Southeast Atlantic Cargo Operators, Inc. v. First State Insurance , 216 Ga. App. 791 ( 1995 )

Smith, Judge.

This case has a history of protracted and piecemeal litigation. Certain facts established in the prior litigation are necessary to understanding the issues involved in this appeal.

Kenneth Meyer, a stevedore foreman working for Southeast Atlantic Cargo Operators, Inc. (SEACO), was injured at a terminal warehouse operated by the Georgia Ports Authority (GPA) in Savannah. Meyer brought suit against GPA, which filed a third-party complaint against SEACO. SEACO had primary insurance coverage under a comprehensive general liability insurance policy issued by Midland Insurance Company with a policy limit of $500,000. It also had coverage under an umbrella policy issued by First State Insurance Company, which provided, except in certain situations not applicable here, up to $10,000,000 in excess liability coverage only above the threshold of $500,000. SEACO turned its defense of the Meyer litigation over to Midland.

Midland was declared insolvent during the pendency of the litigation on the Meyer claim. When Midland was declared insolvent, the Georgia Insurers Insolvency Pool (GIIP) became involved in that litigation, pursuant to the Georgia Insurers Insolvency Pool Act, OCGA § 33-36-1 et seq. However, when GIIP later declined to pay any judgment against SEACO, SEACO took over its own defense in the Meyer litigation.¹

SEACO then demanded that its excess insurance carrier, First State, “drop down” and assume primary coverage of SEACO in the Meyer litigation. First State refused to do so, and SEACO brought suit against First State on the issue of whether First State was required to provide such primary coverage. Southeast Atlantic &c. v. First State Ins. Co., 197 Ga. App. 371 (398 SE2d 264) (1990) (SEACO I). This court affirmed the trial court’s grant of summary judgment to First State in that case, holding that the insolvency of the primary insurer did not require First State to “drop down” and provide first-dollar coverage. Id. at 373.

GPA settled Meyer’s claim for approximately $1.3 million, and a trial was then held to determine the relative faults of all parties. See Ga. Ports Auth. v. Southeast Atlantic &c., 202 Ga. App. 318 (414 SE2d 232) (1991) (SEACO II). In that trial, GPA was found to be sixty percent negligent, the negligence of SEACO was determined to be thirty-five percent, and the remaining five percent negligence was attributed to Meyer. Id. This court affirmed. Id.

SEACO’s liability to GPA for the award to Meyer under the SEACO I judgment is $625,332.96. In 1992, SEACO and First State jointly satisfied this liability, with SEACO paying the first $500,000 of the principal amount of the judgment plus $115,065.30 in accrued post-judgment interest. First State paid the remainder of the principal amount of the judgment and $28,640.95 in accrued post-judgment interest. Both payments were made pursuant to an agreement that each party reserved its rights to proceed against the other and to claim reimbursement from the other. No claim was made by either party regarding the payment of the principal.

The present action was brought by SEACO against First State, alleging that First State was obligated to reimburse it for the post-judgment interest paid, because First State was required under the excess liability policy to pay all post-judgment interest. First State answered, denying it owed reimbursement to SEACO and counterclaiming for the return of the post-judgment interest it had paid. First State alleged that under the holding in SEACO I (the “drop down” litigation) and the terms of the Midland policy, SEACO was required to pay all post-judgment interest. Cross-motions for summary judgment were filed. The trial court granted summary judgment in favor of First State and denied SEACO’s motion. In a supplemental order, the trial court made clear that summary judgment was granted in favor of First State on both the main claim and the counterclaim. SEACO filed a separate appeal from each order. The issues are identical in both appeals, and they are consolidated for review.

1. The issue presented in these appeals is whether First State is liable for all or any of the post-judgment interest. The trial court found that this issue was controlled by SEACO I (the “drop down” litigation). SEACO contends this was error. We do not agree with that contention, and we therefore affirm.

“A judgment of a court of competent jurisdiction shall be conclusive between the same parties and their privies as to all matters put in issue or which under the rules of law might have been put in issue in the cause wherein the judgment was rendered until the judgment is reversed or set aside.” OCGA § 9-12-40. Contrary to SEACO’s contention and that of the dissent, not every precise situation may be covered in the wording of every opinion. The opinion in SEACO I makes clear that First State is required to provide coverage under the excess liability policy only beyond the boundaries of the coverage that Midland would have been required to provide under the primary policy. Id. The omission of express and specific mention either in the opinion or during the course of the litigation in SEACO I of the issue of liability for post-judgment interest does not mean we are now free to decide the issue in direct contradiction of the holding in that case. Under SEACO I, SEACO itself is responsible for all obligations that would have been covered under the Midland policy.

