In Georgia Farm Bureau Mutual Ins. Co., v. Franks (3/13/2013, GA. APP., A12A2196), the court revisited the increasingly complicated issue of determining
In Georgia Farm Bureau Mutual Ins. Co., v. Franks (3/13/2013, GA. APP., A12A2196), the court revisited the increasingly complicated issue of determining insurable interest when the ownership of a home is non-traditional.
In Franks, Thomas Franks purchased his home in Rome Georgia in August of 2000. At the closing, he was required to bring proof of homeowners insurance. He applied for and purchased homeowner’s insurance from Georgia Farm Bureau (GFB) in his own name, showing no other insured. The GFB policy had a provision stating:
“[e]ven if more than one person has an insurable interest in the property covered, [GFB] will not be liable in any one loss…[t]o the insured for more than the amount of the insured’s interest at the time of the loss[.]
After the closing and after the policy was in place, Mr. Franks executed a warranty deed, conveying the property to himself and to his domestic partner, Sterling Morrison, “as joint tenants with survivorship and not as tenants in common.” Later because of improvements to the property, the dwelling limit on the policy was increased from $60,000 to $246,000.
During this time, the GFB policy was continuously renewed. At one point, Franks allegedly told his agent that Sterling Morrison was on the deed as a co-owner and asked whether Morrison needed to be added to the policy as an insured. Franks claims he was told by his agent that since Morrison was not on the deed to secure debt, there was no need to add Morrison to the policy.
During the night of July 15, 2010, the house was completely destroyed by fire. GFB investigated the loss and issued a payment of $104,175.65 to pay off the remaining amounts owed to the mortgagee on the deeds to secure debt. GFB then determined that Franks and Morrison owned the property as “tenants in common with rights of survivorship.” Relying on the policy language quoted above, GFB then issued a check to Mr. Franks for half of the remaining policy limits ($70,912.18).
Apparently, though not explained in the decision, GFB disagreed with the way Franks and Morrison had defined the nature of the conveyance. It appears that the deed expressly stated that the conveyance was as “joint tenants with survivorship and not as tenants in common.” GFB nonetheless appears to have recast the conveyance as “tenants in common with rights of survivorship.” As the court explained in a footnote, however, ultimately GFB conceded that the conveyance was, in fact, as “joint tenants with rights of survivorship.” As will be seen, the legal difference between “tenants in common” and “joint tenants” was crucial for the court.
Mr. Franks brought suit claiming that he was entitled to the entire balance remaining on the policy limits, $141,824.36, i.e., an additional $70,912.18. Both parties filed Motions for Summary Judgment on the question of whether GFB correctly limited the payment to half of the remaining balance after the mortgagee was paid off. The court denied the motions and an interlocutory appeal was allowed on this issue.
GFB argued that Franks undivided half interest in the property with right of survivorship limited his recovery to fifty percent of the balance after the mortgagee was paid. As argued by GFB, this is consistent with not only the policy language quoted above, but was consistent with Georgia’s Insurable Interest statute (O.C.G.A. 33-24-4) and other applicable law. GFB further argued that any evidence that GFB had imputed knowledge of Morrison’s interest through its agent was not relevant. As GFB argued it, even if GFB had this knowledge, it would not change the impact of the policy language or the law.
The Court of Appeals disagreed with GFB and affirmed the trial court’s denial of GFB’s Motion for Summary Judgment. In doing so, the Court of Appeals had to deal with its own prior precedent that would seem to side with GFB, Specifically, the Court of Appeals had to deal with the cases of Allstate Insurance Co. v. Ammons, 160 Ga. App. 257, 286 S.E.2d 765 (1981) (Ammons I); Allstate Insurance Co. v. Thompson, 164 Ga. App. 508, 297 S.E.2d 520 (1982) (Thompson); and Shield Insurance Co v. Kemp, 117 Ga. App. 538, 160 S.E.2d 915 (1968) (Kemp).
In Ammons 1, Thompson and Kemp, the Court of Appeals appeared to have enunciated the very formula used by GFB in determining how the insurable interest of Mr. Franks should be determined. In Ammons 1 and Thompson, the Court had before it damaged property that was the subject of an agreed fifty percent division through a divorce decree. In Kemp, the Court had an insured who was the owner of an undivided half interest in a service station. In each of these cases, the Court of Appeals seemed to articulate the same formula that GFB followed in determining the insurable interest of Mr. Franks. In all three of these cases, however, the Franks Court noted that none of the three cases set out with sufficient detail the specifics of the conveyance language or the policy language that may have been involved. Crucially, none of these three cases noted whether the property was held as “tenants in common” or as “joint tenants.”
The Court of Appeals did, however, have the specific conveyance language and policy language to review in Franks. With GFB conceding that the property was actually held as “joint tenants” the court explained that joint tenants hold undivided interest in the entire property. Thus, as reasoned by the court, Franks insurable interest, though shared with Morrison, was, in fact, in the entire property, not just in fifty percent of the property. This would appear to allow for Mr. Franks to recover all of the remaining balance of his dwelling coverage after payment of the mortgagee. Since Mr. Franks did not file a Cross-Appeal, the Court was not able to address the issue of whether his Motion for Summary Judgment should have been granted. Instead, the denial of GFB’s Motion for Summary Judgment was affirmed and the case was returned to the trial court.
This then left the apparently contradictory approaches taken by Ammons 1, Thompson and Kemp for the Court to deal with. Rather than overrule these decisions, the court “disapproved” of them. Since the relevant conveyance language and policy language was not spelled out in those decisions, the Court did not believe that it was appropriate to overrule them.
The Court then briefly discussed what impact the Valued Policy Law could have on this discussion. The effect of the Valued Policy Law is to conclusively determine that the policy limit of dwelling coverage is the amount due in a total fire loss under the right conditions. The Court noted that this question, unfortunately, was not properly before them. The Court left a strong hint, however, that when this question is properly before them, the Valued Policy Law may trump all of this analysis.