Georgia’s Direct Action Statute May Not Always Apply to Accidents Occurring Outside the State of Georgia

Written by: Payton D. Bramlett, Esq.

In trucking cases, plaintiffs very often sue the motor carrier’s primary insurance company directly pursuant to Georgia’s direct action statute.  Traditionally, Georgia appellate courts have held that a direct action against a motor carrier’s primary insurance provider is permitted even when the accident occurred outside the state of Georgia.  See Johnson v. Woodard, 208 Ga. App. 41, 429 S.E.2d 701 (1993).  In Johnson, the Georgia Court of Appeals held that a plaintiff in a personal injury suit stemming from an automobile accident that happened in South Carolina can pursue a direct action against a motor carrier’s insurer.  Id. at 44.  The Court in Johnson concluded that the mere reference to use of Georgia highways in some sections of the direct action statute does not mean that a person has a cause of action under Georgia’s direct action statute only if an injury occurs on Georgia highways or streets.  Id.   This has long been the precedent in Georgia; however, a recent ruling from a federal trial court in Georgia may be signaling an erosion of this long-held precedent.

In Donaldson v. Old Republic Ins. Co., 2015 WL 2184322 (M.D. Ga. 2015), the U.S. District Court for the Middle District of Georgia analyzed this issue as it related to an accident that occurred in Alabama and arrived at a very different conclusion from the Johnson court.  In Donaldson, the plaintiff sued Old Republic Insurance Company under Georgia’s direct action statute, and the Court had to determine whether Alabama law applied or whether Georgia law applied after the Defendants argued that Georgia’s direct action statute did not apply because the accident occurred in Alabama.  Id. at *1.

The Court in Donaldson was applying Georgia substantive law to the dispute because it was an action based upon diversity of citizenship, and Georgia utilizes the doctrine of lex loci delicti in choice of law disputes.  Dowis v. Mud Slingers, Inc., 279 Ga. 808 (2005).  In that analysis, the court must first determine whether or not the issue is procedural and then determine the nature of the action if it is not procedural.  Donaldson, supra at *1.  In tort cases, the Court uses the law of the state where the tort occurred according to the rule of lex loci delicti.  Id. at *1.  If a dispute involves the validity, nature, construction, or interpretation of a contract, then the Court applies the principle of lex loci contractus and uses the law of the state where the contract was formed.  Id. at *1.

The Court in Donaldson determined that Georgia’s direct action statute is both procedural and substantive.  Id. at *2.  However, the Court ultimately determined that the issue of whether or not an injured party may bring a separate suit against an insurance carrier directly without first obtaining a judgment against the insured is not sufficiently procedural to warrant application of Georgia’s law.  Id. at *2.  In Donaldson, the Court concluded that the Plaintiff’s claim was fundamentally based on the tortious conduct of the insurer’s insured.  Id. at *2.  Citing the Georgia Court of Appeals, the Court held, “While the cause of action…is not on the tort, nevertheless, the tort constitutes the real cause of action, and the liability of the insurance carrier on its policy, issued as required by law, is merely ancillary…”  Addington v. Ohio S. Express, Inc., 118 Ga. App. 770, 771-72, 165 S.E.2d 658, 659 (1968).  As a result, the Court in Donaldson concluded that the law of the state where the tort occurred must be applied.  Donaldson, supra at *2.

Alabama’s direct action statute requires that an injured party must first obtain a judgment against an insurer’s policyholder and then sue the insurance carrier directly.  (See Ala. Code § 27-3-2).  Under Alabama law, “[A] direct action against an insurance carrier [is] not allowable under Alabama law because an injured party cannot bring a direct action against the insurance carrier, absent a final judgment against its insured.”  State Farm Mut. Ins. Co. v. Brown, 894 So.2d 643, 648 (Ala. 2004).  The Court in Donaldson determined that Plaintiff’s direct action against Old Republic was premature because he was attempting to bring a claim against the insurer without first obtaining a final judgment against its insured and that Alabama law does not recognize such a cause of action such that a dismissal was appropriate.  Donaldson, supra at *2.

While the ruling in the Donaldson case may have slightly eroded Georgia’s long-held precedent from Johnson that direct actions against insurers stemming from accidents that occur outside the State of Georgia are permissible, this is still a gray area because the Johnson precedent is technically still good law.  The ruling from Donaldson, however, does give some hope to defense counsel that, given the proper circumstances, it may be a worthwhile endeavor to pursue a motion to dismiss as it pertains to a primary insurer of a motor carrier in cases involving direct actions pursuant to Georgia’s direct action statutes when the accident occurs outside the State of Georgia.

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Attorneys in the Transportation Litigation Group at Hall Booth Smith, P.C. including the author of this blog post have recently successfully utilized the precedent from Donaldson to convince plaintiffs’ attorneys to dismiss their direct action claims against motor carriers’ primary insurance providers in cases where the accident occurred outside the State of Georgia.