Lloyd's Syndicate No. 5820 D/B/A Cassidy Davis V. AGCO Corp
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Lloyd's Syndicate No. 5820 v. AGCO Corp., 734 S.E.2d 899 (2012) 12 FCDR 4013 [5] insurer was not precluded from relying on exclusion based on failure to deliver policy. 734 S.E.2d 899 Court of Appeals of Georgia. Affirmed. LLOYD'S SYNDICATE NO. 5820 d/b/a Cassidy Davis v. Attorneys and Law Firms AGCO CORPORATION. *902 Scott Wayne McMickle, Atlanta, for Lloyd's AGCO Corporation Syndicate No. 5820. v. Lloyd's Syndicate No. 5820 d/b/a Cassidy Davis. Kim Monroe Jackson, Atlanta, Frank C. Bedinger III, Juhee Glynn General Purchasing Group, Inc., et al. Jun, for Glynn General Purchasing Group, Inc. v. T. Bart Gary, Atlanta, Bradley J. Watkins, Brunswick, Seth AGCO Corporation. F. Kirby, Atlanta, for AGCO Corporation. Nos. A12A1125, A12A1126, Opinion A12A1281. | Nov. 30, 2012. PHIPPS, Presiding Judge. Synopsis Background: Manufacturer of agricultural spray applicator AGCO Corporation manufactured and sold agricultural brought action against administrator of service contracts for equipment, offering extended protection plans to its manufacturer, manufacturer's liability insurer, and group in customers. Warranty Specialists, Inc. d/b/a Glynn General which manufacturer was a member that purchased master Corporation sold the extended protection plans to AGCO and liability policy for manufacturer, seeking declaration that administered the plans. Glynn General Purchasing Group, policy covered claims against manufacturer under service Inc. (“GGPG”) obtained a master policy of liability insurance contracts based on alleged design defect in applicator wheel for AGCO from Lloyd's Syndicate No. 5820 d/b/a Cassidy and asserting claims against insurer for breach of contract Davis to provide coverage to AGCO for its liability to and bad faith and against administrator and group for breach AGCO's customers pursuant to the extended protection plans. of contract and fraud. The trial court denied defendants' When Warranty Specialists later suspended payment of motions for summary judgment and granted partial summary warranty claims filed in connection with failed wheel motors judgment to manufacturer. All parties appealed. on equipment enrolled in the extended protection plans, AGCO sued. The trial court granted AGCO's motion for partial summary judgment and denied Cassidy Davis's motion Holdings: The Court of Appeals, Phipps, P.J., held that: for summary judgment on the issue of whether the extended protection plans and the master insurance policy covered [1] policy covered claims against manufacturer; or excluded coverage for equipment failures resulting from a design or engineering defect. The court denied Cassidy [2] material fact issues existed as to whether insurer had Davis's motion for summary judgment on AGCO's claims reasonable basis for refusing to pay claims; for bad faith refusal to pay. It also denied AGCO's summary judgment motion based on estoppel and the inapplicability of [3] manufacturer's demand to insurer for payment was an exclusion clause in the master insurance policy, and denied sufficient under bad faith statute; summary judgment to Warranty Specialists and GGPG on various claims, including those for breach of contract, fraud [4] defendants were not estopped from relying on policy and attorney fees. For the reasons that follow, we affirm the exclusion not originally asserted as a ground for denial of judgments. coverage; and *903 AGCO manufactured and sold an agricultural spray applicator known as the RoGator. The RoGator was powered © 2013 Thomson Reuters. No claim to original U.S. Government Works. 1 Lloyd's Syndicate No. 5820 v. AGCO Corp., 734 S.E.2d 899 (2012) 12 FCDR 4013 by four wheel motors; the failure of one wheel motor caused Also in September 2008, Warranty Specialists sent an email the entire machine to stop functioning. message to AGCO stating that no further wheel motor claims would be paid because, pursuant to the master policy, Beginning in 2005, AGCO offered extended protection Cassidy Davis had invoked the Epidemic Failure Clause in plans (“EPPs”) to its customers who purchased RoGators. relation to RoGator wheel motors. “With immediate effect, AGCO purchased the EPPs from Warranty Specialists, no further claims should be paid in respect of any [AGCO] paying the latter premiums for each RoGator enrolled in attachments ...; for the avoidance of doubt this includes any an EPP. Warranty Specialists administered the EPP. Under claims pending or subsequently advised.” 