Georgia Farm Bureau Mutual Insurance Company v. Croft et al.

Court of Appeals of Georgia, No. A13A0805, decided July 11, 2013 (Branch, Judge, for the court; Phipps, C. J., and Ellington, P. J., concurring). Counsel of record were James, Bates, Brannan & Grover, Duke R. Groover and Bradley J. Watkins for the appellant carrier, and Alan D. Tucker for the appellee homeowners. The complete opinion 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 322 Ga. App. 816. Here is everything we removed or repaired, in full. The reporter’s head matter is only the docket number, the caption, and the parallel-cite line “(746 SE2d 285)”; the caption and a court-and-date line are reprinted above the opinion, and the parallel-cite line is dropped. The archive also sets the reporter’s page-foot block down inside the opinion, between two paragraphs of Division 2 — the “Decided July 11, 2013.” line and the two counsel listings — and that block has been lifted out and summarized in this paragraph instead. Four repairs were made to the remaining text: the judge’s name line was set in bold; a stray apostrophe printed between “house” and “even though” in the first paragraph was removed; the scan’s “appears to he substantially damaged” and “the house has to he razed” were corrected to “be” in both places; and “Cheeks u. Miller” was corrected to “Cheeks v. Miller,” where the scan read a “v” as a “u.” Two presentation notes: the reporter’s indented block quotations are set here as block quotes, and the opinion’s five 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 — including the court’s own “[sic]” inside the Glynn County letter.

The full opinion

GEORGIA FARM BUREAU MUTUAL INSURANCE COMPANY v. CROFT et al.

Court of Appeals of Georgia. No. A13A0805. Decided July 11, 2013.

Branch, Judge.

Vincent and Patricia Croft seek a declaration that their homeowner’s insurance carrier is liable for the full replacement cost to rebuild their house even though it was only partially damaged by fire. The Crofts allege that because the house is located in a flood plain and was damaged by more than 50 percent of its value, a county ordinance requires that any repair to the house must conform to requirements for new construction, which will necessitate rebuilding the house. The carrier informed the Crofts that any damages subject to the “code upgrade exclusion” in the Crofts’ policy would not be covered. In response to motions from both sides, the trial court held that the exclusion was not enforceable, and it therefore granted judgment on the pleadings in favor of the Crofts and denied the carrier’s motion for summary judgment. The carrier appeals. We affirm the denial of the carrier’s motion but reverse the judgment in favor of the Crofts.

A plaintiff is entitled to a judgment on the pleadings under OCGA § 9-11-12 (c) only when there is a complete failure to state a defense to the plaintiff’s claims and, based on the undisputed facts found in the pleadings, the plaintiff is entitled to judgment as a matter of law. Pressley v. Maxwell, 242 Ga. 360 (249 SE2d 49) (1978); Perry Golf Course Dev. v. Housing Auth. of the City of Atlanta, 294 Ga. App. 387 (670 SE2d 171) (2008). For the purposes of the motion, all of the nonmovant’s well-pleaded material allegations are to be taken as true, and all of the movant’s (here, the Crofts) allegations that have been denied are taken as false. Id. See also Alexander v. Wachovia Bank, Nat. Assn., 305 Ga. App. 641 (700 SE2d 640) (2010) (same). And “the trial court is not required to adopt a party’s legal conclusions based on those facts.” (Citation omitted.) Novare Group v. Sarif, 290 Ga. 186, 191 (4) (718 SE2d 304) (2011). Also, a trial court may consider “exhibits that have been incorporated into the pleadings.” (Footnote omitted.) Printis v. Bankers Life Ins. Co., 256 Ga. App. 266 (568 SE2d 85) (2002), aff’d, 276 Ga. 697 (583 SE2d 22) (2003). Our review, in accordance with the above law, is de novo. Perry Golf, supra at 387.

