FEDERAL INSURANCE COMPANY v. MALIBU BOATS LLC (2026)

In 2014, seven-year-old Ryan Batchelder died in a boating accident on Lake Burton.¹ Following extended litigation arising from his death and eventual settlement of claims related thereto, the defendant policyholder, Malibu Boats, LLC (“Malibu”), filed the instant suit against its insurers, Federal Insurance Company (“Federal”) and Starr Indemnity & Liability Company (“Starr”), claiming negligent and/or bad faith failure to settle. The trial court dismissed Malibu's claims against Starr and then granted partial summary judgment to Malibu on Federal's affirmative defense seeking to apportion any damages to Starr. On appeal, Federal challenges these decisions. For the reasons that follow, we affirm.

“On appeal from a grant of a motion for summary judgment, we review the evidence de novo, viewing it in the light most favorable to the nonmovant, to determine whether a genuine issue of fact remains and whether the moving party is entitled to judgment as a matter of law.” Ambrosio v. Giordano, 358 Ga. App. 764, 856 S.E.2d 349 (2021) (quotation marks omitted). Additionally, this Court reviews a trial court's ruling on a motion to dismiss de novo, viewing as true all well-pleaded material allegations in the complaint, but “we are under no obligation to adopt a party's legal conclusions based on these facts.” Auto-Owners Ins. Co. v. Tracy, 344 Ga. App. 53, 54, 806 S.E.2d 653 (2017) (citation and punctuation omitted).

Underlying Litigation

In 2016, litigation ensued regarding Batchelder's death, which litigation included, inter alia, a defective design claim against Malibu, which manufactured the boat. Malibu notified its primary insurer, Federal, with which Malibu had a $1 million primary policy and $5 million over $1 million umbrella policy, and Starr, with which Malibu had a $20 million over $6 million excess policy. During settlement discussions prior to trial, which were received by both Federal and Starr, the plaintiffs demanded $18 million, $16.9 million, and finally $26 million. The trial proceeded to verdict, and the jury returned a judgment against Malibu awarding the plaintiffs $140 million ($20 million in compensatory damages based on 25 percent fault and $120 million in punitive damages). Rather than move forward with its appeal of the case, Malibu independently settled with the plaintiffs for $100 million, and the appeals were withdrawn. Prior to settlement, Federal acknowledged that Malibu had complied with all necessary steps to settle under its policies, and Starr acknowledged that Malibu had sought its consent to settle despite its policy not requiring such consent.

Current Litigation

Thereafter, Malibu filed the instant suit against Federal and Starr alleging claims of negligent and/or bad faith failure to settle the claims surrounding Batchelder's death. Among other documents attached to the complaint were copies of Malibu's policies with Federal, which stated that Federal had the “right and duty to defend” Malibu against suit and the “discretion [to] settle any claim or suit,” and which barred Malibu “from making ‘any payment,’ assuming ‘any obligation,’ or incurring ‘any expense,’ ” related to any claim or lawsuit without Federal's consent. A copy of Malibu's policy with Starr also was attached, and it stated that Starr agreed to indemnify Malibu

for all liability, loss, damage or expense insured against under [Federal's policies]; but this insurance is warranted free from claim hereunder unless such liability in respect to the same accident ․ exceeds [Federal's limits] in which event [Starr] shall be liable only for the amount by which such liability exceeds [Federal's limits], but in no event for more than the Limit of Liability of this insurance.

The policy also stated that Starr

shall not be called upon to assume charge of the settlement or defense of any claim made or suit brought or proceeding instituted against [Malibu], but [Starr] shall have the right and shall be given the opportunity (without incurring any liability or costs or expenses except as herein provided) to associate with [Malibu] or [Federal on its policies] ․ in the defense and control of any claim, suit, or proceeding, which involves or appears likely to involve [Starr], in which event [Malibu], [Federal], and [Starr] shall cooperate in all matters in the defense of such claim, suit, or proceeding.

Starr's policy contains no requirement that Malibu or Federal obtain Starr's consent to settle.

Starr answered and moved to dismiss Malibu's claims against it, contending that it had no duty to defend or settle under the policy, and arguing that Malibu's complaint admitted that Federal failed to exhaust its policies or unconditionally tender its limits toward settlement, which was a prerequisite to triggering Starr's duty to settle. Malibu argued that the plaintiffs had made several offers to settle within Starr's policy limits, and Starr never responded to the offers or agreed to put up any amount of its policy to settle. Malibu contended that Starr was misstating the law, and there were questions of fact as to whether it had acted reasonably under the circumstances of the underlying litigation.

After a hearing, the trial court granted the motion, finding that Starr had no duty to settle the litigation or defend Malibu prior to Federal unconditionally tendering its $6 million policy limits. The court ruled that because Malibu's complaint failed to allege that Starr had a duty to defend or to settle under the terms of its policy, it could not establish that Starr's acts or omissions were the proximate cause of any failure to settle the plaintiffs’ claims or any resulting excess verdict.

