, 810 (229 SE2d 664) (1976). Therefore, the trial court did not err in overruling the insurer’s motion for directed verdict, and the judgment entered by the trial court should be affirmed while that of the Court of Appeals must be reversed.

Judgment reversed.

All the Justices concur.

On Motion for Reconsideration.

On motion for reconsideration, Southern Trust raises several issues, of which we address one. Citing Fortson v. Cotton States Mut. Ins. Co., 168 Ga. App. 155 (308 SE2d 382) (1983), Southern Trust urges that the Court of Appeals’ first decision in this case, Southern Trust Ins. Co. v. Braner, 169 Ga. App. 567 (314 SE2d 241) (1984), referred to above as Braner I, was clearly wrong and the insurer should not be found to have acted in bad faith for relying on the prior (i.e., “correct”) law of Georgia.

Whether Braner I, is right or wrong, it is binding on the parties. OCGA § 9-11-60 (h).

Motion for reconsideration denied.

All the Justices concur.

The four paragraphs that follow are the opinion’s footnotes. The archive prints them as bare final paragraphs with no reference marks; the label is ours, and the text is untouched.

Because the parties had disagreed as to the items of damages recoverable, other than the $55,000 value of the dwelling and $11,275 interest thereon, the trial court used a special verdict form so as to be able to strike any items of damage later found to be improper, and thereby avoid having to retry the case in toto.

The insurer urges that the “no separate interest award on unliquidated damages” rule has been superseded by the special verdict provisions of the CPA. OCGA § 9-11-49 (a). It urges that no interest was allowable in this case, even if included as a part of the damages awarded, because the damages were unliquidated.

The Court nevertheless upheld the verdict which awarded plaintiff “$6,265.02 principal” and “$1,863.68 interest” for “$8,128.70 total,” finding that the reasonable intendment of the jury was to award the plaintiff $8,128.70.

Although the trial court’s instructions to the jury regarding interest on unscheduled personal property loss, additional living expenses and debris removal were directory in nature and did not advise the jury that awards of interest thereon were discretionary with the jury, this matter was not urged as error in the Court of Appeals. There, as here, it was urged that the amounts being unliquidated, prejudgment interest was not allowable, which issue has been decided adversely to the insurer.

What it decided

The Braners bought a vacation home on Colonels Island in Liberty County on January 1, 1982, insured the dwelling for $40,000, and — at their agent’s suggestion, after improvements — raised the dwelling limit to $55,000 and added unscheduled personal property, debris removal and loss of use. On April 5, 1982 the house burned and was a total loss. The proof of loss claimed $23,967.65 for personal property and $6,000 for debris removal and additional living expenses. The carrier asked for a 30-day extension after the 60-day period under OCGA § 33-4-6 ran; the Braners sued instead.

The insured won summary judgment on liability, the carrier’s arson defense having failed as a matter of law, and the Court of Appeals affirmed that. A jury then awarded $16,000 for the unscheduled personal property, $3,000 for living expenses, $1,200 for debris removal, interest as a separate line on each, $11,327 in bad faith damages and $15,000 in attorney fees, on top of the agreed $55,000 dwelling loss and $11,275 in interest. The Court of Appeals wiped all of that out and ordered a new trial on a single technical point: the jury had stated interest separately instead of folding it into a gross damages figure. As the insured put it on certiorari, a verdict totaling $116,943 was going to be retried in full over $4,141 in interest.

The Supreme Court reversed the Court of Appeals and made three holdings.

1. A jury may state prejudgment interest as its own line, even when the damages are unliquidated. OCGA § 13-6-13 allows an ascertained amount of damages at the time of breach to “be increased by the addition of legal interest from that time until the recovery,” and the Court found “no error in allowing such interest to be found by the jury as a separate item of the award, even where the damages are not liquidated.” It disapproved the contrary parts of Tifton R. Co. v. Butler, Atlantic Coast-Line R. Co. v. Henderson Elevator Co. and Merchants Ins. Co. v. Lilgeomont. Along the way it stated the classification plainly: in a suit on a property damage policy — “fire, lightning, windstorm, etc.” — “where liability is not disputed but where the amount of damage is disputed, the amount is unliquidated.”

2. A carrier that has lost liability on summary judgment cannot resurrect the defense to defeat a bad-faith claim — and a carrier whose own agent set up the claim’s format cannot then call the claim inflated. On the arson point: “The purpose of granting summary judgment as to liability (coverage) is to remove that issue from the trial of the case. Once liability is established by summary judgment, liability is no longer in issue.” On the amount: the carrier argued that the gap between the $23,967.65 claimed and the $16,000 the jury found proved a bona fide dispute. But “the insurer’s agent testified that he instructed the insured to list replacement cost and date of purchase, and that he, using a depreciation formula, would reduce replacement cost to actual cash value as called for by the insurance policy. Under these circumstances the insurer will not be heard to assert that the insured’s proof of claim was inflated and that a bona fide dispute existed as to the value of the property.”

