11th Cir. Affirms That Georgia’s Implied Waiver Doctrine Cannot Be Used to Create Coverage

In Century Communities of Georgia LLC v. Selective Way Insurance Co., the Eleventh Circuit Court of Appeals affirmed that the Georgia Supreme Court’s 2012 opinion in Hoover v. Maxum Indemnity Co. does not apply to “coverage defenses” — that is, whether a loss is potentially covered under a policy in the first place. Rather, under Hoover, only certain “policy defenses,” meaning whether a procedural condition of the insurance contract has been fulfilled, may be subject to waiver.

Century Communities involved a coverage dispute arising out of the insurer’s refusal to defend an additional insured in an underlying tort action stemming from property damage from pollutants at one of its housing developments. Specifically, the insurer denied coverage because the alleged property damage was not clearly due to the work of the named insured and because the underlying action included allegations against all defendants. The instant coverage action followed, wherein the insurer raised several additional coverage defenses in its answer — including the pollution exclusion. The insured argued that the insurer waived the right to rely on the pollution exclusion because it was not raised in the initial disclaimer to the insured. The district court disagreed and granted summary judgment in favor of the insurer. The insured appealed.

In affirming the district court’s ruling, the Eleventh Circuit found that the insurer had not waived its coverage defense, even though it had neglected to mention it in its original letter denying coverage. The court turned to Hoover and noted that the Eleventh Circuit previously found that there was no indication that the Georgia Supreme Court intended to upend the long-standing rule that an insurer cannot waive coverage defenses. Because the pollution exclusion enables the carrier to argue that a particular loss is not covered, it is a coverage defense. As a result, the Eleventh Circuit found that the insurer had not waived its ability to assert it.

The Eleventh Circuit noted that its previous rulings regarding Hoover were issued after the district court’s ruling, and as such, the Eleventh Circuit did not reach its result in the same manner as the district court, which had held that the insurer had not waived a coverage defense because waiver is not automatic but rather dependent on the circumstances.