So construed, the pleadings show that the Crofts’ Glynn County home was significantly damaged by fire on August 18, 2011. After the fire, the Crofts received an estimate that the cost of repair was $179,871.19. They also received an appraisal of their home “as of April 17, 2012” that shows the “depreciated cost of building improvements” on the property was $308,133.58. The Crofts applied to Glynn County for a building permit to make repairs based on the $179,871.19 estimate and the appraised value of the home. Glynn County found the permit application to be “noncompliant” because the structure is located in an “AE Special Flood Hazard Area and appears to be substantially damaged.” The County explained:

Buildings having sustained substantial damage must be brought into compliance with the requirements for new construction. Please note that substantial damage means damage of any origin sustained by a structure whereby the cost of restoring the structure to it’s [sic] before damaged condition would equal or exceed 50 percent of the market value of the structure before the damage occurred. Based on your submitted appraisal of $308,133.58, the maximum allowed scope of work would be limited to $154,066.79. Your total cost of $179,871.19 exceeds the allowed value.

The Crofts filed a claim with Georgia Farm Bureau Mutual Insurance Company (“GFB”), their homeowner’s insurance carrier, seeking coverage for their loss, and they eventually forwarded a copy of the Glynn County letter in support of their claim for total replacement of their home. GFB responded and informed the Crofts that GFB’s own appraisal of the damage showed the home could be repaired for $147,186.44, which was less than 50 percent of the appraised value of the home. GFB also stated that their policy contains an exclusion for “law or ordinance issues.”

The Crofts thereafter filed this action seeking a declaration that GFB was required to pay them “the full replacement costs to rebuild their home.” The Crofts incorporated a copy of the policy in their complaint. In addition to the request for declaratory relief, the Crofts alleged that GFB engaged in bad faith and fraudulent conduct, such as by giving them assurances that GFB would “fulfill its obligations pursuant to the Homeowners Policy with the Plaintiffs.” The Crofts also seek punitive damages, litigation expenses, and interest. The Crofts later moved for judgment on the pleadings on the grounds that the policy provides coverage for the full replacement cost to rebuild their home.

GFB moved for summary judgment on the grounds that the Ordinance or Law exclusion is valid and enforceable and that even if the exclusion is not enforceable, issues of fact remain as to whether the actual cost of repairing the Croft home is sufficient to trigger Glynn County’s code upgrade ordinance. The Crofts did not reply to GFB’s motion. In October 2012, the superior court entered an order, which it later amended, in which it held that the Crofts “reasonably expected that if their residence was destroyed their insurance policy would cover the cost to build a replacement building”; that the Crofts suffered a “constructive total loss” as a result of the fire; that the Ordinance or Law exclusion is ambiguous; that the exclusion can reasonably be construed not to preclude coverage; and that as a result, the exclusion “is not applicable and is unenforceable.” The trial court therefore granted the Crofts’ motion for judgment on the pleadings and denied GFB’s motion for summary judgment. GFB appeals both rulings.

1. The trial court erred by granting judgment on the pleadings in favor of the Crofts because the applicable ordinance is not in the record and because, even if we accept the Crofts’ allegations regarding the ordinance, there remain issues of fact on their claim that a county ordinance requires them to rebuild their house.

Both the Crofts’ arguments and the trial court’s decision are based on an ordinance that is not in the record. The Crofts argue that a Glynn County ordinance or building restriction prohibits them from repairing their home without rebuilding it, and the trial court found that “bringing the home into compliance with the current code requirements for new construction in a flood area … would require that the house be razed.” But no such ordinance or code can be found in the pleadings or in the record, let alone a certified copy of the ordinance, which is required to properly prove an ordinance; and GFB has not admitted to the wording of any such ordinance. Accordingly, the trial court erred by concluding that the Crofts were required to raze or rebuild their home as a result of a county code or ordinance.

Even if we were to accept the provisions of an ordinance as alleged by the Crofts (or as explained in the Glynn County letter), the pleadings, when construed as set forth above, show that there are issues of material fact regarding whether the ordinance would require the Crofts to rebuild their home. First, there is a material issue regarding the cost to repair the Crofts’ home. GFB’s appraisal of the damage to the property is $147,186.44, which is less than half the appraised value of the house, whereas the Crofts’ appraisal amounts to more than 50 percent of the appraised value of the house. This factual issue is material because under GFB’s appraisal, Glynn County presumably would approve the repairs to the house without requiring the Crofts to conform to new building requirements. Moreover, the policy provides a mechanism for resolving disputes between the insured and the insurer over the appraised amount of a loss; and the parties have yet to resolve the dispute of the amount of loss under that provision. Second, there is a material issue regarding the appraised value of the house. According to the letter from the Glynn County official, the determination of whether a structure has been substantially damaged depends in part on the “market value of the structure before the damage occurred.” (Emphasis supplied.) Whereas the Crofts rely on an appraisal of the property made “as of April 17, 2012,” which is eight months after the fire. Third, the appraisal of the house offered by the Crofts states that $308,133.58 is the “depreciated cost of building improvements.” The Crofts have not shown that this figure is equivalent to the “market value of the structure before the damage occurred,” the standard stated in the Glynn County official’s letter.

