Legal Issues

Admissible Evidence

Regardless of how strong an insurer may feel its case may be in exposing fraud, whether it be casualty, property, health, life, or workers’ compensation, unless the insurer can present evidence to the jury sufficient to expose the hidden crime, then all efforts undertaken during its investigation shall have been in vain. The purpose of this session is to provide guidance with respect to areas which may assist the insurer in presenting evidence of fraudulent conduct to the jury. While the particular areas of inquiry are by no means exhaustive or to be considered the most important items of evidence to be presented in a fraudulent case, they do represent issues common to the defense of various types of fraudulent cases and have been litigated extensively in almost all jurisdictions across the country.

In order to assist individuals whose particular jurisdiction is not represented in the case law presented, we have utilized the West Key Number System, sufficient to allow the reader the option of locating cases within their particular jurisdiction simply by utilizing either the West Digest of that particular region, West Decennial Digest, West Federal Practice Digest, or Westlaw Computer Research System.

Evidence of prior losses

One of the "badges of fraud" and an initial indicator of a questionable claim is the discovery of a multiple claims history. Although prior acts are generally inadmissible (see F.R.E. Rules 403, 404), many jurisdictions have carved out an exception to this rule where similar acts are intended to show fraud, motive, scheme or intent. See: Standard Fire Insurance Company v. Mitchell, 66 F.Supp. 950 (E.D. Tex. 1987); Galvan v. Cameron Mutual Insurance Company, 733 S.W.2d 771 (Mo. 1987); Sessions Company, Inc. v. Turner, 403 So.2d 1387 (Al. 1986); Weiscopf v. Bond, 739 F.Supp. 1084 (E.D. La. 1990); Turley v. State Farm Mutual Insurance Company, 944 F.2d 669 (10th Cir. Kan. 1991); Pugh v. State Farm Fire & Casualty Company, 474 So.2d 629 (Ala. 1985); Dial v. Travelers Indemnity Company, 780 F.2d 520 (5th Cir. Miss. 1986); Wernowski v. Economy Fire & Casualty Company, 477 N.E.2d 231 (Ill. 1985); Rutledge v. St. Paul Fire & Marine Insurance Company, 334 S.E.2d 131 (S.C. 1985); Collier v. South Carolina Insurance Company, 422 S.E.2d 52 (Ga. 1992).

However, other courts have held that evidence of prior losses, particularly prior fire losses, are inadmissible unless the insurer can prove that the insureds were responsible for the prior losses. See: Garcia v. Aetna, 657 F.2d 652 (5th Cir. Fla. 1981); Smith v. St. Farm, 633 F.2d 401 (5th Cir. Ga. 1980); Pacheco v. Safeco, 780 P.2d 116 (Idaho 1989); Aetna v. Guynes, 713 F.2d 1187 (5th Cir. Tex. 1983); Metropolitan Property & Liability Insurance Company v. Shepherd, 304 S.E.2d 74 (Ga. 1983).

In Dial v. Travelers Indemnity Company, 780 F.2d 520 (5th Cir. Miss. 1986), the Fifth Circuit Court of Appeals held that in order to determine whether evidence of other crimes or acts are admissible, the court must submit the proposed proof to a three-step test. It must determine that the evidence is relevant to issues other than defendant’s character. The evidence must possess probative value that is not substantially outweighed by its undue prejudice and must meet other requirements of Federal Rule of Evidence 404 (6). Finally, the evidence relevant to the issue of intent is valid only if an offense was, in fact, committed and the defendant, in fact, committed it. [Evid. § 129(5)]

While there have been numerous opportunities for insurers to seek introduction of evidence of the insured’s prior losses, there have been several attempts recently by insureds to introduce evidence of the insurer’s prior transactions with other insureds in actions for bad faith denials of claims. See e.g.: Hawkins v. Allstate Insurance Company, 733 P.2d 1073 (Ariz. 1987). [Evid. § 129(5)]

In Southerland v. Argonaut Insurance Company, 794 P.2d 1102 (Colo. 1990), the Colorado Court of Appeals held that evidence of an insurer’s regular late payments of workers compensation checks to its clients was admissible for purposes of demonstrating an ongoing pattern of purposeful delays in paying benefits and to prove the insurer’s economic motive in causing the delays in an action brought against the insurer alleging that the insurer had breached its duty of good faith in processing claims. Similarly, in Underwriters Life Insurance Company v. Cobb, 746 S.W.2d 810 (Tex. 1988), the Texas Court of Appeals held that evidence of an insurer’s denial of other claims around the same time it denied the insured’s claim on the basis that the insured failed to disclose its past medical history or pre-existing condition was so connected with the issue that a jury could construe the insurer’s activity as part of a systematic design or scheme to withhold payment of claims. However, other courts have held that denial of similar claims was immaterial, irrelevant and inadmissible to show a motive or scheme in an action for bad faith denial of claims by the insurer. Jones v. Automobile Insurance Company of Hartford, 698 F.Supp. 226, Aff’d in part, rev’d in part, 917 F.2d 1528 (N.D. Ga. 1988); Group Hospital Services, Inc. v. Daniel, 704 S.W.2d 870 (Tex. at 1985). [Evid. § 129(5)]

Criminal Pleas

In cases involving arson or bodily injury fraud, there may be sufficient evidence of the insured’s involvement that the state or federal government may independently pursue criminal charges of arson, insurance fraud or mail fraud against the insured. Similarly, a claimant may have been charged with a traffic offense which would indicate an admission that he was at fault in causing an accident, although the injured party makes a claim for bodily injury. Almost all jurisdictions have held that guilty pleas are admissible in civil cases as an admission against interest, so long as the statutory scheme for proving the plea, such as securing a certified or exemplified record of the plea from the clerk of court is complied with. See: Brown v. Green 738 F.2d 202 (7th Cir. Ill. 1984); State Farm Fire & Casualty v. Bomke, 849 F.2d 1218 (9th Cir. Cal. 1988)); McCormick v. U.S., 539 F.Supp. 1179 (Colo. 1982); Nunez v. Gonzalez, 456 So.2d 1336 (Fla. 1984); Carolina Casualty Insurance Company v. Davalos, 269 S.E.2d 897 (Ga. 1980); Tempo Trucking and Transfer Corporation v. Dixon 405 F.2d 506 (N.Y. 1975); Country Mutual Insurance Company v. Duncan, 794 F.2d 1211 (7th Cir. Ill. 1986); People v. Powell, 437 N.E.2d 1258 (Il. 1982); State Farm Fire & Casualty v. Miles, 730 F.Supp. 1462 (S.D.Ind. 1990); Perry v. Capital Air, Inc.; 649 F.Supp. 1260 (Dist. P.R. 1986). Romine v. Parman, 831 F.2d 944 (10th Cir. Kan. 1987); Anderson v. New Orleans Public Service, Inc., 433 So.2d 872 (La. 1983); LaMartina v. Hanna, 675 S.W.2d 444 (Mo. 1984); Schaefer v. McCreary, 345 N.W.2d 821 (Neb. 1984); Alexander v. Eldred, 100 A.D.2d 666 (N.Y. 1984); Silveira v. Santos, 490 A.2d 969 (R.I. 1985); Samuel v. Mouzon, 320 S.E.2d 482 (S.C. 1984); Grange Mutual Casualty Company v. Walker, 652 S.E.2d 908 (Tenn. 1983); Dixon v. Stewart, 658 P.2d 591 (Utah 1982); Safeco Insurance Company v. McGrath, 708 P. 2d 657 (Wash. 1985); White v. Lock, 332 S.E.2d 240 (W.Va. 1985). Hinshaw v. Keith, 645 F.Supp. 180 (Dist. Me. 1986).[Evid. § 207(4)]

However, in Texas, unless a guilty plea is made in open court, evidence of the guilty plea is not admissible in a civil suit for damages arising out of the negligence giving rise to the criminal charge. Cox v. Bohman, 683 S.W.2d 757 (Tex. 1984); U.S. v. Ocanas, 528 F.2d 353 (5th Cir. Tex. 1980).

In almost all jurisdictions, except the 6th Circuit, a nolo contendere plea is not admissible in a subsequent civil action. See e.g.: Neuner v. Clinkenbeard, 456 F.Supp. 54 (Dist. Okla. 1978); U.S. v. Kates, 419 F.Supp. 846 (Dist. Pa. 1976); Agnew v. State, 446 A.2d 425 (Md. 1982); Eisenberg v. Commonwealth Department of Public Welfare, 485 A.2d 511 (Pa. 1984); U.S. v. Yonkers Contracting Company, Inc. 689 F.Supp. 339 (S.D.N.Y. 1988); Windsor Forrest, Inc. v. Rocker, 175 S.E.2d 65 (Ga. 1970). [Evid. § 207(4]

Similarly, an insured’s attempt to show that no criminal prosecution was brought against him is inadmissible in a subsequent civil action arising from the same circumstances. Bazza v. Panscher, 533 N.Y.S.2d 285 (N.Y. 1988); Clough v. Greyhound Corp, 85 S.E.2d 476 (Ga. 1955). [Evid. § 147]

As indicated above, the 6th Circuit Court of Appeals has adopted an unusual rule with respect to pleas of nolo contendere insofar as the court has held that evidence of an insured’s nolo contendere plea to arson was admissible in the insured’s civil action against the insurer for civil proceeds in which the party offering the nolo plea is the defendant in the subsequent civil action. Levin v. State Farm Fire & Casualty Company, 735 F.Supp. 236 (E.D. Mich. 1990) [Evid. § 207(4]

Polygraph and Voice Stress Tests

Generally, polygraph tests are not admissible to prove that the party who had submitted to a polygraph exam did or did not tell the truth unless, before the polygraph is administered, both parties stipulate to allow it into evidence. See generally, F.R.E. Rule 702. Foster v. Township of Hillside, 780 F.Supp. 1026 (Dist. N.J. 1992); Brown v. Darcy, 783 F.2d 1389 (9th Cir. Cal. 1986); Simmons, Inc. v. Pinkerton’s, Inc., 762 F.2d 591 (7th Cir. Ind. 1985); Bally National Bank of Cortez v. Chaffin, 718 P.2d 259 (Colo. 1986); Farmer v. City of Ft. Lauderdale, 427 So.2d 187 (Fla. 1983); Haldeman v. Total Petroleum, Inc., 376 N.W.2d 98 (Iowa, 1985); Silver Spring TP v. Thompson, 496 A.2d 72 (Pa. 1985); Bufkin v. Texas Farm Bureau Mutual Insurance Company, 658 S.W.2d 317 (Tex. 1983); Munford, Inc. v. Anglin, 329 S.E.2d 525 (Ga. 1985). [Evid. § 150]

However, in several recent cases, the courts have held that the fact that the insured was willing to undergo a polygraph test was admissible as being relevant to the insured’s credibility and the insurer’s motive in refusing the claim. Murphy v. Cincinnati Insurance Company 772 F.2d 273 (6th Cir. Mich. 1985); Moss v. Nationwide Insurance Company, 493 N.E.2d 969 (Ohio 1985); Senders v. CNA Insurance Company, 515 A.2d 820 (N.J. 1986). [Evid. § 150]

Also, of particular note, are two relatively significant cases which held that an insurer cannot introduce evidence that their insured either refused to take a polygraph exam or took the exam and failed the same in order to establish good faith on behalf of the insurer. Lynch v. Mid-America Fire & Marine Insurance Company, 418 N.E.2d 412 (Ill. 1981); DeVres v. St. Paul Fire & Marine Insurance Company, 716 F.2d 939 (1st Cir. N.H. 1983). [Evid. § 150]

Psychological or voice stress tests are similar to the polygraph examination in that it is a device supposedly designed to detect untruthfulness or nervousness on behalf of the party being examined. However, the courts have universally disapproved admitting these test results into evidence on the same basis that the polygraph results are deemed inadmissible, in that they have been shown to be unreliable, inaccurate and sufficiently invalid to warrant its inadmissibility in judicial proceedings. Joubert v. Travelers, 736 F.2d. 191 (5th Cir. La. 1984); Barrell of Fun v. State Farm Fire & Casualty Insurance Company, 739 F.2d 1028 (5th Cir. La. 1984); Simon Neustadt Family Center, Inc. v. Bloodworth, 641 P. 2d 531 (N.M. 1982). [Evid. § 150]

Photographs, Videotape, Sound recordings and handwriting

During the insurer’s investigation of the claim, the chances are very high that photographs, videotape, sound recordings, handwriting samples and/or signatures will be obtained in order to substantiate the insurer’s contention that the claim is fraudulent. However, unless this evidence can be submitted to the jury for consideration, then these tools are wholly ineffective.

