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GEORGIA COURT OF APPEALS FINDS THAT AN EXCESS INSURER IS NOT SUBJECT TO SUIT UNDER THE DIRECT ACTION STATUTE

Posted by Susan J. Levy

Generally, a party may not bring a direct action against another party’s liability insurer. Hartford Ins. Co. v. Henderson & Son, 258 Ga. 493 (1988). In that case, the Georgia Supreme Court held that “the general rule is that because there is no privity of contract, a party may not bring a direct action against the liability insurer of the party who allegedly caused the damage unless there was an unsatisfied judgment against the insured or it is specifically permitted either by statute or provision in the policy.”

However, Georgia has enacted what is commonly known as the “Direct Action Statute,” which permits an injured party to join a motor carrier’s insurance company in an action for damages. Georgia’s Direct Action Statute, codified at § 46-7-12 and formerly § 46-7-12.1, actually allows plaintiffs injured in an accident with a motor carrier of property or passengers to name the insurer as a party to the action and to inject the issue of insurance at trial.

Significantly, while the Direct Action Statute provides for an “independent action,” the Plaintiff has no separate claim for damages against the motor carrier’s insurer. Andrews v. Yellow Freight Sys., 262 Ga. 476 (1992). The provision allowing joinder of the insurer is not intended, in any respect, to enhance the value of a third party’s claim for damages. Id. Thus, the mere presence of the insurer as a party defendant should theoretically have no effect on the issues of liability or injuries and should not affect the amount of the verdict. Id.

In Werner Enterprises v. Stanton, Georgia Court of Appeals, Case Nos. A09A1699 and A09A1708 (January 13, 2010), the Georgia Court of Appeals found that former O.C.G.A. § 46-7-12.1 did not authorize a direct action against an excess carrier. In that case, Plaintiffs filed suit against Werner Enterprises, Inc., Rafael Ferrer, and Liberty Mutual for the deaths of Mary Gordy and Charles Evans after their motorcycle collided with a freight truck driven by defendant Ferrer. Liberty Mutual moved for summary judgment on the grounds that former O.C.G.A. § 46-7-12.1 authorized direct actions against primary liability insurers, but not excess insurers. Werner was self-insured with $1 million in coverage and the policy issued by Liberty Mutual was an excess policy providing $4 million of coverage in excess of Werner’s self-insurance. Plaintiffs argued that “Werner’s self-insurance was not insurance because there was no third party to assume the risk for Werner, and that, therefore, Werner simply had a $1 million deductible.” The Court rejected Plaintiff’s argument.

Relying on an earlier case, Jackson v. Sluder, 256 Ga. App. 812 (2002), the Court of Appeals agreed with Liberty Mutual and found that an excess policy is not subject to suit under the Direct Action Statute. The court concluded that

[n]othing in the statute mentions any other insurance or provides authorization for suit against the excess insurer. Under the guise of construing a statute, we are not at liberty to rewrite it. Moreover, excess insurance coverage is not regarded as collectible insurance until the limit of liability of the primary policy is exhausted.
Werner Enterprises (quoting Jackson, 256 Ga. App. at 818).

Although the Direct Action Statute continues to be a thorn in the side of insureds and their carriers, we can take some solace in the Court of Appeals’ unwillingness to extend the statute to provide for a direct action against an excess carrier.