NEWBERRY v. COTTON STATES MUTUAL INS. CO

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Docket Number

A99A2395.

Attorney(S)

Shaw, Maddox, Graham, Monk Boling, Daniel M. Roper, for appellant. Chambers, Mabry, McClelland Brooks, DeeAnn B. Waller, for appellee.

Judges

John J. Ellington

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Smart Summary

Factual and Procedural Background

In December 1996, Labron Newberry was involved in a physical altercation at a social function in Mississippi, which led to an intentional tort claim filed against him in November 1997. After being served with the complaint, Newberry contacted a lawyer who advised him to notify his homeowner's insurance carrier, Cotton States Insurance Company. The insurance policy required notice of an occurrence "as soon as practicable." Newberry notified Cotton States seventeen days after service of the complaint, but eleven months after the incident. Cotton States hired counsel to represent Newberry in the underlying lawsuit and conducted an investigation, during which Newberry and his wife gave sworn statements and signed a Bilateral Reservation of Rights and Nonwaiver Agreement. Cotton States then filed a declaratory judgment action seeking a ruling on coverage and was granted summary judgment by the Floyd Superior Court. Newberry appealed, challenging the disqualification of counsel and the propriety of summary judgment.

Legal Issues Presented

Whether counsel for Cotton States should have been disqualified due to an alleged attorney-client relationship with Newberry.
Whether summary judgment was improper because there remained factual issues regarding the timeliness of Newberry's notice to Cotton States under the insurance policy.

Arguments of the Parties

Appellant's Arguments

Newberry contended that counsel for Cotton States should have been disqualified because he believed that counsel represented him during the sworn statement process.
Newberry argued that summary judgment was improper because a factual dispute existed about whether he provided timely notice to Cotton States as required by the policy.

Appellee's Arguments

Cotton States maintained that no attorney-client relationship existed since Newberry signed a Reservation of Rights agreement and the counsel represented the insurer, not Newberry.
Cotton States asserted that Newberry’s notice was untimely and that summary judgment was appropriate based on the evidence gathered during the investigation.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Guillebeau v. Jenkins, 182 Ga. App. 225 (355 S.E.2d 453) (1987)	Attorney-client relationship requires that advice or assistance be both sought and received; a reasonable belief is necessary.	Used to determine that no attorney-client relationship was established between Newberry and Cotton States' counsel.
Huddleston v. State, 259 Ga. 45 (376 S.E.2d 683) (1989)	General principles concerning attorney-client relationships.	Supported the trial court’s discretion in denying disqualification of counsel.
Gene Thompson Lumber Co. v. Davis Parmer Lumber Co., 189 Ga. App. 573 (377 S.E.2d 15) (1988)	Disqualification of counsel rests in the sound discretion of the trial judge.	Confirmed that the trial court did not abuse discretion in refusing to disqualify counsel.
Guaranty National Insurance Co. v. Brock, 222 Ga. App. 294 (474 S.E.2d 46) (1996)	Insured must act reasonably under the circumstances regarding notice; limitations on notice are subject to factual determination.	Supported the conclusion that whether notice was timely was a factual issue for trial.
Norfolk c. Ins. Co. v. Cumbaa, 128 Ga. App. 196 (196 S.E.2d 167) (1973)	Notice requirements in insurance policies are generally issues for factual determination.	Reinforced that the timeliness of notice is a question of fact.
Standard Guaranty Ins. Co. v. Carswell, 192 Ga. App. 103 (384 S.E.2d 213) (1989)	Ignorance of coverage under a policy may justify failure to give notice; conflicting evidence on knowledge of coverage requires a jury determination.	Supported reversal of summary judgment on notice timeliness due to conflicting evidence.

Court's Reasoning and Analysis

The court first addressed the disqualification issue by examining whether an attorney-client relationship existed between Newberry and Cotton States' counsel. The court applied established legal standards requiring that an attorney-client relationship be formed by mutual consent and reasonable belief, not unilaterally by the client. The signed Reservation of Rights agreement and the nature of the statements given led the court to conclude that Newberry had no justifiable basis to believe that Cotton States' counsel was representing him, and thus no conflict warranted disqualification.

Regarding the timeliness of notice, the court recognized that Newberry notified Cotton States seventeen days after service of the lawsuit but almost a year after the incident. The court noted that the insured is only required to act reasonably under the circumstances and is not expected to foresee every possible claim. The evidence showed that Newberry was unaware that his homeowner's policy might cover the intentional tort and that there was conflicting evidence about his knowledge of coverage. Because notice provisions requiring reporting "as soon as practicable" are generally factual questions, the court found that summary judgment was improper on this issue and that the matter should be resolved by a jury.

Holding and Implications

The Court of Appeals affirmed in part and reversed in part the trial court’s judgment. It affirmed the denial of Newberry’s motion to disqualify Cotton States' counsel, finding no abuse of discretion. However, it reversed the grant of summary judgment on the timeliness of notice issue, holding that a factual dispute remained that precluded summary judgment.

The direct effect of this decision is that Cotton States' counsel may continue representing the insurer, and the question of whether Newberry gave timely notice must be decided at trial. The opinion does not establish new precedent but applies existing principles regarding attorney-client relationships and notice requirements in insurance policies.

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NEWBERRY v. COTTON STATES MUTUAL INS. CO.