Most courts in various jurisdictions across the country have formed a relatively simple rule to determine the admissibility of photographs. Simply stated, if a proper foundation can be laid by showing that the photographs accurately depict the subject which they purport to portray, and if such evidence will be helpful to the jury, then the photographs will generally be deemed admissible, even if the photographer himself is unavailable. Shiver v.Waites, 408 So.2d 502 (Ala. 1981); Johnson v. State, 636 P.2d 47 (Ark. 1981); Dildine v. Clark Equipment Company, 686 S.W.2d 791 (Arz. 1985); Blanchard v. City of Bridgeport, 463 A.2d 553 (Conn. 1983); Sinai v. Polinger Company, 498 A.2d 520 (D.C. 1985); Hannewacker v. City of Jacksonville Beach, 419 So.2d 308 (Fla. 1982); Reliance Insurance Company v. Bridges, 311 S.E.2d 193 (Ga. 1983); Hascup v. City and County of Honolulu, 639 P.2d 870 (Haw. 1982); Rowett v. Kelly Canyon Ski Hill, Inc., 639 P.2d 6 (Idaho 1981); City of Chicago v. Scandia Books, Inc., 430 N.E.2d 14 (Ill. 1981); Paducah Area Public Library v. Terry, 655 S.W.2d 19 (Ky. 1983); Rosenthal v. Weckstein 473 N.E.2d 202 (Mass. 1985); McMiddleton v. Otis Elevator Company 362 N.W.2d 812 (Mich. 1984); Jesco, Inc. v. Shannon, 451 So.2d 694 (Miss. 1984); Pfeffer v. Kerr, 693 S.W.2d 296 (Mo. 1985); Simonson v. White, 713 P.2d 93 (Mont. 1986); Chalupa v. Hartford Fire Insurance Company, 350 N.W. 2d 541 (Neb. 1984); DeFrancisci v. Barron, 467 N.Y.S. 2d 419 (N.Y. 1983); Gay v. Walter, 283 S.E.2d 797 (N.C. 1981). [Evid. § 359(1)]

Similarly, in order to lay a proper foundation for sound recordings, the proponent seeking admission of tapes into evidence must establish that a recording device was capable to take the conversation offered into evidence; that the operator of the device was competent to operate it; that the recording is authentic and correct; that changes, additions and deletions have not been made; that the recording has been preserved in a manner satisfactory to the court; that the speakers on the tape are identified by the proponent of admission; and that the conversation was made voluntarily and in good faith without any sort of inducement. Williams v. Butler, 746 F.2d 431 (5th Cir. Ark. 1984). See also: John Hancock Mutual Life Insurance Company v. Dutton, 585 F.2d 1289 (5th Cir. Ga. 1978).

With respect to proof of handwriting, it is sufficient that the proponent seeking admission testifies that he is familiar with the handwriting sample offered and that he recognizes same as an accurate sample of handwriting of the party sought to be established. In some jurisdictions, it is sufficient to allow handwriting samples to go to the jury who are authorized to compare signatures once the foundation is laid for admission of the sample into evidence. Rader v. PageBoyer Marx & Associates, Inc, 235 S.E.2d 690 (Ga. 1977); Perryman v. Johnson Products, Inc., 698 F.2 1138 (11th Cir. 1983).

Examinations Under Oath

Individuals who pursue fraudulent claims have often been involved in litigation and bankruptcy proceedings in the past. As such, procurement of certified or exemplified copies of pertinent pleadings and filings is desirable inasmuch as numerous courts have held that a pleading in a prior civil proceeding may be offered into evidence as an admission against interest. Magnolia Square Homeowners Association v. Safeco Insurance Company of America, 271 Cal. Rptr. 1 (Cal. 1990); Goodwin v. ITT Commercial Finance Corp., 497 N.E.2d 331 (Ill. 1986); Trexlar v. Seaboard Systems, R.R. Inc., 641 F.Supp. 688 (W.D.N.C. 1986); Duhon v. Petroleum Helicopters, Inc., 554 So.2d (La. 1989); McWilliams v. Szymanski, 792 P.2d 457 (Or. 1990); Pankow v. Mitchell, 737 S.W.2d 293 (Tenn. 1987); Williams v. Union Carbide Corp., 790 F.2d 552 (6th Cir. Tenn. 1986); Stratton v. Sachs, 900 F.2d 255 (Dist. Md. 1989); Fidelity and Deposit Company of Maryland v. Hudson United Bank, 493 F.Supp. 434 (Dist. N.J. 1980); Bentley v. Ayres, 117 S.E.2d 633 (Ga. 1961). [Evid. § 208(2)]

Like prior pleadings, examinations under oath and sworn statements taken by the insurer are admissible into evidence in their entirety. Essman v. Fire Insurance Exchange, 753 S.W.2d 955 (Mo. 1988); McIntosh v. Eagle Fire Insurance Company of New York, 325 F.2d 99 (8th Cir. 1963). [Evid. § 269(1)]

Police Reports, Fire Reports and Other Investigative Records

Investigative Records

In general, Rule 803(8) of the Federal Rules of Evidence makes admissible records, reports, statements in any form from public offices or agencies, including factual findings resulting from an investigation made pursuant to authority granted by law, unless the sources of information or other circumstances indicate a lack of trustworthiness. Similarly, 803(6) makes available records kept in the course of a regularly conducted business activity if it was the regular practice of that business activity to make the report a record as long as same is shown by the testimony of the custodian or other qualified witness, unless the source of information or the method or circumstance of preparation indicates a lack of trustworthiness. Generally, the federal courts have permitted police reports to be admitted into evidence unless the document has not been proven to be trustworthy. See, e.g.: Dallas and Mavis Forwarding Company v. Stegall, 659 F.2d 721 (6th Cir. Ky. 1981) [state trooper’s report inadmissible as containing no physical data or evidence regarding where accident occurred and consisted primarily of statements of biased, eyewitnesses]; Meder v. Everest and Jennings, Inc., 637 F.2d 1182 (8th Cir. Mo. 1981) [report inadmissible since the source of information unknown]; Ferries v. Atlas Truck Body Manufacturing Company, 797 F.2d 619 (8th Cir. Mo. 1986) [police report inadmissible where no measurements or relative position of vehicles or length of skid marks were made and report could not be corroborated]; Joseph Schachter & Company v. John Hancock Mutual Life Insurance Company, 801 F.2d 563 (2nd Cir. N.Y. 1986) [police report inadmissible inasmuch as detective who investigated insured’s death stated he did not know whether death was accident or suicide]; Baker v. Elcona Homes Corp., 588 F.2d 551 (6th Cir. Ohio 1978) [police report inadmissible since report contained truck driver’s statement and sergeant’s notations concerning fault].

A number of states have ruled that a motor vehicle accident report is admissible either under the public records exception or business records exception to the hearsay rule. Williamson v. City of Springfield, 465 N.E.2d 1035 (Ill. 1984); Lannon v. Taco Bell, Inc., 708 P.2d 1370 (Colo. 1985); Gross v. Latimer, 472 A.2d 1303 (Conn. 1984); Leiken v. Wilson, 445 A.2d 993 (D.C. 1982); Reid v. Heffernan, 318 S.E.2d 700 (Ga. 1984); Rumley v. City of Mason City, Iowa, 320 N.W.2d 648 (Iowa 1982);Kincade v. Doll, 472 So.2d 60 (La. 1985); Genova v. Genova, 554 N.E.2d 1221 (Mass. 1990); Copeland v. City of Jackson, 548 S.2d 970 (Miss. 1989); Wentz v. Unified, 365 S.E.2d 198 (N.C. 1988); Sanders v. Hairston, 554 N.E.2d 1951 (Ohio 1981); Aetna Casualty & Surety Company v. Kuhl, 463 A.2d 822 (Md. 1983); Schear v. Motel Management Corp. of America, 487 A.2d 1240 (M.D. 1985); McCoy v. Hershey Chocolate Company, 65 S.W.2d 128 (Mo. 1983); Purdy v. Nationwide Mutual Insurance Company, 445 A.2d 424 (N.J. 1982); Bracco v. Mabstoa, 502 N.Y.S. 2d (N.Y. 1986); Ours v. West Virginia Department of Motor Vehicles, 315 S.E.2d 634 (W.Va. 1984).[Evid. § § 318(1), 333(1)]

However, other courts have held that police reports do not fall within any exception to the hearsay rule and, as such, are inadmissible. Plenkers v. Shappelle, 420 S.2d 41 (Ala. 1982); Golli v. Reutter, 384 N.W.2d 43 (Mich. 1985); Holland v. Zelnick, 478 A.2d 885 (Pa. 1984); Stevenson v. Emerson Electric Corp., 333 S.E.2d 355 (S.C. 1985); McDonald v. Onoh, 772 S.W.2d 933 (Tenn. 1989); Victory Park Apartments, Inc. v. Axelson, 367 N.W.2d 155 (N.D. 1985); Kaye v. State Department of Licensing, 659 P.2d 548 (Wash. Appeal 1983). [Evid. § 333(1)]

In addition to police and accident reports, the courts have held on a number of occasions that reports prepared by fire investigators, fire marshals, and the Department of Alcohol, Tobacco and Firearms (ATF), fall within the public records exception to the hearsay rule, and as such, are properly admitted once authenticated. Dean v. Insurance Company of North America, 453 N.E.2d 1187 (Ind. 1983); Kincaid v. Doll, 472 S.2d 60 (La. 1985); Duboise v. State Farm & Casualty Company, 734 F.Supp. 722 (E.D.La. 1990). [Evid. § 333(1)]

Reports prepared during the investigation of a questionable death claim including a death certificate, coroner’s certificate or pathologists report have been deemed to be admissible, once statements contained in the reports declaring that the death was accidental were excised. Pollard v. Metropolitan Life Insurance Company, 598 F.2d 1284 (2nd Cir. Pa. 1979). [Evid. § 333(1)]

Expert Opinions

In order to qualify a witness as an expert under Rule 702 of the Federal Rules of Evidence, it must be demonstrated that they have: (1) Knowledge; (2) Skill; (3) Experience; (4) Training; or (5) Education in their field of expertise. It is not necessary that the witness be qualified with respect to all five criteria related above. Although the trial judge determines whether witnesses are properly qualified as experts, it is up to the jury to determine how much weight to give his testimony once the court has declared him as an expert witness. See generally Exum v. General Electric Corp, 819 F.2d 1158 (Dist. D.C. 1987); Thomas J. Klein, Inc. v. Lorillard, Inc. 878 F.2d 791 (4th Cir. Md. 1989); Rogers v. Ray Mark Industries, Inc., 922 F.2d 1426 (9th Cir. Cal. 1991); Mason v. E. L. Murphy Truck Company, Inc., 769 F.Supp. 341 (Dist. Kan. 1991); Bailiff v. Manville Forest Products, Corp., 772 F.Supp. 1578 (S.D. Miss. 1991).

