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Innocence Lost: The Innocent Co-Insured Doctrine In Georgia

January 02, 2010 BY Mike Bagley

            In a first party property insurance setting,  a question that frequently arises is whether the fraud or misconduct of one insured will bar recovery by other innocent co-insureds.  Georgia has a long zigzagging history which went from allowing an innocent co-insured to recover in Richards v. Hanover Insurance, 250 Ga. 613, 299 S.E.2c 561 (1983),  to denying recovery in Sales v. State Farm Fire & Casualty Co., 849 F.2d 1383, 1385 (11th Cir. 1988).

            In Fireman's Fund Ins. Co. v. Dean, 212 Ga. App. 262, 441 S.E.2d 436(1994), the estate of an innocent co-insured sought coverage for wrongful death and property damage as the result of the acts of the innocent so-insured' spouse who murdered him and set fire to their residence. In Dean, the policy listed both spouses as named insureds and provided that the policy would be void if "an insured" has intentionally concealed material facts. The Court found that the language was not ambiguous and clearly created joint obligations in the insureds.

            However, bad facts make bad law,  and despite the unambiguous language, the Court held that the policy did not satisfy the criteria of O.C.G.A. § 33-32-1 (a), which requires that the language of any fire insurance policy be as favorable to the insured as the language in the Standard Fire Policy.  The Standard Fire Policy fraud provision used the term "the insured," and thus provided several obligations as to each insured. The Court then held that the policy had to be reformed to conform with the minimum coverage provided in the Standard Fire Policy, and therefore, the innocent co-insured was allowed to recover.

            It was thought by many that Dean was an anomaly based in large part upon its horrific facts, and the Court of Appeals signaled that it was anomalous when it addressed the issue of conformance with the Standard Fire Policy again in Ga. Farm Bureau Mut. Ins. Co. v. Roland, 215 Ga. App. 834, 452 S.E.2d 548 (1994).  The Court of Appeals found the policy language requiring that the insured premises must be the exclusive premises where "the named insured spouse" maintains a residence to be unambiguous and denied the claim of Frances Roland, the spouse who had not resided in the house at the time of the fire.  The dissent argued that Deanwould prevent any alteration or addition to the wording of the Standard Fire Policy, which had no such residence requirement.  However, the Court specifically rejected that argument and found that the Standard Fire Policy contained the the qualifier "[u]nless otherwise provided in writing," which clearly recognizes that the parties to the insurance contract may agree to special conditions varying from the standard language.  The Court held "[t]o create a Procrustean bed of an unamendable Standard Fire Policy would not only change the longstanding law of Georgia, but do a profound disservice to both insurers and insureds."  On appeal to the Supreme Court, the Roland case was reversed on other grounds, but the Supreme Court did not reverse the Court of Appeal’s holding in relation to deviation from the Standard Fire Policy and specifically acknowledged the qualifier allowing modification if "provided in writing" and held "we do not reach the question of whether the special residency provision deviates from the Standard Fire Policy prescribed by the Insurance Commissioner of Georgia pursuant to O.C.G.A § 33-32-1."  Roland v. Ga. Farm Bureau Mut. Ins. Co., 265 Ga. 776, 462 S.E.2d 623 at footnote no. 2 (1995).  The Standard Fire policy still provides that other provisions or agreements "may be provided for in writing . . .”  (Ga. Comp. R. & Regs § 120-2-19.01).

            Following Roland, in Brown v. Ohio Cas. Ins. Co., 239 Ga. App. 251, 519 S.E.2d 726 (1999), the court upheld the intentional act exclusion as a bar to the claim of an innocent co-insured, and in Graphic Arts Mut. Ins. Co. v. Pritchett, 220 Ga. App. 430, 469 S.E.2d 199 (1995), the court barred the claim of an innocent co-insured in an application misrepresentation case.

The Journal is a publication for the clients of Drew Eckl & Farnham, LLP. It is written in a general format and is not intended to be legal advice to any specific circumstance. Legal Opinions may vary when based upon subtle factual differences. All rights reserved. 

Editorial Board:

H. Michael Bagley