3. Georgia relaxed its proof rule for contents destroyed by fire. The old rule was that an owner’s valuation opinion “based solely on purchase price lacks probative value” unless the owner also showed the item’s condition when bought and its condition immediately before destruction. The Court called that “too stringent,” for reasons any fire survivor will recognize: the receipts and cancelled checks “may also have been destroyed by the fire,” and item-by-item condition testimony across “drapes, curtains, rugs, furniture of all sorts, dishes, glasses, cooking utensils, food supplies, condiments, mattresses, pillows, bedspreads, blankets, sheets, towels, shirts, pants, dresses, underwear, socks, sweaters, coats, swim wear and other items of clothing, to mention only a few” is “unnecessarily time consuming.” The Court also named the tactical problem the old rule created: it rewarded a defendant for declining to cross-examine and then moving for a directed verdict after the evidence closed.

The new rule, in the Court’s own words:

Where a homeowner or homeowner’s spouse testifies as to either the purchase price or replacement cost of household furnishings, items of personal clothing and other commonly used personal property destroyed by fire, and as to the approximate date of purchase or acquisition of each such item, the evidence is sufficient for the jury to find the actual cash values of such common and familiar property.

On reconsideration the carrier argued that the earlier appellate decision against it had been wrongly decided, so it should not be penalized for having relied on what it called the correct law. The Court’s whole answer: “Whether Braner I, is right or wrong, it is binding on the parties.”

What it did NOT decide

• It did not hold that the homeowner’s numbers must be accepted. The rule is one of sufficiency — the testimony is “sufficient for the jury to find the actual cash values.” This jury found $16,000 on a $23,967.65 claim. Braner gets your contents case to the jury; it does not decide what the jury will do with it.
• It did not define actual cash value, and it did not equate replacement cost with actual cash value. The bridge in this case was the carrier’s own agent applying “a depreciation formula” to convert replacement cost to actual cash value. What Georgia means by actual cash value is worked out elsewhere — see American Casualty v. Parks-Chambers (1965), which ties it to fair market value at the time of loss.
• The rule is limited by its own words. It covers “household furnishings, items of personal clothing and other commonly used personal property destroyed by fire” and “common and familiar property.” It says nothing about jewelry, fine art, collectibles, firearms, business inventory, or scheduled high-value items — the categories where carriers most often demand documentation, and where policies most often impose sublimits.
• It did not make every disputed contents valuation a bad-faith case. The estoppel in Division 2 (b) rested on a specific fact: the carrier’s own agent told the insured to list replacement cost with purchase dates and said he would depreciate it. Without that instruction in the record, a genuine disagreement about the amount of a loss remains available to a carrier as an answer to a penalty claim. Compare Parks-Chambers, where a bad-faith count failed because the demand was built around one specific sum that included a non-covered item.
• It did not decide whether a jury’s award of prejudgment interest is discretionary. The Court’s own footnote records that the trial court’s instructions “were directory in nature and did not advise the jury that awards of interest thereon were discretionary with the jury,” but “this matter was not urged as error.” Only the availability of separately stated interest was decided.
• It states no penalty percentage, and the statute has moved since 1985. The opinion cites OCGA § 33-4-6 for the 60-day period and nothing more. The governing text today is on our shelf: O.C.G.A. § 33-4-6, which now provides “not more than 50 percent of the liability of the insurer for the loss or $5,000.00, whichever is greater,” plus reasonable attorney’s fees, and which is not abated by payment after the 60-day period. Read the current statute, not the 1985 numbers in this verdict.

Why it matters to policyholders

After a house fire, the contents inventory is the part that breaks people. Carriers hand over a spreadsheet and ask for every item, its age, its condition and what it cost, and the receipts are ash. Braner is the Georgia decision that says the law will not demand the impossible.

Two columns, per item. The rule has a shape, and it is worth copying exactly: for each item, (1) purchase price or replacement cost, and (2) the approximate date of purchase or acquisition. Testify to those, item by item, and Georgia law treats the evidence as sufficient for a jury to find actual cash value on ordinary household property. You do not have to describe the condition of every towel.

Do it item by item anyway. The rule says “each such item.” A single lump number for “kitchen” is not what the Supreme Court approved. The reason the Braners’ testimony carried is that it was organized the way the rule describes.

If the adjuster tells you how to fill out the inventory, save the instruction. The most useful sentence in this opinion for a working claim is Division 2 (b). The carrier’s own agent told the insured to list replacement cost with purchase dates and promised to depreciate it himself — and that instruction is what stopped the carrier from later calling the claim inflated. Emails, letters, recorded calls, the adjuster’s own worksheet: keep them. Instructions from the carrier are evidence about what the carrier asked for.

Interest is its own line. Under Braner and OCGA § 13-6-13, a jury in a Georgia breach-of-contract case may add legal interest as a separate item even where the amount of the loss was disputed. On a claim that sits unpaid for years, that is not a rounding error.

And the deeper lesson is about who bears the cost of a hard proof problem. The Court of Appeals had ordered a $116,943 verdict retried over a $4,141 line item. The Supreme Court refused, and it changed the underlying evidence rule because the old one loaded the burden onto the person whose records had just burned. That is the register in which Georgia contents claims should be argued.

A public adjuster builds and prices the contents inventory, documents the carrier’s instructions, values the dwelling loss and negotiates the amount. The bad-faith penalty and attorney’s fees in this case were the product of a lawsuit, and litigation is attorney work — we document it, and refer it out.

Related on our shelf: Georgia Farm Bureau v. Brown on proving a total fire loss to the dwelling, Hanover v. Hallford and Primerica v. Humfleet on what a bad-faith demand requires, Cotton States v. Walker on proof of loss, and the full Georgia reading room.

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