Furthermore, in determining whether to admit the testimony of an expert, the court must determine whether the proposed testimony falls within traditional fields of learning and expertise, or whether the knowledge, skill, experience, training or education offered by the witness will help the jury understand the evidence or determine the fact at issue. Van Blargan v. Williams Hospitality Corp, 754 F.Supp. 246 (Dist. P.R. 1991). However, if an expert is not qualified, his opinion is inadmissible, regardless of the content of the opinion. Smith v. Ortho Pharmaceutical Corp., 770 F.Supp. 1561 (N.D. Ga. 1991). [Evid. § § 544, 545, 550(1)]

An expert witness may give testimony which provides an opinion going to the ultimate issue in the case. See F.R.E. Rule 704(a); Hanson v. Waller, 888 F.2d 806, (11th Cir. Ga. 1989). However, an expert may not base his opinion on an opinion expressed by another witness. Stancill v. McKenzie Tank Lines, Inc., 497 F.2d 529 (5th Cir. Ga. 1974). Nor is it proper for one witness to state that another expert’s view is spurious. Ostrander By Ostrander v. Cohen Mills, Inc., 119 F.R.D. 417 (Dist. Minn. 1988); Smith v. Ortho Pharmaceutical Corp., 770 F.Supp. 1561 (N.D. Ga. 1991). [Evid. § § 544, 545, 550(1)]

In cases involving fire claims, opinions of fire officials that an insured premises was deliberately set was held to be a proper opinion and deemed admissible. American Home Assurance Company v. Sunshine Supermarket, 753 F.2d 321 (Ct.App.V.I. 1985); Godwin v. Farmers Insurance Company of America, 631 P.2d 571 (Ariz. 1981); Thrifty-Mart, Inc. v. Commercial Union Assurance Companies, 268 S.E.2d 398 (Ga. 1980) [inspector from state fire marshall’s office]; Phillips v. USF&G, 235 S.E.2d 771 (Ga. 1977) [fire chief with eighteen years experience]; Galvan v. Cameron Mutual Insurance, 733 S.W.2d 771 (Mo. 1987) [professional fire expert]; Godwin v. Farmers Insurance Company of America, 631 P.2d 571 (Ariz. 1981). However, see Audobon Insurance Company v. State Farm Mutual Insurance Company, 425 S.E. 907 (La. 1981) [fireman with six years on the scene investigation experience with only high school education and no formal courses in fire origins who had never testified as an expert witness is not qualified as expert]; Bloomgreen v. Fire Insurance Exchange, 517 N.E.2d 290 (Ill. 1987) [volunteer fireman who had never conducted cause and origin investigation was not qualified as expert witness]. [Evid. § § 544, 545, 550(1)]

Not only have the courts qualified expert witnesses in fire cases, but also with respect to accident investigations. For example, in Carpenter v. Barner, 797 S.W.2d 99 (Tex. 1990), a 21 year veteran of the City’s Police Department was found to be qualified as an expert to testify as to negligence and proximate cause in an action involving a motor vehicle accident. See Also: Hanson v. Waller, 888 F.2d 806 (11th Cir. Ga. 1989); Estate of Hunt v. Board of Commissioner of Henry County, 526 N.E.2d 1230 (Ind. 1988) [state trooper qualified to testify as expert witness, although only on the job twenty months, based upon knowledge and training at the time of trial]; May v. Strecker, 453 N.W.2d 549 (Minn. 1990) [21 year veteran of police force with 80 hours in class on traffic accident investigation and involvement in numerous rear-end traffic accident qualified as expert]; Hastings Mutual Insurance Company v. State Farm Insurance Company, 442 N.W.2d 664 (Mich. 1989) [accident reconstruction expert and former state trooper with expertise as to speeds and impact held competent to testify that high-speed collision would likely cause skull fractures and spine fractures on motorcycle involved in four car collision]; Jefferson Pilot Life Insurance Company v. Clark, 414 S.E.2d 521 (Ga. 1991) [trial court abused discretion when it determined that state patrolman with twenty years experience and numerous courses on traffic accident investigations and actual investigation in hundreds of traffic accidents, was not qualified as expert, when called upon to decide cause of accident]. [Evid. § § 544, 545, 550(1)]

It is not permissible for a witness qualified in one area, to testify in an area which is not part of the witness training or experience. Laffman By and Through Jacques v. Sherrod, 565 S.2d 760 (Fla. 1990) [Accident Reconstructionist and Metallurgist not qualified to render an opinion, based on examination of orthopaedic X-rays, that moped rider’s injuries were caused by "Fred Flintstone" maneuver (i.e. dragging feet to brake moped), inasmuch as his opinion was dependent on radiology orthopaedic studies in which he was not qualified].

Evidenece Demonstrating State of Mind

Although allegations of bad faith are generally not welcomed by insurers, it has proven to be a doubled edge sword in numerous jurisdictions. Insurers who face allegations of bad faith are permitted to introduce evidence to show the basis for their decision to deny the claim, or to otherwise demonstrate their state of mind at the time the decision was made in order to explain their conduct. Such evidence is deemed admissible, even if the testimony they offer would be otherwise inadmissible in the case. The basis for the rule is that such testimony is offered not to show the truth of the matter asserted, but to explain the reason behind the insurer’s decision to dishonor the claim.

In Pace v. Insurance Company of North America, 838 F.2d 572 (1st Cir. R.I. 1988), the court held that letters containing results of interviews with the insured and the captain of a ship were not hearsay when they were offered to prove that the insurer had refused to pay under a Maritime Hull policy on counsel’s advice and not in bad faith. Similarly, in Davis v. Cincinnati Insurance Company, 288 S.E.2d 233 (Ga. 1982), the trial court did not err in allowing testimony by an attorney who represented the insurer at the time a decision was made to refuse to settle a claim on the basis that the inventory indicated that the claim might result in a judgment of $17,000 to $20,000, whereas the injured party was not willing to settle for less than $32,000. See Also: Heller v. Jonathan Investment, 481 N.E.2d 987 (Ill. 1985); Spotts v. Reidell, 497 A.2d 630 (Pa. 1985); Commercial Union Insurance Company v. Smith, 347 S.E.2d 701 (Ga. 1986); Colonial Life and Accident Insurance Company v. Donaldson, 322 S.E.2d 510 (Ga. 1984); New Market Investment v. Firemen’s Fund Insurance Company, 774 F.Supp. 909 (E.D. Pa. 1991); Letson v. Liberty Mutual Insurance Company, 523 F.Supp. 1221 (N.D. Ga. 1981). [Evid. § § 269(1), 471(9)]

Chain of Custody

Where physical evidence has been collected by the insurer for examination by another entity, sufficient care must be taken to insure that the chain of custody can be established so that the sample can be traced from taking possession to the time it was delivered for analysis. The insurer must be able to identify all persons who came in contact with the sample during the time that it was in the possession of the insurer. The purpose for the chain of custody rule is to insure that the possibility of tampering with the physical evidence is greatly reduced or diminished. Sligh v. Johnson, 342 S.E.2d 620 (S.C. 1986); Emerick v. Carson, 472 A.2d 1133 (Pa. 1984); Bartel v. State, 704 P.2d 1067 (Mont. 1985); Elliott v. Leavitt, 178 S.E.2d 268 (Ga. 1970); Richardson v. Continental Insurance Company, 468 S.2d 675 (La. 1985); Moerman v. Kalamazoo County Road Commission 341 N.W.2d 829 (Mich. 1983); Irwin v. Town of Ware, 467 N.E.2d 1292 (Mass. 1984); Uniguard Ins. Co. v. Elmore, 224 S.E.2d 762 (Ga. 1976); Interstate Life & Acc. Ins. Co. v. Whitlock, 144 S.E.2d 532 (Ga. 1965). [Evid. § 150]

Misrepresentation In The Application

The law in Georgia with respect to misrepresentations is as follows:

• Misrepresentation, omissions, concealment of facts and incorrect statements [in an application for insurance] shall not prevent a recovery under the policy in conflict unless:
• Fraudulent;
• Material either to the acceptance of the risk or to the hazard assumed by the insurer; or
• The insurer in good faith would have either not issued a policy or contract or would not have issued a policy or contract in as large an amount or at the premium rate applied for and would not have provided coverage with respect to the hazard resulting in the loss if the true facts had been known to the insurer as required either by the application for the policy or contract otherwise. [O.C.G.A. § 33-24-7].

If an insurer seeks to void a policy, ab initio, due to misrepresentations in the application, it is incumbent upon the insurer to return all premiums to the insured for that policy term, less it waive the defense or misrepresentation in the application. Massachusetts Bay Insurance Company v. Hall, 186 Ga. App. 19, (1990). An insurer who fails to return the premiums acts inconsistently with his intention that the policy is void because of the application misrepresentation and, as such, waives that defense. State Farm Fire & Casualty Company v. Jenkins, 167 Ga. App. 4 (1983); Loeb v. Nationwide Mutual Fire Insurance Company, 162 Ga. App. 561 (1892).

As indicated above, under O.C.G.A. § 33-24-7, to determine whether a misrepresentation is material or would change the nature, extent or character of the insured interest, the insurer must show that the misrepresentation would either: (1) influence the insurer in determining whether to accept the risk initially; or (2) result in the charge of a higher premium for the risk sought to be insured. Haugseth v. Cotton State Mutual Insurance Company, 192 Ga. App. 853 (1989); Lee v. Metropolitan Life, 158 Ga. 517 (1924). Furthermore, the misrepresentation made by the insured need not be made intentionally in order for the insurer to void coverage. Misrepresentations made innocently, in good faith, and without knowledge that it is false, are sufficient to void the policy so long as same is material to the risk.O.C.G.A. §33-24-7(b)(3); Haugseth v. Cotton State Mutual Insurance Company, Supra; United Family Life Insurance Company v. Shirley, 242 Ga. 235 (1978).

Contracts of insurance are governed generally by the laws which are applicable to contracts in the State of Georgia. Pursuant to Georgia law, once a contract has been breached, absent ratification by the non-breaching party, the breach cannot be undone. In other words, once the contract has been breached, the complying party is free to treat the contract as if it were at an end, and is relieved of any duty to perform under the terms of the contract.Rollins v. Gault, 153 Ga. App. 781, 266 S.E.2d 560 (1980). Insurance in the State of Georgia is a matter of contract, and insurance contracts are treated no differently than any other form of contract.Grange Mutual Casualty Company v. King, 174 Ga. App. 716, 331 S.E.2d 41 (1985); Richmond v. Georgia Farm Bureau Mutual Insurance Company, 140 Ga. App. 215, 231 S.E.2d 245 (1976).

