131_C174

“MADE WHOLE” DOCTRINE DID NOT APPLY TO INSURANCE COMPANY’S SUBROGATION RIGHTS

Commercial Property	Complete Compensation Rule/”Made Whole” Doctrine
Subrogation	Interlocutory Appeal

Atmos Energy Corporation (Atmos) owned and operated an underground gas pipeline. It ruptured and the ensuing explosion and fire damaged the building that Woodcraft by MacDonald, Inc. d/b/a Coachcraft (Woodcraft) owned and occupied. Georgia Casualty and Surety Co. (Georgia Casualty) insured the building. It paid Woodcraft $1,675,169 and then pursued its subrogation rights against Atmos in federal court. Woodcraft and its owner, Brad MacDonald (collectively “Coachcraft”) intervened as plaintiffs. After more than two years of discovery and preparing for trial, Georgia Casualty settled its claim against Atmos for $950,000. Coachcraft objected to the settlement. It argued that Georgia Casualty could not settle its subrogation claim until Coachcraft was “made whole.” The federal court denied the objection. Coachcraft also settled its claim against Atmos for $125,000 in lieu of continuing its own federal case.

Following these settlements, Coachcraft demanded that Georgia Casualty pay it $179,130.59 from its settlement with Atmos. This was the amount that Coachcraft maintained was necessary to make it whole from the damage to the building. Georgia Casualty refused and Coachcraft brought an action in superior court that asserted that Georgia Casualty breached the insurance contract and acted in bad faith by refusing to ensure that Coachcraft was made whole. The trial court denied Georgia Casualty’s motion for summary judgment on the breach of contract claim but granted summary judgment on its motion for summary judgment on the bad faith claim. On interlocutory appeal, the appellate court determined that Georgia Casualty was entitled to summary judgment on both issues. It held that the “made whole” doctrine did not require that Georgia Casualty demonstrate that Coachcraft was fully compensated before it exercised its subrogation rights under the insurance policy. It reversed the trial court’s ruling on the breach of contract claim and affirmed its ruling on the bad faith claim.

Note: An interlocutory appeal is an appeal of a matter that is not determinable of the controversy but that is necessary for a suitable adjudication of the merits. It is also known as the Final Decision Rule.

The appellate court granted Coachcraft’s petition for certiorari for the Georgia Supreme Court to determine if the appellate court erred in reversing the trial court’s denial of summary judgment to Georgia Casualty on the breach of contract claim.

Note: A petition for certiorari is a writ of common law that a superior court issues to an inferior court that requires the inferior court to produce a certified record of a particular case it tried. It is issued so the superior court can examine the inferior court’s proceedings to determine if there have been any irregularities.

Coachcraft maintained that the complete compensation rule or “made whole” doctrine required that an insured be fully compensated before the insurance company settles its subrogation rights with the tortfeasor with respect to insurance policies that cover property damage to commercial properties. The court disagreed with Coachcraft’s assertion. It noted that Georgia law allowed doing so with respect to personal injury claims. However, the Georgia Legislature specifically refused to include a “made whole” provision in the statute that directly governs such claims for property damage to commercial buildings. The court noted that the Georgia Legislature was the ultimate arbiter of public policy and it was up to that body to determine if this doctrine was to apply to a commercial property insurance policy that granted subrogation rights to an insurance company.

It was for this reason that the court upheld the appellate court’s conclusion that the “made whole” doctrine did not require that Georgia Casualty demonstrate that Coachcraft was fully compensated before it exercised its subrogation rights under the insurance policy.

Supreme Court of Georgia. Woodcraft by MacDonald, Inc. et al, v. Georgia Casualty & Surety Co. No. S12G1317. May 20, 2013. 2013 WL 2150808 (Ga.)