This seems like a peculiar case to me.  I’ve certainly never seen this issue addressed before.  At issue in United Specialty Ins. Co. v. Cardona-Rodriquez, No. A19A0859 (Ga. Ct. App. Oct. 16, 2019) is coverage for a car washing business, Geno’s Car Wash, for an injury sustained by a customer, Rodriguez, when an employee struck him with a vehicle. 

United Specialty, the car wash’s insurer, filed an action seeking a declaratory judgment that the maximum limit, owed under its “Commercial Lines Policy,” is $25,000, because the employee was operating Rodriguez’s vehicle without a valid Georgia driver’s license.  The trial court concluded that a driver’s license is not required to operate a vehicle on private property.  Thus, the policy limit for the accident is $100,000.

The case went to the Georgia appeals court.  Here is where it got peculiar.  The court addressed whether there was a justiciable controversy, as required to establish jurisdiction under the Georgia Declaratory Judgment Act. 

The court noted that “even though United asserted that it was providing a defense for [Geno’s Car Wash] under a reservation of rights, it unequivocally rejected Rodriguez’s $100,000 demand for payment under the policy and offered him $25,000. The reservation of rights letter did not assert that United was uncertain as to its rights or the policy limits, or advise Lewis that it was unclear how to proceed under the policy given that [the employee] was operating the van without a license. Instead, United’s litigation specialist unequivocally asserted that ‘the limits of liability coverage under your policy are $25,000, which is the basic financial responsibility limit required by the State of Georgia.’”

Based on this, the court concluded that there was no justiciable controversy as “United elected to deny Rodriguez’s demand for the full $100,000 limit of the policy, prompting Rodriguez to file suit. . . . United consistently denied the existence of policy limits of $100,000. Accordingly, United is not in need of any direction from the court with respect to future conduct on its part.” 

The court cited several Georgia cases purportedly supporting this conclusion, including Builders Ins. Group v. Ker-Wil Enterprises, 274 Ga. App. 522, 523 (618 SE2d 160) (2005), which the court described as “affirming dismissal of workers’ compensation insurer’s declaratory judgment action because [insurer] had already denied coverage when it filed its petition for declaratory relief, [and] was not uncertain or insecure of its rights, status, or legal relations with respect to the making of that decision.”

Needless to say, the obvious response is that, simply because United maintained that the policy limit was $25,000, others did not agree.  Thus, there was still a dispute over the amount of the policy limit.  Under the court’s rationale, as long as parties are dug-in in their positions, there is no dispute between them.

But even if that’s the law, at least the court carved out an exception.  However, the exception is peculiar.  It appears that an insurer can maintain that coverage is not owed, but still establish the existence of a dispute needed to maintain jurisdiction for a declaratory judgment action, by having told the insured that it would “reconsider its position if the insured disagreed and/or could provide additional information that may have a bearing on the coverage issue.”

As the court saw it, the inclusion of such language creates uncertainty in the insurer, as to its coverage determination, which creates a justiciable controversy necessary for jurisdiction under the Declaratory Judgment Act. 
 
The court also noted that its decision was dictated by a desire to prevent an insurer from denying coverage and then using the declaratory judgment procedure as a means to avoid bad faith exposure.  

Accordingly, the appeals court held that the trial court was without jurisdiction to render a declaratory judgment.