The burden of proof, however, is on an Insurer to prove affirmative defenses such as failure of the insured to comply with policy conditions, misrepresentations made by the insured or fraud. See: O.C.G.A. § 24-4-1; Equitable Life Assur. v. Florence, 47 Ga. App. 711, 171 S.E. 317 (1933); Masonic Relief Ass’n v. Hicks, 47 Ga. App. 499, 171 S.E. 215 (1933); Pennsylvania Threshermen & Farmers Mutual Cas. Ins. Co. v. Taylor, 81 Ga. App. 277, 58 S.E.2d 542 (1950); Employers Liab. Assur. Corp v. Sheftall, 97 Ga. App. 398, 103 S.E.2d 143 (1958).

It is also important that the agent not have any knowledge about misrepresentations made by the insured in the application. In Gustafson v. Cotton States, 230 Ga. App. 310, 496 S.E.2d 346 (1998), Cotton States was able to prevail on Summary Judgment in a matter where the insured has misrepresented her five (5) prior fire losses as well as the fact that they had a Chow on the premises. The Court of Appeals reversed, stating that there were too many fact questions remaining which had to be resolved by a jury.

The Court of Appeals found in Gustafson that even if an application contains material misrepresentations sufficient to void the policy under O.C.G.A. 33-24-7, if an agent of the insurer has actual knowledge that the statement on the application is false, then the agent’s knowledge is imputed to the insurer and the insurer is thereafter estopped from asserting the misrepresentation in the application as a defense. See: O’Kelley v. Southland Life Ins. Co., 167 Ga. App. 455, 305 S.E.2d 873 (1983); Jones v. United Ins. Co., 177 Ga. App. 102, 338 S.E.2d 532 (1985); Graphic Arts. Mut. Ins. Co. v. Pritchett, 220 Ga. App. 430, 469 S.E.2d 199 (1996); Millan v. Residence Inn, 226 Ga. App. 826, 487 S.E.2d 431 (1997); Gustafson v. Cotton States, Supra.

When determining whether material misrepresentations were made in the application, the insured is permitted to state what their "subjective" understanding of the question was when they read the policy application. See: Jackson National Life v. Snead, 231 Ga. App. 406 ; 499 S.E. 2d 173 (1998).

Omissions in an insured’s policy application are an affirmative defense under Georgia law. As such, it must be plead and pointed out to the insured. Any failure of the insurer to assert the defense initially will result in a waiver of that defense by the insurer. See: Hamilton v. Mecca, Inc., 930 F. Supp. 1540 (S.D. Ga. 1996).

If Insurance Company intends to void the policy as a result of misrepresentations in the application, it is essential that it do so immediately. Where a company discovers a misrepresentation in the application, but continues to treat the policy as valid and binding, and retains the insureds’ premiums as earned, the misrepresentation defense is waived. See: State Farm Fire & Cas. Co. v. Jenkins, 167 Ga. App. 4, 305 S.E.2d 801 (1983); Loeb v. Nationwide Mut. Fire. Ins. Co., 162 Ga. App. 561, 292 S.E.2d 409 (1982); Haugseth v. Cotton States Mut. Ins. Co., 192 Ga. App. 853, 386 S.E.2d 725 (1989); Jones v. Carter, 227 Ga. App. 401, 489 S.E.2d 141 (1997).

The Georgia Court of Appeals has ruled on three occasions that automobile policies may, in fact, be voided to the date of inception pursuant to O.C.G.A. § 33-24-7.

In Bourne v. Balboa Insurance Company, 147 Ga. App. 55 (1977), the insured owned a motorcycle and completed an application for a policy of insurance with Balboa. Balboa maintained that when he made the application, he was asked no question about his driving record and signed the application in blank. The application had, in fact, inquired of Bourne if he had ever had his license suspended or if he had suffered a moving traffic violation in the past two years. The completed application indicated "no" to both questions. In fact, Bourne’s driving reflected, and Bourne admitted, that several months before the issuance of the policy, he was convicted of driving under the influence and that his license had been temporarily suspended. Shortly after the policy was issued, Bourne’s motorcycle was stolen and a claim was filed. During its investigation, Balboa discovered the violation mentioned above and refused the claim, maintaining that the policy was void ab initio, based on false and material misrepresentations in the application.

During litigation, Bourne admitted that he was not unable to read the application, or that the agent prevented Bourne from reading the application. The court found that one who signs a written document without reading it, unless prevented from doing so by some fraud or artifice, is chargeable with knowledge of its content. As such, Bourne was chargeable with knowledge that the information contained in the application was incorrect, even though he may not have provided same.

The trial court granted summary judgment to the insurer, holding that the policy was void ab initio due to material misrepresentations in the application. Balboa Insurance Company established that the insurance would not have been issued to anyone who had been convicted of DUI or to anyone who had suffered a license suspension in the past. As such, Balboa was well within its rights to void the policy ab initio and decline to pay the claim based on material misrepresentations in the application. The Court of Appeals affirmed the trial court’s result and approved the propriety of voiding the motorcycle policy ab initio due to the material misrepresentations in the application. It should be noted that this particular case was decided in 1977, well after the Georgia Legislature’s enactment of Georgia’s Motor Vehicle Insurance Cancellation statute found in O.C.G.A. § 33-24-45 in 1968. See Ga. L. 1968,p. 1126, § 1.

More recently, the Court of Appeals approved use of voiding automobile policies to the date of inception in Haugseth v. Cotton States Mutual Insurance Company, 192 Ga. App. 853 (1989) and Platt v. National General Insurance Co., 205 Ga. App. 705, 423 S.E.2d 387 (1992).

Arson Committed By or On Behalf of The Insured

An insurer may defend an action based upon arson, even if that exclusion is not contained in the policy itself. See: Powell v. Merrimack Mutual Fire Ins. Co.,80 F.R.D. 431 (N.D. Ga. 1978); J.B. Smith v. Federated Mutual Ins. Co., 124 Ga. App. 693 (1971). In order for the Insurer to establish a prima facie case of arson for the purpose of denying coverage under a fire policy, the Defendant must show by a preponderance of the evidence, all three of the following items: (1) That the fire is a result of arson, that is, the intentional setting of the fire, absent any circumstances showing cause by accident or neglect, but that it was intentionally and deliberately set by the act of some person with the intent to cause the destruction of the property; (2) Motive on the part of the Insureds to set the fire; and (3) Direct evidence implicating the Insureds, or unexplained surrounding circumstantial evidence implicating the Insureds. See: Southern Trust Ins. Co. v. Braner, 169 Ga. App. 567 (1984); Allstate Ins. Co. v. Talbot, 198 Ga. App. 190 (1990).

Intentional burning of property may be shown by evidence aimed at demonstrating the improbability that the fire had resulted from accidental or natural causes. See: Jackson v. State, 157 Ga. App. 580 (1981); 5 Am. Jur. 2d, Arson & Related Offenses, § 49.

By the very clandestine nature of the act, intentional burning is generally incapable of direct proof. It may therefore be proved by the preponderance of circumstantial evidence, which proof of intentional burning, ample motive to burn, and unexplained circumstances surrounding the fire. See: Boone v. Royal Indem. Co., 460 F.2d 26 (10th Cir. 1972); Carpenter v. Union Soc. Of Centon, Ltd., 284 F.2d 155 (4th Cir. 1960); Miele v. Boston Ins. Co., 288 F.2d 178 (8th Cir. 1961) Cora Publishing, Inc. v. Continental Cas. Co., 619 F.2d 482 (5th Cir. 1980).

Accordingly, the insurance company may rely solely upon circumstantial evidence to prove the policyholder’s involvement or connection with the fire. See: Fortson v. Cotton States Mut. Ins. Co., 168 Ga. App. 155 (1983).

Among the ways motive may be inferred would be presentation by the Insurer that the Insured had experienced substantial financial distress. See: Southern Trust Ins. Co. v. Braner, 169 Ga. App. 567 (1984).

The Insurer is not required to establish that the Insureds personally set fire to their property in order to establish its defense and prevail on the question of arson. See: Don Burton, Inc. v. Aetna, 575 F.2d 702 (9th Cir. 1978); Cora Pub.Inc. v. Continental Cas. Co., Supra.

Georgia’s Bad Faith Statute

O.C.G.A.§33-4-6 reads, in relevant part:

• In the event of a loss which is covered by a policy of insurance and the refusal of the insurer to pay the same within 60 days after a demand has been made by the holder of the policy and a finding has been made that such refusal was in bad faith, the insurer shall be liable to pay such holder, in addition to the loss, not more than 25 percent of the liability of the insurer for the loss and all reasonable attorney’s fees for the prosecution of the action against the insurer.

Before a party can recover attorney’s fees or other penalty for bad faith against an insurer, the party seeking such penalties must make a demand for payment under the policy more than 60 days prior to the filing of the suit. Hanover Insurance Co. v. Hallford, 127 Ga. App. 322 (1972). Furthermore, an insurer’s denial of a claim does not waive that statutory period of 60 days, and the filing of a lawsuit by the insured against the insurer within the 60-day period precludes any recovery of penalties outlined in O.C.G.A.§33-4-6 for attorney’s fees stemming from an insurer’s bad faith refusal to pay a claim. Kilpatrick Marine Piling v. Fireman’s Fund Insurance Co., 795 F.2d 940 (11th Cir. 1986).

A long-standing tenet of Georgia law holds that where the evidence put forth by the insured seeking bad faith penalties under O.C.G.A.§33-4-6 fails to authorize a finding of bad faith on the part of an insurer, a jury is not authorized to find against the insurer for attorney’s fees.New York Life Ins. Co. v. Ittner, 64 Ga. App. 806 (1941). Attorney’s fees and penalties provided by statute for bad faith should never be permitted unless the insured can show that the insurer acted in such a way that its defense was "frivolous and unfounded."Georgia Farm Bureau Mut. Ins. Co. v. Boney, 113 Ga. App. 459 (1966); Continental Casualty Co. v. Owen, 90 Ga. App. 200 (1954).

Where there is evidence that the insurer’s refusal to pay the Plaintiff’s claim was justified there can be no bad faith. See: Lincoln Life Ins. Co. v. Anderson, 109 Ga. App. 238 (1964); National-Ben Franklin Ins. Co. v. Prather, 109 Ga. App. 459 (1964); Old Colony Ins. Co. v. Dressel, 109 Ga. App. 465 (1964).

Georgia is very liberal in its application of the Bad Faith Statute. In most states, the standard for determining whether an insurer acted in bad faith is whether it had reasonable grounds upon which to deny a claim at the time the decision was made for denial of the matter. In Georgia, the standard is much less stringent. The standard is whether reasonable grounds exist to support denial of the claim at trial, not at the time the claim was actually denied. If the evidence at trial of the matter provides the insurer "reasonable grounds" for contesting the claim, there can be no finding against an insurer for bad faith and attorney’s fees in the matter regardless of the case’s outcome. Grange Mut. Cas. Co. v. Law, 223 Ga. App. 748 (1996); Interstate Life & Accident Ins. Co. v. Williamson, 110 Ga. App. 557 (1964).