In sum, there are issues of fact and law as to whether the Crofts are required to raze and rebuild their home as a result of a Glynn County ordinance, which is an essential part of their claim that GFB should be required to compensate them for the replacement cost of the entire structure. The trial court therefore erred by granting judgment on the pleadings in the Crofts’ favor.

2. GFB also contends the trial court erred by denying its motion for summary judgment because the Ordinance or Law exclusion is unambiguous, valid and enforceable. But summary judgment is proper when there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. OCGA § 9-11-56 (c). As already shown, and as GFB admits, there are genuine issues of material fact as to whether the Ordinance or Law exclusion is triggered with regard to the Crofts’ insurance claim.

In its brief in the trial court, GFB impliedly acknowledges that the Crofts’ case turns on an issue of fact and that the question of whether the Ordinance or Law exclusion applies to the Crofts’ insurance claim depends on resolution of the issue of fact:

This declaratory judgment case arises out of a dispute over whether the cost to repair the damage to the plaintiffs’ home exceeds fifty percent of the value of the home and, if so, whether a code upgrade exclusion in GFB’s homeowner’s policy is valid.

GFB further acknowledges that if the Crofts had utilized GFB’s lower appraisal of the damage to the house in their application for a building permit from Glynn County, “Glynn County’s code upgrade ordinance would not apply.” Similarly, on appeal GFB argues that it was error for the trial court to conclude that the code upgrade ordinance “is necessarily triggered.”

We agree, as shown in Division 1, that there are issues of fact as to whether the Crofts are impacted by any Glynn County ordinances with regard to repairing their house. And we conclude that it would be premature for this Court to determine in the abstract whether the Ordinance or Law exclusion in the Crofts’ policy is enforceable as a matter of law. See generally Cheeks v. Miller, 262 Ga. 687, 688 (425 SE2d 278) (1993) (“A controversy is justiciable when it is definite and concrete, rather than being hypothetical, abstract, academic, or moot.”) (citation omitted). See, e.g., Ga. Farm Bureau Mut. Ins. Co. v. Franks, 320 Ga. App. 131, 139 (3) (739 SE2d 427) (2013) (physical precedent only) (where insurer had not shown that the value of the dwelling on the date of loss triggered application of Georgia’s Valued Policy Statute, OCGA § 33-32-5, the insurer’s argument regarding application of the statute was not ripe for review in this Court).

Because GFB has not shown that it is entitled to summary judgment, we find no error in the trial court’s denial of its motion.

Judgment affirmed in part and reversed in part.

Phipps, C. J., and Ellington, P. J., concur.

The five 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.

The policy sets forth the “Ordinance or Law” exclusion, as follows:

Section I - Exclusions

1. We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss.

a. Ordinance or Law, meaning enforcement of any ordinance or law regulating the construction, repair, or demolition of a building or other structure, unless specifically provided under the policy.

For an additional premium, GFB offers a separate endorsement providing coverage for property loss caused by the enforcement of an ordinance or law. But the Crofts did not purchase such an endorsement for the subject property.

In fact, the letter from Glynn County does not state that the house has to be razed; it only states that the Crofts must submit plans that bring the house into compliance with new building requirements.

Police Benevolent Assn. of Savannah v. Brown, 268 Ga. 26, 27 (2) (486 SE2d 28) (1997) (prior to January 1, 2013, proper method of proving an ordinance is “by production of the original or of a properly certified copy”) (citation omitted). Prime Home Properties v. Rockdale County Bd. of Health, 290 Ga. App. 698, 700 (1) (660 SE2d 44) (2008). See also OCGA § 24-2-221 (effective January 1, 2013, judicial notice may be taken of a certified copy of any ordinance or resolution under specified circumstances).

