United States: Lewis Brisbois Atlanta Coverage Team Makes New Law In Georgia
Last Updated: July 21 2017

Case:  Atl. Speciality Ins. Co. v. Lewis
          Court of Appeals of Georgia, First Division
          No. A17A0190, 2017 Ga. App. LEXIS 290 (Ct. App. June 20, 2017)

Atlanta Partner Seth Friedman and Associate Christopher Meeks obtained a ruling from the Georgia Court of Appeals that, absent very limited circumstances, third-party claimants do not have standing to bring a declaratory judgment action against an insurance company prior to obtaining a judgment against the insured. The opinion was the first time a Georgia appellate court had directly addressed whether a third-party claimant has standing to seek declaratory relief prior to obtaining a judgment against the insured.

The case, Atlantic Specialty Insurance Company v. Lewis, 2017 Ga. App. LEXIS 290, stemmed from a personal injury suit brought by Nancy Lewis ("Lewis") against the City of Cartersville, Georgia ("City"), alleging that the City was liable for injuries her daughter sustained in an automobile collision. While the personal injury suit was pending, Lewis filed a declaratory judgment action against the City, and the City's insurer, Atlantic Specialty Insurance Company ("Atlantic"), seeking a declaration regarding the limits of Atlantic's policy issued to the City. In response, Atlantic filed a motion to dismiss, contending that Lewis lacked standing to seek declaratory relief and that the action was not ripe for judicial review due to the absence of a judgment against the City in the underlying personal injury suit. The trial court denied Atlantic's motion to dismiss. The trial court then went on to rule on the merits of the case and granted the Lewis summary judgment on the merits of the dispute.

On appeal, the Court held that Lewis lacked standing to bring the declaratory judgment action because she did not have an unsatisfied judgment against the city and the underlying personal injury suit against the City was still pending. The Court reaffirmed the general rule in Georgia that a plaintiff does not have standing to bring a direct action against a defendant's insurance company, including actions by way of counterclaim and the assertion of certain equitable defenses, unless the plaintiff has obtained a judgment against the defendant that remains unsatisfied. See Arnold v. Walton, 205 Ga. 606, 612 (2) (54 SE2d 424) (1949); Capitol Indem. Corp. v. Fraley, 266 Ga. App. 561, 563 (1) (597 SE2d 601) (2001); Colonial Penn Ins. Co. v Hart, 162 Ga. App. 333, 337-339 (6) (291 SE2d 410 )(1982). The rationale for this rule is that the plaintiff is not in privity of contract with either the defendant or the defendant's insurance company under the liability insurance policy and is not considered a third-party beneficiary of the policy. See Googe v. Florida Intl. Indem. Co., 262 Ga. 546, 548 (1) (422 SE2d 552) (1992). While the court recognized that there are a limited number of exceptions to the general rule, such as statutes or insurance policy provisions specifically authorizing a direct action, the Court held that none of situations applied to this case.

Furthermore, the Court held that Lewis failed to meet the standards to obtain relief under the Georgia Declaratory Judgment act. The Court held that it is well-established that a plaintiff lacks standing to seek declaratory relief when he or she has only a "generalized economic interest that is contingent upon future events" because "[s]uch interests are not legally protectable interests." Board of Natural Resources v. Monroe County, 252 Ga. App. 555, 558 (1) (556 SE2d 834) (2001). The Court held that the contingent nature of whether and how much of a judgment might be entered against the City prevented Lewis from having standing under the Act.

The Court vacated the trial court's ruling on the merits of the case, reversed the trial court's ruling on the motion to dismiss and remanded with direction that the case be dismissed for lack of standing.

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