Declaratory Judgement Action

O.C.G.A. § 9-4-2 provides:

1. In cases of actual controversy, the respective superior courts of this state, should have power, upon petition or other appropriate pleading, to declare rights and other legal relations of any interested party petitioning for such a declaration, whether or not further relief is or could be prayed; and the declaration shall have the force and effect of a final judgment or decree and must be reviewable as such.
2. In addition to the cases specified in subsection (a) of this code section, the respective superior courts of this state shall have power, upon petition or other appropriate pleading, to declare rights and other legal relations of any interested party petitioning for the declaration, whether or not the relief is or could be prayed, in any civil case in which it appears to the court that the ends of justice require that the declaration should be made; and the declaration shall have the force and effect of a final judgment or decree and must be reviewable as such.

The words "actual controversy" mean justiciable controversy where interested parties have asserted adverse claims upon a set of facts when a legal judgment is sought that would have controlled or directed future action. The danger, dilemma, or injury must not be speculative or contingent upon a future event, but there must be a present, concrete issue between the parties wherein there is a definite assertion of legal rights and positive legal duty on the part of the adverse party. The threat to the plaintiff must be actual and genuine, not merely possible or remote. See: Darnell v. Tate, 206 Ga. 576 (1950).

The Georgia courts have previously held that unless there is a pending lawsuit which could expose an insurer to uncertainty with regard to its duty to defend or indemnify, a Declaratory Judgment action will not lie. To file such a suit for declaratory relief would result in an action seeking an advisory opinion which is not permitted under Georgia law. Chastain v. U.S.F. & G., 190 Ga. App. 215 (1989); Reliance Insurance Company v. Brooks Lumber Company, 101 Ga. App. 620 (1960).

However, the Georgia Supreme Court recently held in Atlanta Casualty Company v. Fountain, 262 Ga. 16, 413 S.E.2d 450 (1992), that when a demand for payment has been made, and the insurance company has not yet acted to deny the claim, and it cannot determine whether the claim should be paid under Georgia law, a Declaratory Judgment action may be appropriate. The Supreme Court in Fountain reversed an earlier ruling of the Georgia Court of Appeals in the same case, wherein the Supreme Court found that Atlanta Casualty had adequately demonstrated a need for a legal judgment that would control its future actions where it had shown:

• That a demand for payment on the policy had been made;
• That the insurance company had not acted to deny the claim;
• That legitimate questions existed as to the validity and applicability of the policy exclusion clause; and
• Existing Georgia law does not provide a clear answer.

It is imperative that Insurers not send out correspondence to the insured or the claimants denying the claims since, in so doing, they would forfeit its right to seek a Declaratory Judgment in the future See: State Farm Mutual Insurance Company v. Allstate, 132 Ga. App. 332 (1974).

Finally, Insurers must act immediately to reserve its rights to file a declaratory judgement action by sending out a reservation of rights letter to the insured stating the claim is being investigated and/or defended under a reservation of rights due to a violation of the policy, whatever that may be. See: Richmond v. Ga. Farm Bureau, 140 Ga. App. 215, 231 S.E.2d 245 (1976).

Fraud and Concealment

Most insurance policies contain a fraud and concealment provision similar to the following which states:

• Fraud And Misrepresentation
• "We do not provide coverage for any covered person who had made fraudulent statements or engaged in fraudulent conduct in connection with any accident or loss for which coverage is sought in this policy."

It is well settled in Georgia that policy provisions such as that quoted above are valid and enforceable. Perry v. State Farm Fire & Casualty Co., 734 F.2d 1441 (11th Cir. 1984); Pittman v. American Mutual Fire Ins. Co., 129 Ga. App. 399, 199 S.E.2d 893 (1973); American Alliance Ins. Co. v. Pyle, 62 Ga. App. 156, 8 S.E.2d 154 (1940); Smith v. Federated Mut. Ins. Co., 124 Ga. App. 693 (1971); Allstate Ins. Co. v. Baugh, 173 Ga. App. 615 (1985).

The law imposes upon Insureds the utmost of honest good faith dealing with the insurer. See: Fortson v. Cotton States Mut. Ins. Co., 168 Ga. App. 139 (1983); Chaacou v. American Central Ins. Co., 241 F.2d 889 (5th Cir. 1957); Washington v. Interstate Fire Ins. Co., 163 Ga. App. 15 (1982).

Fraudulent concealment or misrepresentations by an insured need not be under oath in order to void the insured’s claim. See: American Diver’s Supply and Mftg. Corp v. Boltz, 482 F.2d 795 (1973); Mercantile Trust Co. v. New York Underwriters Ins. Co., 376 F.2d 502 (1967).

It is not necessary that the misrepresentation be proven by direct and positive proof, but it may be shown by circumstances. If the facts and circumstances shown in evidence are such that it would lead a reasonable man to the conclusion that fraud exists, this is all the proof that the law requires. Patillo v. Thompson, 106 Ga. App. 808 (1962); Rollins v. Great Southwest Fire Ins. Co., 162 Ga. App. 139 (1982).

A fraudulent misrepresentation is a misrepresentation of fact, knowingly made. It is not necessary that the insurance company actually be deceived by such misrepresentation. Life Ins. Co. of Virginia v. Shiflett, 359 F.2d 501 (5th Cir. 1966); Chaacou v. American Central Ins. Co., 241 F.2d 889 (5th Cir. 1957); Mercantile Trust Co. v. New York Underwriters Ins. Co., Supra.

A misrepresentation is material if a reasonable insurance company, in determining its course of action, would attach importance to the fact misrepresented. Chaacou v. American Central Ins. Co., Supra; Long v. Insurance Co. of North America, 670 F.2d 930 (10th Cir. 1982).

Pittman, Supra, involved a claim wherein an insured sought to recover under a fire policy for the loss of a home and its contents, including a color television set. The policy contained a provision which read as follows:

• "This entire policy shall be void if, whether before or after a loss, the insured has wilfully concealed or misrepresented any material fact or circumstance concerning this insurance or the subject thereof, or the interest of the insured therein, or in case of any fraud or false swearing by the insured relating thereto."

The charred remains of an old television set were found in Pittman’s residence, but it was determined that this was not the 23-inch RCA color set claimed on the proof of loss. A witness had previously seen the charred remains of an old television set in the trunk of Pittman’s car on the day preceding the fire. The same witness additionally testified that she had seen other items claimed to have been destroyed in the fire in Pittman’s apartment following the fire.

Citing the above quoted policy provision, the trial court ruled that the verdict in favor of the insurer was authorized by the evidence as a result of false statements made by the insured to his insurer.

In American Alliance, Supra, the policy sued on provided that it would be void "in the case of any fraud or false swearing by the insured touching any matter relating to this insurance or the subject thereof, whether before or after the loss."In that instance, the insured submitted an inflated proof of loss as to the value of property insured under a fire insurance policy. The court held:

• "...fraudulent false swearing....in the examinations which the insurers have a right to require, [will void] the policies."

Contracts of insurance are governed generally by the laws which are applicable to contracts in the State of Georgia. Pursuant to Georgia law, once a contract has been breached, absent ratification by the non-breaching party, the breach cannot be undone. In other words, once the contract has been breached, the complying party is free to treat the contract as if it were at an end, and is relieved of any duty to perform under the terms of the contract. Rollins v. Gault, 153 Ga. App. 781, 266 S.E.2d 560 (1980).

Insurance in the State of Georgia is a matter of contract, and insurance contracts are treated no differently than any other form of contract. See Grange Mutual Casualty Company v. King, 174 Ga. App. 716, 331 S.E.2d 41 (1985); Richmond v. Georgia Farm Bureau Mutual Insurance Company, 140 Ga. App. 215, 231 S.E.2d 245 (1976).

Insurable Interest

There are only two statutes in Georgia which specifically pertain to the principle of insurable insurance. O.C.G.A.§ 33-24-3 deals with "personal insurance". Personal insurance is that which pertains to life, health, or bodily safety. Under that code section, an insurable interest in personal insurance is an interest based upon a reasonable expectation of pecuniary advantage through the continued life, health or bodily safety of an another person. Thus, this code section is inapplicable to our situation.

The second statute, O.C.G.A.§ 33-24-4 deals with "property insurance". An insurable interest in property insurance is defined as "any actual, lawful, and substantial economic interest in the safety or preservation of the subject of the insurance free from loss, destruction, or pecuniary damage". The code section further provides that no insurance contract on property or of any interest in property is enforceable except for the benefit of persons having an insurable interest in the thing insured at the time of the loss. To the extent that a property damage claim has been presented to Nationwide, this code section would seem to be applicable.

The test of an insurable interest under O.C.G.A.§ 33-24-4 pertaining to property insurance is whether the insured has such a right, title or interest in the property, or a relation to the property, that she will be benefitted by its preservation and existence or suffer a direct pecuniary loss from its destruction or injury. Farmers Mutual Fire Insurance Co. v. Pollock, 52 Ga. App. 603, 184 S.E.2d 383 (1936); New Jersey Insurance Co. v. Rowell, 157 Ga. 360, 121 S.E.2d 414 (1924).

However, in Auto-Owners Insurance Co. v. Smith, 178 Ga. App. 420, 343 S.E.2d 129 (1986), the Georgia Court of Appeals held that no legal or equitable interest in the insured vehicle as property is necessary to support an insurable interest regarding liability insurance. In Auto-Owners, a father assisted his son in purchasing an automobile for use as a family-purpose vehicle. Subsequently, the son moved out of his father’s household, and soon thereafter attempted to sell his car to a third-party. Although the sale was never consummated, the son prematurely transferred title to the prospective buyer. The son was thereafter involved in a collision while driving the insured automobile.

The automobile was insured originally under a policy issued to the father, who maintained the policy on the vehicle at the time of the collision. The court found that under the circumstances, the father may have faced liability vicariously under the family-purpose doctrine, and therefore had an interest in maintaining liability insurance on the automobile. Therefore, although the car was never titled in his name, and he never had a pecuniary interest in the automobile, he had an interest in maintaining liability insurance on the automobile.See Also: James v. Pennsylvania General Insurance Company, 167 Ga. App. 427, 306 S.E.2d 422 (1983). Thus, a person who does not have sufficient insurable interest in an automobile to maintain insurance for physical damage to the automobile, may have sufficient insurable interest to maintain other forms of coverage.

Failure of The Insured to Attend An EUO

An essential requisite to the duty of the insurer to pay a claim asserted against the insured is the ability of the insurer to investigate the facts and circumstances of the accident. Paramount to the insurer’s ability to investigate, is the assistance and cooperation of the insured. The duty of the insurer to honor a claim coincides with the duty of the insured to cooperate with the insurer in investigating the loss. The concomitant obligations of the insured are embodied in the cooperation clause found in the conditions referenced earlier.

There are numerous cases which confirm that an insured’s failure to submit to an Examination Under Oath and provide requested documents constitutes a failure to cooperate under the policy. Purvis v. State Farm, 901 F.2d 944 (11th Cir. 1990); Halcome v. Cincinnati Insurance Company, 254 Ga. 742 (1985); Hines v. State Farm, 815 F.2d 648 (11th Cir. 1987); Fireman’s Fund Ins. Co. v. Sims, 115 Ga. 939 (1901); Nichols v. Pearl Assurance Co., 71 Ga. App. 378 (1944); Townley v. Patterson, 139 Ga. App. 249 (1976); Brookins v. State Farm Fire & Cas. Co., 529 F. Supp. 386 (1982); Saft America Inc. v. Ins. Co., 155 Ga. App. 500 (1980).