Federal also answered, and it asserted several affirmative defenses, including apportionment of any liability and damages with Starr. After entry of the dismissal order, Malibu moved for partial summary judgment of, inter alia, Federal's affirmative defense of apportionment, arguing that Federal should be precluded from seeking to apportion fault to Starr based on the trial court's dismissal of Starr from the litigation.

Federal responded, attaching an affidavit of an adjuster, who provided a sworn account of the negotiations between the parties. Federal argued that it should be able to argue that damages should be apportioned to Starr because, among other things, the plaintiffs never offered to settle for a sum wholly within Federal's policy limits, and Starr never agreed to tender its policy limits in order to settle as shown in its evidence. Federal conceded that as the primary insurer, it had a duty to defend and right to settle claims against Malibu. Nevertheless, it argued that fact questions remained as to whether Starr violated its common law duty of good faith to act as a reasonable insurer, and whether, as a result of that breach, Federal could apportion fault to Starr. Alternatively, Federal argued that a determination of the motion should be continued until after further discovery among the parties, including Starr.

After a hearing on Malibu's partial motion for summary judgment, the trial court granted Malibu's motion, finding that based on the policies’ language, Federal could not show that any act by Starr contributed to Federal's failure to settle. To the extent that Federal's affidavit or any other evidence showed that it had responded to any offer to settle, Federal had failed to establish that it had tendered its full policy limits. Thus, the trial court reasoned that Federal could not apportion any damages to Starr because Starr had breached no duty to Malibu and could not, therefore, be considered a non-party that contributed to the excess verdict.

1. Federal argues that the trial court erred by granting partial summary judgment to Malibu on Federal's affirmative defense seeking to apportion damages to Starr pursuant to OCGA § 51-12-33.

Pursuant to OCGA § 51-12-33(b), if “an action is brought against one or more persons for injury to person or property, the trier of fact, in its determination of the total amount of damages to be awarded, if any, shall ․ apportion its award of damages among the ․ persons who are liable according to the percentage of fault of each person.” Moreover, “[i]n assessing percentages of fault, the trier of fact shall consider the fault of all persons or entities who contributed to the alleged injury or damages, regardless of whether the person or entity was, or could have been, named as a party to the suit.” OCGA § 51-12-33(c). Under this statutory scheme, Federal asserted that in the event it is found to have negligently or in bad faith breached its duties to Malibu to defend or settle that resulted in a judgment in excess of its policy limits, a jury should determine whether Starr also breached any duties to Malibu that resulted in the excess judgment.

“When the facts concerning an affirmative defense are uncontradicted, the matter may be disposed of by summary judgment; but the burden is on the movant to prove no genuine issue of fact remains, [and] the evidence is construed in favor of the respondent[.]” Grand Partners Joint Venture I v. RealTax Res., Inc., 225 Ga. App. 409, 411(1), 483 S.E.2d 922 (1997) (citation omitted). Under the statutory apportionment scheme, all individuals who breached a duty and caused the injury are considered by the jury, even if they are protected from liability. See Pneumo Abex, LLC v. Long, 357 Ga. App. 17, 20(1), 849 S.E.2d 746 (2020). “[Q]uestions regarding causation are ‘peculiarly questions for the jury except in clear, plain, palpable and undisputed cases.’ ” Id. at 21(1), 849 S.E.2d 746.

Under Georgia law, an insurer and an insured owe each other many post-loss duties that arise from their contractual relationship. Some of these duties are implied; others are found in the terms and conditions of the insurance policy. For example, ‘every contract implies a covenant of good faith and fair dealing which modifies and becomes part of the contract itself.’

GEICO Indemnity Co. v. Whiteside, 311 Ga. 346, 350–51(2), 857 S.E.2d 654 (2021) (punctuation omitted) (quoting Piedmont Office Realty Trust, Inc. v. XL Specialty Ins. Co., 297 Ga. 38, 42, 771 S.E.2d 864 (2015)). Thus, “[a]n insurance company may be liable for damages to its insured for failing to settle the claim of an injured person where the insurer is guilty of negligence, fraud, or bad faith in failing to compromise the claim.” S. Gen. Ins. Co., v. Holt, 262 Ga. 267, 268(1), 416 S.E.2d 274 1992. See also Great Am. Ins. Co. v. Exum, 123 Ga. App. 515, 518–19, 181 S.E.2d 704 (1971) (addressing a case in which the plaintiff's offer to settle within policy limits was made prior to trial and holding that the good faith duty applied to offers occurring both before trial and after a verdict). “[A]lthough an insurer's duty to accept a reasonable settlement offer may be written into the terms of an insurance contract, an insurer's duty to settle also arises from and is included within the covenant of good faith and fair dealing implied in every insurance contract.” Whiteside, 311 Ga. at 351(2), 857 S.E.2d 654 (citing Piedmont Office Realty Trust, Inc., 297 Ga. at 42, 771 S.E.2d 864 (applying the good faith duty to the unambiguous language of a policy)). Based on this duty, an insurer may be liable for damage to the insured even though the amount of damage is greater than the policy limits of the policy because “the insurer ‘may not gamble’ with the funds of its insured by refusing to settle within the policy limits.” McCall v. Allstate Ins. Co., 251 Ga. 869, 870(1), 310 S.E.2d 513 (1984).