The Crofts’ brief contains wholly unsupported assertions that GFB’s repair estimate was an attempt “to defraud Glynn County into giving the Appellees a building permit.” “We will not consider on appellate review any assertions of fact unsupported by the trial record.” (Citation omitted.) Tarleton v. Griffin Fed. Sav. Bank, 202 Ga. App. 454, 455 (2) (a) (415 SE2d 4) (1992).

What it decided

A fire on August 18, 2011 significantly damaged the Crofts’ Glynn County home. Their repair estimate was $179,871.19. Georgia Farm Bureau’s own estimate of the damage was $147,186.44. The gap mattered for a reason that had nothing to do with the policy: the house sits in an AE Special Flood Hazard Area, and the county applies a substantial-damage test — if the cost of restoring the structure “would equal or exceed 50 percent of the market value of the structure before the damage occurred,” the repair has to meet the requirements for new construction. Working from the Crofts’ number and an appraisal of $308,133.58, the county called their permit application “noncompliant” and capped allowable work at $154,066.79. Working from the carrier’s number, the county threshold would not have been crossed at all.

The Crofts sued for a declaration that the carrier owed “the full replacement costs to rebuild their home,” plus bad faith, fraud, punitive damages, litigation expenses and interest. The carrier pointed to its Ordinance or Law exclusion. The trial court held that the Crofts had a reasonable expectation of replacement coverage, that they had suffered a “constructive total loss,” that the exclusion was ambiguous, and that it was “not applicable and is unenforceable.” It gave the Crofts judgment on the pleadings and denied the carrier summary judgment.

The Court of Appeals reversed the judgment for the homeowners and affirmed the denial of the carrier’s motion — and it is important to see why it did each one.

Division 1: the homeowners’ record could not carry the claim. Three separate failures, each of which is a checklist item for anyone making a code-upgrade claim in Georgia:

1. The ordinance was not in the record. “[N]o such ordinance or code can be found in the pleadings or in the record, let alone a certified copy of the ordinance, which is required to properly prove an ordinance.” The court’s footnote collects the authority: before January 1, 2013 an ordinance was proved “by production of the original or of a properly certified copy,” and OCGA § 24-2-221, effective that date, permits judicial notice of a certified copy under specified circumstances. A county official’s letter describing an ordinance is not the ordinance.
2. The repair cost was still in dispute — and the policy had a way to settle it. Because the two estimates fell on opposite sides of the 50 percent line, the court called the disagreement “material,” noting that under the carrier’s number “Glynn County presumably would approve the repairs to the house without requiring the Crofts to conform to new building requirements.” Then this sentence, which is the one to keep: “Moreover, the policy provides a mechanism for resolving disputes between the insured and the insurer over the appraised amount of a loss; and the parties have yet to resolve the dispute of the amount of loss under that provision.”
3. The valuation was the wrong valuation. The county’s test runs on “the market value of the structure before the damage occurred.” The Crofts offered an appraisal “as of April 17, 2012” — eight months after the fire — and the figure they relied on was the “depreciated cost of building improvements,” which, the court said, they “have not shown … is equivalent to the ‘market value of the structure before the damage occurred.’”

Division 2: the court would not rule on the exclusion. The carrier wanted a holding that its Ordinance or Law exclusion is “unambiguous, valid and enforceable.” It did not get one. Because fact issues remained over whether the exclusion was even triggered, the court held “it would be premature for this Court to determine in the abstract whether the Ordinance or Law exclusion in the Crofts’ policy is enforceable as a matter of law,” citing the rule that “[a] controversy is justiciable when it is definite and concrete, rather than being hypothetical, abstract, academic, or moot.” Summary judgment for the carrier was properly denied — on ripeness and fact grounds, not because the exclusion had been found bad.

Two footnotes carry weight of their own. The court printed the exclusion in full, including its anti-concurrent-causation lead-in (“Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss”). And it recorded that the carrier “offers a separate endorsement providing coverage for property loss caused by the enforcement of an ordinance or law. But the Crofts did not purchase such an endorsement for the subject property.”

What it did NOT decide

This case is often described as one in which the Court of Appeals refused to enforce the Ordinance or Law exclusion. That is not what happened, and the difference matters.