Further, it is not necessary for the Insurer to show prejudice to its case in order to prevail on the issue of non-cooperation. Wolverine Insurance Company v. Sorrough, supra, the Court of Appeals held that the insurer does not have to prove that it was prejudiced in order to deny a claim based on failure of the insured to cooperate. The court found that it is generally difficult, if not impossible, to determine whether the company may have been prejudiced by any failure of the insured to cooperate. The court found that it would be impossible for a court or jury to know what the insured might have included in statements they may have given, such as particulars of the accident, names they may have listed, or leads for an investigation which might have been conducted. The court further found that failure to give reasonable, timely notice of the accident, will relieve the insurer from any obligations imposed by the contract, even though prejudice may not have resulted. The court reasoned that the insured’s duty to cooperate and provide timely notice regarding the claim constituted a condition precedent to the policy so that no rights accrued under the policy until these conditions were satisfied.

The Insurer has the burden of showing, prima facie, a violation of the cooperation clause by the insured and that it had been diligent and acted in good faith in seeking to obtain the insured’s cooperation. The breach, once prima facie is shown, shifts the burden to him who seeks to enforce the policy to show justification or excuse therefore. The insurer is not required to anticipate or negate all excuses or reasons that might justify denial. The breach of the cooperation clause is prima facie when it appears that the insurer made reasonable efforts to obtain the insured’s cooperation, without success. Wolverine Insurance Company v. Sorrough, 122 Ga. App. 556, 177 S.E.2d 819 (1970); H.Y. Akers & Sons, Inc. v. St. Louis Fire & Marine Insurance Company, 120 Ga. App. 800, 172 S.E.2d 355 (1969).

The Insured’s Duty To Cooperate

Most policies contain a cooperation provision which might read as follows:

Duties after an accident or loss

"A person seeking any coverage must: Cooperate with us in the investigation...of any claim or suit."

The Georgia courts have interpreted the cooperation clause to require that the insured cooperate with his insurer in the investigation of accidents, the securing of evidence, giving notice of the accident, and making full, fair, complete and truthful disclosures of the facts known to them relative to the claim when called upon to do so. St. Paul Fire & Marine Insurance Company v. Gordon, 116 Ga. App. 658 (1967); H.Y. Akers & Sons, Inc. v. St. Louis Fire & Marine Insurance Company, 120 Ga. App. 800 (1969). A breach of the cooperation provisions by the insured relieves the insurer of its obligations to pay any claim asserted. Hurston v. Georgia Farm Bureau Mutual Insurance Company, 148 Ga. App. 324 (1978).

The insurer has the burden of showing, prima facie, a violation of the agreement by the insured and that it has been diligent and acted in good faith in seeking to obtain the insured’s cooperation. The breach, once prima facie is shown, shifts the burden to him who seeks to enforce a claim under the policy to show justification or excuse therefore. The insurer is not required to anticipate or negate all excuses or reasons that might justify denial. The breach of the clause is prima facie when it appears that the insurer made reasonable efforts to obtain the insured’s cooperation without success. Wolverine Insurance Company v. Sorrough, 122 Ga. App. 556 (1970); H.Y. Akers & Sons, Inc. v. St. Louis Fire & Marine Insurance Company, Supra.

In Hurston, Supra, the insured was shown to have acted in collusion with a claimant in an automobile accident, and assisted the claimant in pursuing a bogus claim against Farm Bureau. The Court of Appeals held that such collusive activities violated the Cooperation Clause of the automobile policy which governed the conduct of the parties. As a result of false statements to the insurer by the insured and collusive activity by the insured, the Court of Appeals held that no coverage was afforded to the insured under the policy.

Loss Payable Clauses

Whether an Insurer pays or refuses to pay a lienholder due to an intentional act or fraud committed by the insured, or the insured’s failure to cooperate with the Insurer during its investigation, or the insured otherwise fails to comply with the terms and conditions of the policy of insurance depends solely upon one thing... the wording of the Insurer’s Loss Payable Clause.

The Georgia Courts recognize two (2) different types of Loss Payable Clauses. In the "Open" clause, the loss is paid to the loss payee (Lienholder) named in the policy declarations or endorsements "as its interests may appear". Under this "Open" clause, the loss payee (Lienholder) is a mere appointee of the fund whose right of recovery is no greater than that of the loss payor. See: Southern States Fire & Casualty Ins. Co. v. Napier, 22 Ga. App. 361, 96 S.E. 15 (1918); Decatur Federal S & L Association v York Ins. Co., 147 Ga. App. 797, 250 S.E.2d 524 (1978);

Conversely, where the Loss Payable Clause contains language providing that the loss payee’s (Lienholder’s) interests shall not be invalidated by any act of the payor or owner of the property, the effect of such language is to create a separate and distinct contract on the loss payee’s interest and give to it independent status. See: Northwestern National Ins. Co. v. Southern State Phosphate and Fertilizer Co. , 20. Ga. App. 506 (1917); Pacific Ins. Co. v. R.L. Kimsey Cotton Co., 114 Ga. App. 411 (1966); Aetna Life & Cas. Co. v. Charles S. Martin Distrib. Co., 120 Ga. App. 133 (1969). This is known as the "New York Standard" or "Union" loss payee clause. See: Decatur Federal S & L Association v. York Ins. Co., Supra; Canal Ins. Co. v. Savannah Bank & Trust Co., 181 Ga. App. 520, 352 S.E.2d 835 (1987) INA v. Gulf Oil, 106 Ga. App. 382 (1962); Employers Fire Ins. Co. v. Pennsylvania Millers Mutual Ins. Co., 118 Ga. App. 665 (1967); Reserve Ins. Co. v. Associates Discount Corp., 116 Ga. App. 792 (1967); Citizens Finance Co. v. Ins. Co. of St. Louis, 105 Ga. App. 422 (1962); Corbin v. Aetna Life & Cas. Co., 447 F. Supp. 646 (N.D. Ga. 1978).

A loss payee or lienholder protected by a New York Standard clause will still recover proceeds from an insurer under an insurance policy containing such a provision, notwithstanding a breach of the policy by the insured, by fraud or other means, which would otherwise preclude recovery by the insured.

So, what does an Open Loss Payable Clause look like?

"Loss or Damage under this policy shall be paid as Interest may Appear to You and the Loss Payee Shown in the Declarations. This Insurance Covering the Interest of the Loss Payee Shall Become Invalid Only Because of Your Fraudulent Acts or Omissions."

The preceding is a classic example of an "Open" Loss Payable Clause. As such, if the insured committed fraud, or failed to appear for an examination under oath, or otherwise failed to cooperate during an investigation, the insured would well be within its rights not to pay either the insured or the Lienholder as a result of the insured’s violation of the policy conditions.

The following is an Example of A New York Standard Loss Payable Clause:

"We will pay loss or damage due under this policy according to your interest and that of the loss payee if one is shown in the declarations. We will make separate payments according to those interests. We will pay the loss payee for a loss under this policy even though you have violated the terms of the policy by something your have done or failed to do."

Under this policy provision, even if the insured commits fraud or fails to cooperate with the insured during its investigation, the lienholder or loss payee is still paid for its loss due to the occurrence.

Recent Developments in Premises Liability in Georgia

The Georgia Court of Appeals has made it more difficult for defendants to prevail on summary judgment, at least in foreign substance cases under several recent premises liability cases. A bare majority of the Court has abrogated to some extent the longstanding authority of Alterman Foods v. Ligon, 264 Ga. 620, 272 S.E.2d 327 (1980). In Alterman Foods, the Court had outlined a two-part test for foreign-substance slip and fall cases: the plaintiff must establish (1) that the defendant had actual knowledge of a foreign substance and (2) that the plaintiff was without knowledge or for some reason attributable to the defendant, was prevented from discovering the foreign substance. The Court expressly held that merchandise on store shelves does not constitute a distraction which would shift the responsibility for the fall to the defendant. In any event, a plaintiff is charged with the duty of exercising due care for his or her own safety. The general rule previously followed by the Court was that if a plaintiff could have, in the exercise of reasonable care, observed the foreign substance, equal knowledge on the plaintiff’s part would be established. Each of these principles has been eroded by the following cases:

In Dill’s Food City v. Johnson, 96 F.C.D.R. 29 (Ga. App., 12/5/95), the plaintiff was looking at pickles (what else?) shortly before she slipped and fell in a brown puddle of tea on the white tile floor. In a deposition, the plaintiff admitted that she could have seen the twelve-inch spill if she had looked down. The evidence indicated that the store had actual knowledge of the hazard. The Court, finding that the pickles distracted the plaintiff, determined that she had no knowledge of the foreign substance on the floor. As a consequence, the Court ruled that a jury question existed as to the plaintiff’s failure to exercise care for her safety. Judge Beasley, pointing out the principle that merchandise on shelves is not a legal distraction, nevertheless concurred with the 5-4 majority.

J. H. Harvey Co. v. Edwards, 96 F.C.D.R. 33 (Ga. App., 12/5/95), involved a plaintiff who slipped on a green bean while pushing her cart toward a display table loaded with beans. She testified that a store employee had remarked just prior to her fall that, "These are mighty pretty beans", but that she was not distracted by anything but the beans. She admitted that, if she had looked at the floor, she could have seen the beans. Nevertheless, in a 7-2 decision, the Court of Appeals found that the store employee’s greeting represented some evidence of distraction and affirmed the trial court’s denial of summary judgment to the defendant.

In another green bean case, the Court affirmed summary judgment in favor of the defendant. The plaintiff in Baker v. Winn-Dixie, 95 F.C.D.R. 3912 (Ga. App., 12/4/95), stepped on a bean as she was exiting the supermarket. She was looking straight ahead and admitted that she could have seen the bean if she had looked down. The case did not involve any distraction, but in a special concurrence, Judge J. D. Smith announced the rule that some conduct on the part of an employee must distract the plaintiff in order to permit recovery under the distraction theory.

In another 5-4 decision, Department of Human Resources v. Thomas, 217 Ga. App. 174, 456 S.E.2d 724 (1995), the majority ruled that the defendant was not entitled to a directed verdict. The plaintiff had slipped and fallen on cream of broccoli soup on the floor of the cafeteria at the West Central Georgia Regional Hospital. She insisted that she never saw the spill, but made inconsistent statements about whether she could have seen it if she had looked. In his dissent, Judge Andrews stated, "apparently one may now trip over a battleship and recover if one states that he did not see it, or can verbalize any excuse for not seeing it."

Until recently, it has been generally accepted that if an individual could have seen a foreign object on the floor by looking at the floor, then summary judgment would be granted for the defendant. Several recent decisions, have brought this presumption into question. In Barentine v. Kroger Company, 264 Ga. 224, 443 S.E.2d 485 (1994), the plaintiff was searching for a checkout counter that was open when he slipped and fell on a puddle of clear liquid. The plaintiff admitted that if he had been looking down he would have seen the foreign object but stated that instead of looking down he was distracted by looking for the cashier who was missing from the checkout counter. The court found that this testimony gave some evidence that the plaintiff was exercising reasonable care for his own safety in approaching the checkout counter and did not demand a finding that the plaintiff had failed to exercise reasonable care.