Despite the broad language of Whiteside quoted above, however, the Georgia Supreme Court has explained that “[a]s is the case with all contracts, unambiguous terms of an insurance policy require no construction, and the plain meaning of such terms must be given full effect, regardless of whether they might be beneficial to the insurer or detrimental to the insured.” Piedmont Office Realty Trust, Inc., 297 Ga. at 41 n.1, 771 S.E.2d 864. In some cases, such unambiguous terms may preclude a suit for bad faith or negligence against an insurer. See id. at 42–43, 771 S.E.2d 864 (citing Trinity Outdoor, LLC v. Cent. Mutual Ins. Co., 285 Ga. 583, 679 S.E.2d 10 (2009)). As always, “[c]onstruction and interpretation of an insurance contract are matters of law for the court[.]” Landmark Am. Ins. Co. v. Kahn, 307 Ga. App. 609, 612(1), 705 S.E.2d 707 (2011) (punctuation omitted).

The Supreme Court of Georgia has clarified that “an insurer's [good faith] duty to settle arises when the injured party presents a valid offer to settle within the insured's policy limits.” First Acceptance Inc. Co. of Ga., Inc. v. Hughes, 305 Ga. 489, 492–93(1), 826 S.E.2d 71 (2019). If a valid offer to settle is presented and then declined by the insurer, “[t]he jury generally must decide whether the insurer, in view of the existing circumstances, has accorded the insured ‘the same faithful consideration it gives its own interest[,]’ ” which is a duty that the insurer owes to the insured when “deciding whether to settle a claim within the policy limits[.]” Holt, 262 Ga. at 268–69(1), 416 S.E.2d 274. This question essentially turns on reasonableness under the specific facts of the case. See Cotton States Mutual Ins. Co. v. Brightman, 276 Ga. 683, 685(1), 580 S.E.2d 519 (2003).

Federal contends that the trial court erred by finding that Starr did not owe Malibu a duty to settle because none of the demands made by the plaintiffs were within Federal's policy limits, and therefore, Starr was required to respond to the offers to settle, which is the action a reasonable insurer would have taken. See, e.g., Hughes, 305 Ga. at 492–93(1), 826 S.E.2d 71; Holt, 262 Ga. at 268–69(1), 416 S.E.2d 274. We disagree. In this case, the admissions by Federal and the plain language of Federal's and Starr's policies do not implicate Starr in a breach of a duty to settle. See Piedmont Office Realty Trust, Inc., 297 Ga. at 42–43, 771 S.E.2d 864. Federal's adjuster averred that in response to the plaintiffs’ pre-trial offers, Federal responded with counteroffers between $1 million and $2 million. And in response to the motion for summary judgment, Federal (as the primary insurer in charge of Malibu's defense and settlement negotiations) presented no evidence that Starr prevented it from settling or tendering Federal's own policy limits to the plaintiffs. Compare Whiteside, 311 Ga. at 351(2), 857 S.E.2d 654; Brightman, 276 Ga. at 687(2), 580 S.E.2d 519. Starr's policy contains no duty to settle claims or defend Malibu, and the language of the association and cooperation clauses do not create such duties for Starr.

Moreover, the plain language of Starr's policy required that Federal fully tender its limits in order for Starr's limits to be implicated. See Piedmont Office Realty Trust, Inc., 297 Ga. at 41 n.1, 771 S.E.2d 864 (applying the plain meaning of unambiguous contract terms). The record evidence, including emails between the parties and Federal's adjuster's affidavit, establish that Federal, as the primary insurer, was at all times responsible for and never tendered to the plaintiffs its policy limits. Moreover, Starr's policy did not require Malibu (or Federal) to obtain Starr's consent to settle had Federal decided to do so. Thus, any lack of tender by Starr could not be the proximate cause of any damage to Malibu, and Federal has not established that the trial court erred by granting the motion for partial summary judgment.

2. Finally, Federal argues that the trial court abused its discretion by denying a continuance of the motion for summary judgment prior to the completion of discovery pursuant to OCGA § 9-11-56(f). Based on our holding in Division 1, supra, this enumeration is moot.

3. Starr has filed a motion to dismiss the appeal in part, arguing that Federal cannot appeal the order granting the motion to dismiss. Based on our holding in Division 1, the motion to dismiss the appeal in part is denied as moot.

Judgment affirmed.

FOOTNOTES

1.   See Malibu Boats, LLC v. Batchelder, 347 Ga. App. 742, 819 S.E.2d 315 (2018).

Doyle, Presiding Judge.

Gobeil and Davis, JJ., concur.