1 When Warranty the EPP, AGCO agreed to repair or replace covered parts Specialists failed to pay the dealers' wheel motor claims, of the RoGator, “if required due to a MECHANICAL AGCO paid the claims. BREAKDOWN or FAILURE that is the result of a true defect in material or workmanship.” [1] AGCO sued Warranty Specialists, Cassidy Davis, and GGPG, seeking declaratory relief regarding coverage under The EPP pertinently provided: “This service contract the master policy and reimbursement for payment of the coverage is limited exclusively to the repair or replacement warranty claims; asserting claims for breach of contract and of covered parts ... determined to have failed due to a bad faith against Cassidy Davis; asserting claims for breach of MECHANICAL BREAKDOWN or FAILURE as defined contract and fraud against Warranty Specialists and GGPG; under terms and definitions.” The EPP defined a covered and asserting claims for money had and received against “mechanical breakdown or failure” as “the actual breaking Warranty Specialists, Cassidy Davis, and GGPG. Cassidy or electronic failure of any covered part of the covered Davis appeals in Case No. A12A1125; AGCO appeals in MACHINE while in ordinary use arising from faults Case No. A12A1126; and Warranty Specialists and GGPG attributable to manufacturing defects in workmanship or appeal in Case No. A12A1281. This court reviews the *904 materials in such MACHINE causing sudden stoppage of the grant or denial of summary judgment de novo. 2 functions thereof and necessitating repair before it can resume work.” GGPG obtained a master policy of liability insurance for Case No. A12A1125 AGCO from Cassidy Davis, which provided coverage to AGCO for any liability AGCO had to its customers for [2] 1. Cassidy Davis contends that the trial court erred by machines enrolled in the EPP. granting AGCO's motion for partial summary judgment and by denying its motion for summary judgment on the issue Pursuant to the EPP and the master policy, the purchaser of whether there was coverage for breakdowns attributable of a machine that had a mechanical breakdown or failure to design defects. According to Cassidy Davis, the EPP and presented the machine to one of AGCO's dealers, who master policy did not afford coverage for failures resulting made the initial determination of coverage; if the repair was from a design or engineering defect, and the RoGator's wheel covered, the dealer repaired the machine. The dealer then motor failures resulted from such a defect. 3 submitted a claim for reimbursement for the repair cost to Warranty Specialists, who would evaluate and pay or deny The trial court ruled that the language of the EPP and master claims under the EPP. Warranty Specialists paid premiums to policy was unambiguous and “[did] not exclude or limit Cassidy Davis, and Cassidy Davis paid Warranty Specialists coverage for a design or engineering defect”; and that, as used for claims deemed valid. in these contracts, the “the term ‘manufacturing defects' [did] not exclude coverage for breakdowns or failures attributable In mid-to late 2008, after having accepted and paid to, or caused by, a design defect.” The court granted AGCO's approximately 25 wheel motor claims, Warranty Specialists motion for partial summary judgment “on the issue of whether stopped processing the claims. In September 2008, it the EPP and the master policy provide coverage for a informed AGCO that it was placing all wheel motor claims on mechanical breakdown or failure that is allegedly attributable hold until it received support from AGCO (such as assistance to, or caused by, a design or engineering defect.” in paying the claims or higher premiums). © 2013 Thomson Reuters. No claim to original U.S. Government Works. 2 Lloyd's Syndicate No. 5820 v. AGCO Corp., 734 S.E.2d 899 (2012) 12 FCDR 4013 [3] An insurance policy is simply a contract, the provisions Thus, assuming that the procedural requirements of the Code of which should be construed as any other type of contract. 4 section were met, the question of whether an insurer has acted The whole contract should be looked to in arriving at the in bad faith in denying a claim under OCGA § 33–4–6 11 must construction of any part. 5 be submitted to a jury unless the insurer can prove as a matter of law that it possessed a reasonable defense to coverage. 12 [4] [5] [6] As set out above, the EPP covered the actual The insurer's defense to the coverage must be reasonable breaking or electronic failure of any covered part “while in under the circumstances presented in the case. 13 ordinary use arising from faults attributable to manufacturing defects in workmanship or materials.” Where a contract There was evidence that, in explaining its basis for denying requires that conduct “arise out of” an act, “it does not the claims, Cassidy Davis cited “a clear historical reliability mean proximate cause in the strict legal sense but instead problem on wheel motors,” not a contractual provision. And encompasses almost any causal connection or relationship.” 6 it cited the EFC; AGCO pointed to evidence that the EFC “Indeed, nothing more than a slight causal connection is was not part of the EPP or the master policy, that it had been required to show that a loss arose out of a specified act given no notice of the EFC before the clause was invoked, set forth in a contract.” 7 The phrase “arising from faults that Cassidy Davis and Warranty Specialists knew of previous attributable to manufacturing defects in workmanship or wheel motor issues before entering into the contracts, and that materials” is broad enough to include a breakdown or failure the claims were being denied because they had become too related to a manufacturing defect, even where there was a costly.