In Axom v. Wendy’s International, Inc., 95 F.C.D.R. 3909 (Ga. App., 12/4/95), the Georgia Court of Appeals took Barentine’s reasoning one step further. In Axom, the plaintiff admitted that if she had been looking down she would have seen the water on the floor. However, instead she was maneuvering through a busy dining area with her hands full of food, a drink and a purse, and her attention was focused on getting back to her car where her child had been waiting for thirty minutes. The court in this situation found that there was some evidence that plaintiff was exercising reasonable care for her own safety by focusing on the people in the restaurant rather than the floor and therefore reversed the granting of summary judgment to the defendant.

Similarly, in McDonald’s Restaurant of Georgia, Inc. v. Banks, 96 F.C.D.R. 36 (Ga. App., 12/5/95), the Georgia Court of Appeals affirmed the denial of summary judgment to the McDonald’s Restaurant. The court found that the plaintiff, who admits that if she had looked down she would have seen the puddle of water in front of her, was reasonable in focusing on ordering at the counter directly ahead of her and dodging customers who were leaving rather than on the floor in front of her. Therefore, the trial court was correct in denying summary judgment.

Clearly, the Georgia Court of Appeals has shifted away from its longstanding position that individuals are expected to inspect the path in front of them absent some kind of distraction from the property owner. In so doing, the court is attempting to demonstrate that in normal life experience it is not always reasonable to require that individuals look down and that sometimes it is more reasonable for the individual to look forward. The end result should be more cases to try to the jury.

Recent Cases Involving Fire Losses

The Innocent Co-Insured

In Firemen’s Fund Insurance Company v. Dean, 212 Ga. App. 262, 441 S.E.2d 436 (1984), the Court of Appeals deviated from previous rulings regarding the rights of innocent co-insureds in arson cases. In the earlier case of Richards v. Hanover Insurance Company, 250 Ga. 613, 299 S.E.2d 561 (1983), the court interpreted an insurance contract provision which excluded from coverage losses caused by the intentional misconduct of "the insured." The court interpreted the language against the insurance company drafter and held that the innocent spouse of an alleged arsonist was not automatically barred from recovery because of the use of the term "the" in the exclusion.

Later cases dealt with insurance companies’ attempts to revise their policies to bar recovery for an innocent co-insured by the use of such phrases as "an insured" or "any insured". Cases had found that such terms bar recovery of an innocent co-insured. See Sales v. State Farm Fire, 849 F.2d 1383 (11th Cir. 1988) and Meyers v. State Farm Fire, 801 F. Supp. 709 (N.D. Ga. 1992).

The Georgia Court of Appeals in the Dean decision, however, analyzed coverage from the perspective of the State’s Standard Fire Policy. The Standard Fire Policy uses the phrase "the insured" in voiding coverage for intentional misconduct. The Georgia Court of Appeals held that given the interpretation of "the insured" in the Richards decision, that regardless of the terms subsequently used by insurers in drafting their policies, an innocent co-insured in Georgia was not automatically denied coverage.

In the recent decision of Graphic Arts Mutual Insurance Co. v. Pritchett, 1995 Westlaw 619281 (Ga. Ct. of App. October 23, 1995), the court expanded the principle espoused in Dean to apply to material misrepresentations in the application of the policy. In Pritchett, the insurance company allege that the husband had made intentional misrepresentations in the policy application by falsely denying that he had had any previous cancellations of insurance policies in the preceding three years. In fact, the plaintiff had three such cancellations. The court, in expressly applying Dean, held that material misrepresentations by one insured in the policy application will not void coverage as to an innocent co-insured.

Policy Provisions Regarding Residency

The recent decisions of Georgia Farm Bureau Mutual Insurance Company v. Kephart, 211 Ga. App. 423, 439 S.E.2d 682 (1993) and Roland v. Georgia Farm Bureau Mutual Insurance Company, 462 S.E.2d 623 (S. Ct. 1995), provide an interesting explanation as to when the residency requirements of a policy will or will not be held applicable.

In the Kephart decision, the husband and wife purchased the house in question in 1989 with the insurance in both parties name. Shortly thereafter, the parties separated and the wife instructed the agent to drop her husband from the policy. Thereafter, the wife elected to vacate the premises and allowed her estranged husband to live in the house. Approximately two weeks before the fire, the husband and wife were formerly divorced.

The insurance policy in question stated that it covers:

1. The dwelling on the residence premises shown in the declarations, including structures attached to the dwelling.
2. "Residence premises" is defined in the policy as "the one family dwelling, other structures, and grounds; or
3. That part of any other building; where you reside which is shown as the "residence premises" in the declarations.

In a paragraph captioned "Special Provisions", the policy requires, inter alia, that unless noted as an exception in the declarations, "the residence premises must be the only premises where the named insured or spouse maintains a residence other than business or farm properties."

The Court of Appeals found that inasmuch as the wife was the only named insured under the policy and she and the husband were divorced at the time of the fire loss, no coverage existed. Id. at 684.

In the Roland decision, the court found coverage in a slightly different fact pattern. In the Roland case, the husband and wife both purchased the property and were both named insureds under the policy. Prior to the fire loss, the wife had moved out of the premises but she and her husband both remained on the policy. In addition, at the time of the fire loss the divorce was not finalized. Based on these facts, the Court of Appeals found that the wife’s claim for coverage was still valid since one of the named insureds continued to live in the dwelling in question.

When Is A Misrepresentation "Material"?

Georgia Farm Bureau v. Richardson, 217 Ga. App. 201, 457 S.E.2d 181 (1995), dealt with the issue of what constitutes a material misrepresentation in a claim.

The insurance carrier alleged in part that the insured’s claim was barred due to material misrepresentations she made in her Examination Under Oath when she said (1) she was having no problem making her mortgage payments; (2) she was up to date with the primary obligation encumbering the insured premises and only one payment behind to an individual holding a subordinate security interest encumbering the insured premises at the time of the fire; (3) she had not been refused credit when applying for loans prior to the fire; (4) she was up to date on all utility bills; (5) she was not romantically involved with the man she and her children were visiting on the night of the fire until after the fire; (6) she was living in her house continuously, using normal amounts of electricity, until a few days to a week before the fire; and (7) she took her mail out of the mailbox every day before the fire.

The court first held that provisions such as those involved in the case sub judice which declare the entire insurance policy void upon misrepresentation or concealment of any material fact, fraud, or false swearing by the insured are applicable to proofs of loss and other statements made under oath by the insured. Such a provision would cover cases of fraudulent misrepresentation of material facts or circumstances, made by the insured to the company or its agents that might affect the action of the insurer in respect to settling or adjusting the claim of the insured. The court went on to hold that it is a jury question as to whether a misrepresentation may have actually affected the action of the insurer with respect to settling or adjusting a claim. As noted, whether a misrepresentation is intentional or not is generally held to be a question of fact for the jury and the jury must determine not only whether the statement is false but whether it was made with the intent of defrauding the insurance company. Absent such a finding, a misrepresentation will not be held to be material as a matter of law.

The Current Dog Bite Laws in Georgia

To sustain a dog bite claim in Georgia, a plaintiff must show either that 1) the culprit dog had, on a prior occasion, displayed a propensity to bite, or 2) a local "leash law" was in effect at the time of the incident, and the dog was not properly confined in accordance with the local law. This article discusses current developments in the case law in each of these areas.

Prior Incidents

In 1999, the dog bite law significantly changed, and this change was the first substantial alteration of the law in this area since the dog bite statute, O.C.G.A. § 51-2-7, was amended in 1985. The recent change widened the law, rendering summary judgment more difficult to obtain for defendants, and retired the traditional "first bite rule." However, the Court of Appeals only took modest steps away from the traditional law, reflecting a lingering adherance to the requirement that, for liability to attach, a defendant’s knowledge of the animal’s propensity to bite must be ostensibly demonstrated.

The traditional "first bite rule" holds that one may be held liable for injuries caused by a dog bite only if he or she had prior knowledge that the dog had, on a prior occasion, bitten another human being. See Hamilton v. Walker, 235 Ga. App. 635, 635, 510 S.E.2d 120 (1998); accord Smith v. Culver, 172 Ga. App. 183, 322 S.E. 2d 294 (1984); Rowlette v. Paul, 219 Ga. App. 597, 466 S.E.2d 37 (1995). Evidence that the dog had, on a prior occasion, growled, barked or had otherwise appeared threatening has traditionally been insufficient to sustain a dog bite claim. Hamilton v. Walker, supra ; Durham v. Mooney, 234 Ga. App. 772, 507 S.E. 2d 877 (1998). A "...dog’s bark is often worse than its bite," the courts have offered in support of their position. Banks v. Adair, 148 Ga. App. 254, 255, 251 S.E.2d 88 (1978).

The Court of Appeals cautiously and narrowly expanded the "first bite" rule in Supan v. Griffin, 238 Ga. App. 404, (1999). In Supan, evidence existed that the dog that bit the plaintiff had, on a prior occasion, attacked another dog, and had viciously growled at a neighbor. Evidence also existed that, when the neighbor informed the defendant about the dog’s behavior, the defendant replied that the neighbor should "do whatever was necessary ... to keep the dogs from attacking..." Id. at 406. The court held that Defendant Supan’s statement raised a genuine issue regarding his prior knowledge of his dog’s tendency to attack humans, thereby allowing the case to survive summary judgment. By this holding, the traditional dog bite law was expanded, because the court allowed the claim to survive even though no evidence existed that the dog had, on a prior occasion, actually bitten a person, as the traditional law required.

Although, in Supan, the court did expand the boarders of what evidence could establish that a defendant had prior knowledge of a dog’s propensity to bite, the court clearly indicated that it was only somewhat broadening the "first bite" rule. The court’s reluctance to greatly depart from the traditional law is demonstrated by the fact that the court based its holding that the defendant’s knowledge of the dog’s prior act of attacking another dog and growling viciously at the neighbor were, according to the Supan court, still insufficient to establish that the defendant had knowledge of the animal’s propensity to bite a human being. It was the defendant’s own statement, that the neighbor should "do whatever was necessary to keep the dog[s] from attacking..." that persuaded the court that evidence existed that the defendant had knowledge that the dog might have a tendency to bite a person. Therefore, a defendant’s knowledge of his dog’s prior "menacing" behavior of growling or barking is still insufficient to sustain a dog bite claim under Supan.

In Thurmond v. Saffo, 238 Ga. App. 687 (1999), rendered a few weeks after the Supan decision, the plaintiff was bitten by the defendants’ dog. Evidence existed that prior to the subject dog attack, a neighbor, Brenda Webb, had walked into the Defendants’ garage when the dog started walking slowly toward her and barked. Ms. Webb testified that she believed the dog was going to attack her because of the way the dog’s eyes and tail looked. Id. at 688. Ms. Webb jumped over the car in the garage to escape from the dog. The dog later bit the plaintiff in the garage. Webb testified that, prior to the incident involving the plaintiff, she told the Defendants that she thought that the dog was going to attack her, and that Ms. Saffo scolded the dog for this behavior. Because Ms. Webb told the defendants prior to the incident that she thought the dog was going to attack her, and because the defendants scolded the dog for this behavior, the court held that evidence existed that the defendants had knowledge of the dog’s tendency to attack. In keeping with its digression from the traditional law, the Thurmond court allowed the plaintiff’s claim to survive although no evidence existed that the dog had, on a prior occasion, actually bitten another human being, as was customarily required by the traditional law.