Therefore, resolution of the question of whether First State is responsible for paying any post-judgment interest is dependent entirely on whether, under the terms of its policy, Midland was obligated to pay all or part of the post-judgment interest. If Midland was required to do so even if that obligation brought the amount of Midland’s coverage over the limits of the primary policy, then SEACO and not First State must bear the entire obligation. If, on the other hand, Midland was obligated under its policy to pay post-judgment interest only on the amount of principal under $500,000, then First State is not entitled to reimbursement of the post-judgment interest it paid on its share of the principal. Finally, if the Midland policy did not require that Midland pay any post-judgment interest, then SEACO is not obligated to do so, and the obligation must be borne entirely by First State. The crucial question here, then, is what the Midland policy provides as to this issue.

2. We turn, therefore, to the provisions of the Midland policy. Under the caption “Supplementary Payments,” the Midland policy provides that “the company will pay, in addition to the applicable limit of liability: ... all expenses incurred by the company, all costs taxed against the insured in any suit defended by the company and all interest on the entire amount of any judgment therein which accrues after entry of the judgment and before the company has paid or tendered or deposited in court that part of the judgment which does not exceed the limit of the company’s liability thereon.” (Emphasis supplied.)

This is a “standard interest clause.” 8A Appleman, Insurance Law & Practice, § 4894.25, p. 80, n. 3. Its language could not be clearer or less ambiguous. Midland was obligated to pay principal only up to its policy limits. However, it was obligated to pay all post-judgment interest, even though that obligation brought its liability over the stated policy limits. The modern and prevailing view in jurisdictions across the country is that since the primary insurer controls the litigation, both on appeal and at trial, it is both proper and fair to place upon the primary insurer the burden of all interest accruing during that time. See generally 8A Appleman, supra at § 4894.25, pp. 75-77 and cases cited therein.

We are also persuaded by the reasoning in Weber v. Biddle, 483 P2d 155 (Wash. App. 1971), that it is the intent of the “standard interest clause” that the insurer will pay interest on the entire amount of the judgment until policy limits are paid or tendered or deposited in court. Evidence of this intent is found in the fact that “[t]he National Bureau of Casualty Underwriters formerly included a different clause in their form of standard policy, but subsequently changed the form to include the clause in issue here. In connection with this change, the bureau stated . . . : ‘Several court cases have held that an insurer’s obligation to pay interest extends only to that part of the judgment for which the insurer is liable. The respective rating committees have agreed that this is contrary to the intent. As a result, the wording with respect to payment of interest in [certain policies] has been restated, in order that it be entirely clear that all interest on the entire amount of any judgment, which accrues after entry of the judgment, is payable by the insurer until the insurer has paid or tendered or deposited in court that part of the judgment which does not exceed the limit of the insurer’s liability thereon.’ [Cit.]” Id. at 161.

Finally, this also comports with common sense. An insurer may avoid the obligation to pay post-judgment interest on the entire amount of the judgment by paying, or at least tendering, the judgment prior to appeal. That is certainly true where, as here, the insured itself retained its own counsel, was in control of the litigation, and was responsible for making such decisions. First State, as excess liability carrier, did not defend SEACO and had no obligation to do so. It did not make the decisions regarding appeal or payment of the judgment. Consequently, it is fair that SEACO, which did make those decisions (which would have been made by Midland but for its insolvency), should be responsible for interest on the entire judgment.

Although this precise issue apparently has never been decided in Georgia, it was assumed to be the rule in Ins. Co. of Pennsylvania v. Giles, 196 Ga. App. 271 (395 SE2d 833) (1990). Indeed, in his dissent in Giles, Judge Deen cited numerous foreign authorities holding that such clauses obligate an insurer to pay post-judgment interest even over the amount of the policy limits. Id. at 274-275. In Giles, however, a majority of this court found the insurer had no liability for post-judgment interest despite this general rule, because it had, in effect, timely tendered an amount toward the judgment equal to its policy limits.

Because responsibility rested with SEACO to pay those portions of the judgment that would have been paid by Midland, and because the Midland policy required it to pay all post-judgment interest, the trial court properly granted summary judgment in favor of First State both on SEACO’s claim and on the counterclaim.

Judgment affirmed.

Beasley, C. J., Birdsong, P. J., Pope, P. J., Andrews, Johnson and Ruffin, JJ., concur. McMurray, P. J., and Blackburn, J., dissent.

1 The issue involving whether GIIP was required to contribute to the judgment against SEACO was resolved in favor of SEACO in Ga. Insurers Insolvency Pool v. Southeast Atlantic &c., 211 Ga. App. 660 (440 SE2d 254) (1994) (SEACO III). This court held in SEACO III that SEACO was entitled to reimbursement from GIIP of the first $100,000 of its liability to GPA. That holding is not involved in this appeal.