• It did not hold the exclusion unenforceable. It also did not hold it enforceable. It expressly declined to decide, calling the question premature and abstract on this record. The trial court’s rulings that the exclusion was ambiguous and “is not applicable and is unenforceable” did not survive as law — but they were not reviewed and rejected on the merits either. They came down with the judgment they supported.
• It did not adopt “reasonable expectations” or “constructive total loss.” Both were trial-court findings. Neither is endorsed anywhere in the opinion.
• It did not decide what the Glynn County ordinance requires. The court noted, in a footnote, that “the letter from Glynn County does not state that the house has to be razed; it only states that the Crofts must submit plans that bring the house into compliance with new building requirements.”
• It did not order appraisal, and it did not hold appraisal to be a prerequisite. It observed that the policy’s mechanism for resolving a dispute over the amount of loss existed and was unused. Read that as the court pointing at a tool, not creating a rule. For how Georgia courts treat appraisal as a policy condition, see Cudd v. State Farm (11th Cir. 2024) and McGowan v. Progressive (Ga. 2006).
• It did not touch the bad-faith, fraud, or punitive damages claims. Those were pleaded and never reached.
• It did not apply Georgia’s valued policy statute. OCGA § 33-32-5 appears once, inside a citation to Ga. Farm Bureau Mut. Ins. Co. v. Franks — a decision the court flagged as “physical precedent only” — and only for the proposition that an argument can be unripe. For what the valued policy statute actually does, see Georgia Farm Bureau v. Brown (1989).
• It did not create a general rule about “50 percent” thresholds. That number came from a county official’s letter in this record. It is a floodplain administration standard, not a policy term the court construed.

Why it matters to policyholders

Code-upgrade exposure is the quiet catastrophe in a partial loss. A fire burns a third of the house; the building department says you cannot put back what was there; and the cost of complying — elevation, wiring, egress, sprinklers, structural — can dwarf the fire damage itself. Croft is the Georgia appellate decision that shows how that fight is actually won or lost, and the answer is unglamorous: it is won on exhibits.

Read your declarations page before you have a loss. Most homeowners policies exclude the enforcement of building ordinances and then sell the coverage back as an endorsement, exactly as the footnote in this case describes. The Crofts did not buy it. That single line in the record shaped the whole case. This is a rule that can cost you your claim if you ignore it: if there is no Ordinance or Law endorsement on the policy, the starting position is that the code-driven part of the rebuild is excluded, and the argument has to be about whether the exclusion reaches the loss at all — not about what you assumed the policy covered.

Get a certified copy of the ordinance. Not the inspector’s letter, not the plan reviewer’s email, not a printout from the county website. The court threw out a judgment because the ordinance itself was missing from the record, and it said so twice.

Value the structure as of the day before the loss. The county’s substantial-damage test — and most floodplain ordinances written to the federal model — turns on pre-loss market value of the structure. The Crofts brought an appraisal dated eight months after the fire, reporting the “depreciated cost of building improvements.” That is a different number answering a different question, and the court said they had not shown the two were equivalent. If a 50 percent test decides your claim, the denominator has to be the right denominator, dated correctly, and supported.

Settle the repair cost through the policy’s own machinery. The entire case sat on a disagreement between $147,186.44 and $179,871.19 — a pure extent-of-damage and cost-of-repair fight, which is exactly the kind of dispute an appraisal clause exists to resolve. The court noticed that the parties “have yet to resolve the dispute of the amount of loss under that provision.” A repair cost fixed by an appraisal award is a fact in the record. A repair cost asserted in a brief is not.

And notice the order of operations. Croft is a reminder that a code-upgrade claim has two locks on it. The first is factual: does the ordinance, correctly proved and applied to a correctly determined repair cost and a correctly dated market value, actually force the rebuild? The second is contractual: does the policy pay for it? Georgia courts read exclusions narrowly and against the insurer that drafted them — see Nationwide v. Kim and American Strategic v. Helm — but no reading rule rescues a record that cannot open the first lock.

A public adjuster’s job here is the first lock: pull the certified ordinance, establish the pre-loss market value of the structure, build a defensible repair estimate, and use the appraisal clause where the policy allows it. The declaratory judgment action, the bad-faith count and the fraud count in this case were attorney work, and we refer that out.

More Georgia authority on our shelf: Georgia Farm Bureau v. Brown on proving a total fire loss, Braner v. Southern Trust on proving what was lost inside the house, and the full Georgia reading room.

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