In summary, to escape liability for dog bite in Georgia, a defendant may no longer merely assert that there exists no evidence of a prior bite. A defendant must now show that no evidence exists that he or she was on notice that the dog had, on a prior occasion, actually attempted or endeavored to bite another human being. Evidence that a dog displayed "menacing behavior," on a prior occasion, such as mere barking or growling, remains insufficient to sustain a dog bite claim, according to the courts, as held in the surviving cases of Hamilton v. Walker, supra, Durham v. Mooney, supra, and Banks v. Adair, supra. However, the distinctions between these cases and the later cases of Supan v. Griffin and Thurmond v. Sappo are clearly minor.

The courts’ decisions in this area are clearly progressing in a plaintiff-friendly direction. A defendant’s task is to show that the facts of his or her case are more like the facts in Banks v. Adair and is progeny, rather than like the facts in Supan v. Griffin and Thurmond v. Saffo.

Violation of a Local Leash Law

As established above, a plaintiff must be able to establish that a defendant had prior knowledge that the dog had a propensity to bite. Since the statute which codified the Georgia dog bite law was amended in 1985, the propensity requirement may be abrogated by establishing that the dog was not properly restrained at the time of this incident, in accordance with a local law.

The statute codifying Georgia’s dog bite law, O.C.G.A. § 51-2-7, states,

• "A person who owns or keeps a vicious or dangerous animal of any kind and who, by careless management or by allowing the animal to go at liberty, causes injury to another person who does not provoke the injury by his own act may be liable in damages to the person so injured...
• The latter, amended portion of O.C.G.A. § 51-2-7 states,"
• In proving vicious propensity, it shall be sufficient to show that the animal was required to be at heel or on a leash by an ordinance of a city, county, or consolidated government, and the said animal was at the time of the occurrence not at heel or on a leash..."

According to the express words of the statute, the element of vicious propensity may be substituted by showing that the animal was required to be at heel or on a leash by an ordinance of a city, county, or consolidated government, and the said animal was at the time of the occurrence not at heel or on a leash. See Evans-Watson v. Reese, 188 Ga. App. 292, 372 S.E.2d 675 (1988); Fields v. Thompson, 190 Ga. App. 177, 378 S.E. 2d 390 (1989). If one attempts to establish vicious propensity in this manner, the owner’s scienter is no longer an issue. Id. at 177.

Therefore, in such a case, a plaintiff’s dog bite claim will survive summary judgment upon the mere showing that a dog bite occurred and the animal was not properly restrained in accordance with a local law at the time of the occurrence. However, the courts have noted that, depending on the exact requirements of the local law, the propensity to bite element may not be substituted in some cases.

For example, the Court of Appeals stated in dicta that the DeKalb County ordinance is not of a type specifically designated by the legislature to constitute a substitute for proof of vicious propensity, so a plaintiff cannot rely on a violation of said ordinance to establish this element of their claim. Evans-Watson v. Reese, supra The DeKalb County Code, Sec. 5-11, which pertains to the County law regarding animals that are off their owner’s property, provides as follows:

Same - While off owner’s property.

1. It shall be the duty of the owner of any animal or anyone having possession of any animal to keep the animal under restrain and control at all times while the animal is off the real property limits of the owner, possessor or custodian.
2. For the purposes of this section, an animal is deemed under control when:
3. 1. It is securely confined within a vehicle, parked or in motion;
   2. It is properly confined with a secure enclosure with the permission of the owner of the property where the enclosure is located; or
   3. It its securely restrained by a leash or other devise held by a competent person...
4. Additional requirements for precautions to be taken by owners of dangerous animals are that, except when being transported in and securely confined within a vehicle, no dangerous animal shall be permitted off the property of its owner, except when it is:
   1. Attended by its owner;
   2. Restrained by secure collar and leash (not to exceed six (6) feet in length, both collar and leash of sufficient strength to prevent escape; and
   3. Muzzled by any means sufficient to prevent biting other persons or domestic animals... (emphasis added).

The DeKalb County ordinance allows that, where an animal is not on the premises of the owner, the animal may be confined in a vehicle, confined in some other secure enclosure, or muzzled by any means, in addition to the choices of being in "attendance" by the owner or on a leash. The legislature specifically provided in O.C.G.A. § 51-2-7 that an ordinance may substitute for proof of vicious propensity where it provides that the animal was required to be restrained at the time of the incident by one of only two methods: 1) at heel, or 2) on a leash. Therefore, the DeKalb County ordinance is more broad that the type of ordinance mentioned by the legislature in O.C.G.A. § 51-2-7.

Additionally, the DeKalb County ordinance does not require that an animal be kept "at heel," like the type of statute mentioned by the legislature in O.C.G.A. § 51-2-7, but the ordinance only requires that an animal be "attended by its owner." DeKalb County Code, § 5-11 (c)(1), supra."At heel" is clearly a more restrictive requirement than "attended." Webster’s Dictionary defines "at heel" as "Directly following in time or space." (Emphasis added) Webster’s II New Riverside Desk Dictionary 196 (Home and Office ed., Houghton Mifflin Co.) (1988). However, Webster’s defines "attend" as "to be present."Id. at 28. Therefore, the DeKalb County Code, providing that an animal merely must be "attended by its owner," allows a dog owner to merely be in the presence of his or her animal when the animal is off of the owner’s property. This is a more lenient guideline than a requirement that an animal be kept "at heel," which would indicate that the owner must be in extremely close in proximity to the animal. Therefore, the DeKalb County animal restraint ordinance is a broader and more lenient type of ordinance than the type envisioned by the legislature to substitute for evidence of an animal’s vicious propensity.

In Evans-Watson v. Reese, supra, the plaintiff was injured when she fell as she was being chased by the defendant’s dog that was, like in the present case, off the premises of its owner. Regarding DeKalb County Code § 5-11, the Reese Court stated:

"We note that the ordinance does not limit the requirement to "at heel" or on leash but allows also other devices or confinement. Since it is broader, it does not appear to be the type of ordinance specifically designated by the legislature to constitute a substitute for proof of vicious propensity." Id. at 294.

Therefore, if the evidence shows that the dog was not properly restrained at the time of the incident in accordance with a local law, all hope is not lost for a defendant if the local law allows for less restrictive means of animal confinement than only the requirements of at heel or on a leash.

Suit Against a UM Carrier After Expiration of the Statute of Limitations is Valid

Consider the following scenario. The insured is involved in a motor vehicle accident over two (2) years ago. The applicable statute of limitations expired approximately six (6) months ago. After the running of the statute of limitations, the Plaintiff/Claimant has filed suit against the UM carrier for damages arising from the motor vehicle accident of over two (2) years ago. May the UM carrier successfully claim that the action is barred by the running of the two (2) year statute of limitations? O.C.G.A. §33-7-11(d) provides, in relevant part:

"In cases where the owner or operator of any vehicle causing injury or damages is known, and either or both are named as defendants in any action for such injury or damages, a copy of the action and all pleadings thereto shall be served as prescribed by law upon the insurance company issuing the policy as though the insurance company were actually named a party defendant."

A recent case from the Georgia Supreme Court addresses seemingly late service of a UM carrier. Stout v. Cincinnati Insurance Co., 269 Ga. 611 (1998) addresses two (2) issues, which are:

1. Whether the statute of limitations for serving a UM carrier pursuant to O.C.G.A. §33-7-11 should be the same as that for serving the defendant, even though the defendant does not qualify as uninsured under the statute until the applicable statute of limitations has run; and
2. Whether service upon a UM carrier of an original action is necessary in order to allow for service in a properly filed renewal action.

Applicability of the statute of limitations for service of a UM carrier

The Georgia Supreme Court has held that, "[a] plaintiff can wait to serve a UM carrier until he files a valid renewal suit after the running of the statute of limitation." United States Fid. &c Co. v. Reid, 268 Ga. 432, 434 (1997). The rationale behind this holding is based upon the court’s interpretation of O.C.G.A. §33-7-11(d) as not requiring service upon the UM carrier for the purpose of making the UM carrier a party to the underlying tort suit, but to provide for service upon the UM carrier as though it were a named party defendant. This interpretation treats service of the UM carrier as intended merely to establish "notice of the existence of a lawsuit in which [the UM carrier] ultimately may be held financially responsible." Stout at 611-612; Bohannon v. Futrell, 189 Ga. App. 340, 342 (1988).

The purpose of service upon a UM carrier being merely to provide notice of the pendency of a lawsuit, it is the validity of service upon the actual named Defendant which must ultimately control. If a Defendant is validly served within an authorized period of time, then the UM carrier can also be served within that same time period. The court even goes so far as to say that a statute of limitations defense posed by a UM carrier who is not even a party to the underlying tort suit would be inconsistent with the intent of O.C.G.A. §33-7-11(d). Stout at 612. "Although the UM carrier should not be placed in a worse position than the alleged tortfeasor for whose negligence it may ultimately be held financially responsible, it likewise should not be placed in a better position . . . Because the statutory requirement that the Plaintiff serve his own UM carrier is intended to achieve the same purpose as a contractual requirement that the Defendant notify his own liability carrier of the pendency of a suit, there is no reason why service is not permissible on the UM carrier at any time within which valid service could be made on the [named] Defendant." Stout at 612; See Also: Granite State Insurance Co. v. Nord Bitumi U.S., 262 Ga. 502, 504 (1992).

Simply put, the Stout decision provides that a UM carrier’s interest in any litigation against the named Defendant is contingent upon that named Defendant’s liability in such litigation. To that end, so long as a named Defendant is made a proper party to a case, including, specifically, a renewal action accruing after the expiration of the applicable statute of limitations, the UM carrier is without recourse to raise a defense that the named Defendant is not entitled to raise.

Requirement of service of the original action upon the UM carrier

Stout interprets the holding of Bohannon v. J.C. Penney Casualty Ins. Co., 259 Ga. 162 (1989) as requiring that a UM carrier need only be served with a lawsuit, whether an initial suit or a renewal suit, that would "ultimately result in financial responsibility for the UM carrier." Stout at 612. The only requirement imposed by O.C.G.A. §32-7-11(d) for service upon a UM carrier is the requirement that the UM carrier be "served within the time allowed for valid service on the [named] defendant in the tort action." Id.; See Also: Vaughn v. Collum, 236 Ga. 582 (1976).

Even though a UM carrier was not given notice of an earlier, dismissed, lawsuit, timely notice of a renewal action to a "non-party liability insurer" would be sufficient for purposes of satisfying the statute. See: Granite States, Supra.

In conclusion, the two(2)-year statute of limitations can be circumvented with regard to service upon a UM carrier in situations where a renewal suit was filed within the mandatory six(6)-month renewal period authorized by O.C.G.A. §9-2-61, but after the statute of limitation has run. The UM carrier rights in such a situation can be seen as derivative of those afforded to the named Defendant. If a named Defendant can be properly served in a renewal action after the expiration of the statute of limitations, then the UM carrier can be similarly served regardless of whether it was placed on notice of the first, dismissed lawsuit because the UM carrier may incur financial responsibility only for the current, pending lawsuit.