ELLINGTON, Judge.

Cotton States Insurance Company was granted summary judgment on this declaratory judgment action against its insured, Labron Newberry. Newberry appeals on two grounds, that counsel for Cotton States should have been disqualified because an attorney-client relationship existed with Newberry, and that summary judgment was improper because issues of fact remain as to whether Newberry's notice to Cotton States was timely.

In December of 1996 Newberry and his wife attended a social function in Mississippi sponsored by her employer. During the party, Newberry became involved in a physical altercation with another guest which led to the underlying lawsuit. In November of 1997 the guest filed an intentional tort claim naming Newberry as a defendant and served him with a copy of the complaint. It was not until after receipt of service that Newberry contacted a lawyer, who told him to notify his homeowner's insurance carrier, Cotton States, about the incident and the claim. Newberry's policy required him to provide Cotton States notice of an occurrence "as soon as practicable." On December 15, 1997, seventeen days after he received service of the complaint, Newberry first notified Cotton States. Cotton States then hired counsel in Mississippi to represent Newberry in the underlying lawsuit. Cotton States also hired attorneys in Georgia to take sworn statements from Newberry and his wife in connection with its investigation concerning coverage for the claim. Prior to giving his sworn statement, Newberry signed a document entitled Bilateral Reservation of Rights and Nonwaiver Agreement acknowledging that Cotton States was conducting an investigation to determine whether coverage was afforded to him and authorizing Cotton States to undertake such an investigation without waiving its right to disclaim coverage. In its declaratory judgment action Cotton States relied on information given in these statements and moved for summary judgment. The trial court granted the motion and Newberry appeals.

1. Newberry argues that the trial court erred by not using the proper standard of law in determining whether an attorney-client relationship existed between Newberry and Cotton States' counsel in denying Newberry's motion to disqualify counsel. This argument is based on the assertion that Newberry believed that counsel for Cotton States represented him at the sworn statement. In its order granting summary judgment to Cotton States, the trial court stated,

Having reviewed the record, including the statements given by Mr. and Mrs. Newberry to counsel as well as the Reservation of Rights letter signed by Mr. Newberry, the Court can see no reason to believe that Mr. Newberry had a justifiable reason to conclude that Cotton States' counsel was in fact representing him.

The basic question in regard to the formation of the attorney-client relationship is whether it has been sufficiently established by the appellant that advice or assistance of the attorney is both sought and received in a matter pertinent to his profession. Guillebeau v. Jenkins, 182 Ga. App. 225 (1) ( 355 S.E.2d 453) (1987). "An attorney-client relationship cannot be created unilaterally in the mind of the client: a reasonable belief is required." Id. at 231. In this case the evidence authorized the trial court in determining that there was no legal representation of Newberry by counsel for Cotton States. See generally Huddleston v. State, 259 Ga. 45 (1) ( 376 S.E.2d 683) (1989). "The ultimate determination of whether an attorney should be disqualified from representing a client in a judicial proceeding rests in the sound discretion of the trial judge." (Citations and punctuation omitted.) Gene Thompson Lumber Co. v. Davis Parmer Lumber Co., 189 Ga. App. 573, 574 (1) ( 377 S.E.2d 15) (1988). Newberry has not demonstrated an abuse of discretion in the trial court's refusal to disqualify counsel for Cotton States.

2. Newberry contends that the trial court erred in granting Cotton States motion for summary judgment because an issue of fact exists as to whether Newberry's notice of a claim was given "as soon as is practicable," as required by the insurance policy. It is undisputed that Newberry notified Cotton States about the claim seventeen days after receipt of service of the underlying lawsuit, but eleven months after the actual occurrence of the incident that gives rise to the suit.

In their sworn statements the Newberrys stated that they believed the plaintiff in the underlying suit was the type of person who is looking to sue somebody and that they suspected she may file a claim on the incident. However, there is evidence that the Newberrys had actual knowledge that the plaintiff in the underlying lawsuit had filed a workers compensation claim based on this incident and that she only filed suit after that claim was denied. Newberry stated that he believed that if a claim was filed it would be handled through workers compensation. Newberry was not required to foresee every possible claim, no matter how remote, that could have arisen from the incident. Guaranty National Insurance Co. v. Brock, 222 Ga. App. 294, 295 (1) ( 474 S.E.2d 46) (1996). He was only required to act reasonably under the circumstances. As a general rule, limitations in insurance policies requiring the insured to report an incident "as soon as practicable" are subject to a factual determination. Id. citing Norfolk c. Ins. Co. v. Cumbaa, 128 Ga. App. 196, 198 ( 196 S.E.2d 167) (1973).

To further support his contention that his actions were reasonable, Newberry stated that he had no idea that his homeowner's insurance policy might afford coverage for an intentional tort that occurred at an office Christmas party hundreds of miles from his house. "The fact that an insured did not know the policy might afford coverage under a given factual situation may provide justification for the failure to give notice." Standard Guaranty Ins. Co. v. Carswell, 192 Ga. App. 103, 104 ( 384 S.E.2d 213) (1989). "Where there is a conflict in the evidence on the issue of the insured's lack of knowledge of coverage, a jury must determine the question." Id. Accordingly, the trial court erred in granting summary judgment on this issue.

Judgment affirmed in part, reversed in part. Andrews, P.J., and Ruffin, J., concur.