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COURT LOOKS TO CAUSE RATHER THAN EFFECT TO DETERMINE COVERAGE LIMIT IN AN AUTO INSURANCE LIABILITY POLICY THAT LEAVES WORD “ACCIDENT” UNDEFINED

Posted by H. Lee Pruett

Justice David Nahmias, the newest member of the Georgia Supreme Court, recently authored an opinion which ruled in favor of the insurer in an important case that sought to determine the meaning of “accident”-and the resulting limits of coverage-when the word is undefined in the policy. Answering a certified question from the U.S. District Court for the Middle District of Georgia, the majority in State Auto Property and Casualty Co. v. Matty, Case No. S09Q1846 (Ga. S. Ct., Mar. 1, 2010), held that when a liability policy leaves “accident” undefined, the court must apply the “cause theory” to determine whether there was more than one accident under the policy. In other words, the court will look to the cause of the injuries, regardless of whether each injury occurred in the same moment of time, rather than the number of resulting injuries. Thus, a limit of liability for one “accident” would apply to all injuries resulting from one proximate cause, and would not be extended to each individual injury.

In Matty, the insured struck and killed a bicycle rider and then struck and injured another bicyclist. An expert testified that it took just over a second in time for the insured to travel the 95 to 115 feet between the two impacts. The State Auto policy provided $100,000 liability coverage for “each accident.” The limit applied to “any one auto accident” regardless of the number of claims made or vehicles involved. The policy, however, failed to define “accident.” The two claimants argued that there were two accidents and, therefore, the policy provided $100,000 for each. State Auto argued that both injuries resulted from a single accident. The U.S. District Court found no answer in Georgia law and certified the question to the Georgia Supreme Court.

The Georgia Court considered three theories nationwide and held that it would follow the majority of states in applying the “cause” theory: “the number of accidents is determined by the number of causes of the injuries,” in other words, the proximate cause.

In the context of vehicle accidents involving multiple collisions that do not occur simultaneously (recognizing that it is almost impossible that such collisions can occur without any difference in time and place), courts look to whether, after the cause of the initial collision, the driver regained control of the vehicle before a subsequent collision, so that it can be said there was a second intervening cause and therefore a second accident.

The Court rejected the “effect” theory in which each individual injury would constitute a separate “accident.” The Court left it to the U.S. District Court to apply the cause theory to the facts at issue.

This was a close case, the Georgia Court splitting 4-3. The dissent argued the policy terms were ambiguous and that the majority had ignored the long-standing rule that any ambiguities must be construed against the insurer. Both the dissent and the majority opinion, however, underscore the importance of insurers providing clear definitions in their policies.