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Released Opinions

March 17, 2014

The Supreme Court of Georgia released opinions in seven cases this morning, three of which are within the scope of our coverage. Summaries of the cases and opinions are below. The Court will next hear argument on April 7, 2014, after it completes the distress period for its January term.

S13G0582. LLOYD’S SYNDICATE NO. 5820, d/b/a CASSIDY DAVIS v. AGCO CORP.

This case is primarily a coverage dispute over extended warranties. AGCO manufactures and sells a variety of agricultural equipment, including the RoGator, a large agricultural sprayer. In 2005, AGCO began offering “extended protection plans” (EPPs) for the RoGators its customers bought, purchasing the EPPs from Warranty Specialists. Warranty Specialists administered the EPPs and Glenn General Purchasing Group (GGPG) obtained liability insurance from Cassidy Davis for AGCO’s liability on the EPPs. If a RoGator had a mechanical breakdown, the customer took it to an AGCO dealer, which determined if it was a covered repair. If the repair was covered, the dealer fixed the machine and sent a claim to Warranty Specialists, which then paid or denied the claim. Cassidy Davis then paid Warranty Specialists for the valid claims. In 2008, Warranty Specialists stopped paying claims, telling AGCO that it would not repair any more wheel motor claims until AGCO assisted in paying the claims or paid higher premiums. Warranty Specialists also informed AGCO that Cassidy Davis had invoked the “Epidemic Failure Clause” (EFC), which stopped payment of claims if more than 10% of the units had a common component failure. AGCO sued, seeking a declaratory judgment that they had coverage under the policy and seeking reimbursement for unpaid warranty claims. The trial court granted partial summary judgment to AGCO on several fronts and denying partial summary judgment motions of AGCO and the various insurers.

The Court of Appeals (Phipps, Ellington, Dillard) unanimously affirmed the decision, finding the trial court properly found the language of the EPP covered design and manufacturing defects that led to claims. The Court of Appeals also found the trial court properly denied Cassidy Davis’ motion for summary judgment on the question of the reasonableness of its defense to coverage and that the indemnity duty of Cassidy Davis did not first require a judgment before it was obligated to reimburse AGCO. On a variety of other issues, the Court of Appeals also found that the trial court properly denied various other claims of AGCO and the insurers, determining that the insurers were not estopped from asserting other grounds for denying coverage, that the insurers are not precluded from relying on the EFC, and that some factual disputes remained.

On May 6, 2013, the Supreme Court unanimously granted the petition for certiorari to consider the following issues:

  1. Did the Court of Appeals err in its interpretation of the coverage provision of the extended protection plan?
  2. Did the Court of Appeals err in its interpretation of the indemnity provision of the master policy of liability insurance?

The case was heard on September 10, 2013.

On March 17, 2014, the Supreme Court unanimously reversed and remanded the case. Writing for the Court, Justice Nahmias explained that the Court of Appeals misinterpreted the language of the insurance contracts on both issues. On the coverage issue, the contract does not cover design defects. The term “manufacturing defect” does not ordinarily include defects in design. Because the contract did not cover design defects, Cassidy Davis was entitled to summary judgment on that issue. On the indemnity issue, the contract only required indemnification for amounts that AGCO had been “held legally liable” to pay. Thus, there is no indemnification obligation until legal liability is established, making AGCO’s demand premature and entitling Cassidy Davis to summary judgment on the bad faith claim.

S13G0590. STANFIELD et al. v. ALIZOTA

This case involves the termination of parental rights and which court had jurisdiction over a child. After SK’s mother was arrested for driving under the influence while SK (who was six months old) was in the car, the Juvenile Court found SK was deprived as to her mother. Alizota was the putative father and petitioned to legitimate the child. He eventually consented to nonreunification and long-term custody was given to the Stanfields by the Juvenile Court in June 2010, granting custody to them until SK reached 18 years old. Alizota had supervised and unsupervised visits with SK in accordance with the order over the next several months. In December 2010, the Stanfields filed in Superior Court to adopt SK. Alizota answered, challenging the contentions that SK was deprived as to him. The Superior Court granted the petition for adoption and Alizota appealed.

The Court of Appeals (Doyle, Andrews, and Boggs (concurring specially and in the judgment only)) reversed the superior court ruling, finding that the superior court lacked jurisdiction to terminate Alizota’s parental rights because the juvenile court already exercised jurisdiction. The Court of Appeals found that when there is an issue of concurrent jurisdiction, the first court taking jurisdiction will retain it. Judge Boggs wrote separately on the issue of priority jurisdiction between juvenile and superior courts and its increasing prevalence in litigation.

On May 6, 2013, the Supreme Court unanimously granted the petition for certiorari to consider the following question:

  1. Whether the Court of Appeals properly applied the principle of priority jurisdiction? See Ertter v. Dunbar, 292 Ga. 103, 734 S.E.2d 403 (2012).

The case was heard on September 9, 2013.

On March 17, 2014, the Supreme Court unanimously reversed and remanded the case. Writing for the Court, Chief Justice Thompson explained that, while the Court of Appeals was correct that superior courts and juvenile courts have concurrent jurisdiction over termination proceedings, it was incorrect that priority jurisdiction prevented the superior court from exercising jurisdiction. While the juvenile court had personal jurisdiction over SK for the deprivation action, it never took subject matter jurisdiction over the termination of parental rights because no petition for termination was filed in juvenile court. The juvenile code treats deprivation and termination actions separately and termination of rights was raised for the first time in conjunction with the adoption petition, giving the superior court jurisdiction over the termination proceeding.

S13G0655. AYERS v. PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM OF GEORGIA

This case involves the payment of benefits to a beneficiary after the retiree’s death. When Leroy Ayers’ mother, Esther, retired from the Rome City School System in 1982, she chose “Option A” in her retirement system, which allowed a monthly benefit paid to her, then a portion of the benefit paid to her “primary beneficiary, if living, for the remainder of his life.” Esther’s husband (her primary beneficiary) died in 1991 and Esther later died in 1999. During the three subsequent months after her death, the Retirement System paid a total of $1,064.91 into her account, which Leroy Ayers then withdrew. The Retirement System sued for the amounts erroneously deposited in the bank account and Ayers counterclaimed to claim he was entitled to the monthly benefit as a surviving beneficiary. The trial court denied the Retirement System’s motion for a directed verdict and a jury entered a $5,000 verdict for Ayers. The Retirement System appealed.

The Court of Appeals (Barnes, Adams, McFadden) unanimously reversed the decision, finding the issue was one of contractual interpretation and should not have been tried by a jury. Because the contractual language was clear and unambiguous, the construction of the contract is a question of law for the court. The contract only provided payments for the primary beneficiary, which was Esther’s husband, and Ayers had no claim on the funds as a secondary beneficiary.

On June 3, 2013, the Supreme Court granted the petition for certiorari in a 5-2 vote (Nahmias and Blackwell dissenting) to consider the following issue:

  1. Did the Court of Appeals err in reversing the trial court’s denial of the motions for summary judgment and directed verdict?

The case was heard on September 23, 2013.

On March 17, 2014, the Supreme Court unanimously affirmed the Court of Appeals. Writing for the Court, Justice Nahmias explained that no retirement benefits could be paid beyond the life of Esther and her husband. A statute governing an retirement plan for a government employee becomes part of the contract of employment. The Retirement System could not vary the terms of the contract, so reviewing the forms filled out by Esther was unnecessary. But the statutes governing the options available make clear that Leroy was not entitled to the three months of benefits the system mistakenly paid after Esther’s death.

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