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Court of Appeals of Georgia.


No. A01A1647.

Decided: October 15, 2001

Stephen M. Ozcomert, Decatur, for appellant. Swift, Currie, McGhee & Hiers, John W. Campbell, Sharon W. Ware & Associates, Paul L. Groth, Michael T. Bennett, Atlanta, for appellees.

We granted appellant-plaintiff Gary Richards's application for interlocutory review of the state court's order granting appellee-defendant State Farm Mutual Automobile Insurance Company's motion to dismiss for lack of standing.   Pertinently, this case arises out of an automobile collision between appellant-plaintiff Richards and appellee-defendant Robert Bufkin, the driver of a vehicle insured by State Farm, allegedly causing injuries to Richards's lower back.   Following the collision, Richards filed a personal injury claim with State Farm. He and State Farm thereafter engaged in settlement negotiations.   When these broke down,1 Richards sued State Farm for bad faith refusal to settle and Bufkin for damages.   Richards appeals the state court's order granting State Farm's motion to dismiss, arguing, among other things, standing to sue as a third-party beneficiary of Bufkin's State Farm insurance policy under OCGA § 9-2-20(b).2  We find no standing to sue.   Held:

 Generally, a party not in privity of contract may not bring a direct action suit against the liability insurer of the party alleged to have caused damage absent an unsatisfied judgment against the insured, legislative mandate, or as permitted by a provision in the insurance policy in issue.   Googe v. Fla. Intl Indem. Co., 262 Ga. 546, 548(1), 422 S.E.2d 552 (1992);  Caudill v. Strickland, 230 Ga.App. 644(1), 498 S.E.2d 81 (1998);  McKin v. Gilbert, 208 Ga.App. 788, 790(1), 432 S.E.2d 233 (1993);  Bacon v. Liberty Mut. Ins. Co., 198 Ga.App. 436, 401 S.E.2d 625 (1991).   The exceptions to the general rule as “legislatively mandated” include the statutory authority of persons injured by motor common carriers from tort liability to sue the insurers directly.   OCGA § 46-7-12(e);  Griffin v. Johnson, 157 Ga.App. 657, 278 S.E.2d 422 (1981).   The statutory language designating children riding county school buses as insureds under required accident policies allows direct action.   OCGA § 20-2-1090;  Krasner v. Harper, 90 Ga.App. 128, 136-138(2), 82 S.E.2d 267 (1954), aff'd, American Guarantee &c. Ins. Co. v. Krasner, 211 Ga. 142, 84 S.E.2d 46 (1954).   Further, members of the general public also are insured from injury resulting upon the operation of such buses, not as liability coverage, but as accident coverage, allowing direct action.   OCGA § 20-2-1092;  State Farm &c. Ins. Co. v. Jones, 98 Ga.App. 46, 57-58(2), 104 S.E.2d 725 (1958).   Although not expressly recognized by statute, the Supreme Court has recognized the status of the victims of automobile accidents as third-party beneficiaries in light of compulsory automobile accident insurance;  however, such status does not create the right of direct action for damages under the policy but only allows an action for equitable reformation or declaratory relief under the policy.  Googe v. Fla. Intl. Indem. Co., supra at 548-549(1), 422 S.E.2d 552;  see also Payne v. Twiggs County School Dist., 269 Ga. 361, 364(3), 496 S.E.2d 690 (1998).

The General Assembly's passage of mandatory automobile liability insurance makes clear that [the] public policy is ․ concerned with providing adequate resources with which to compensate victims of automobile accidents, a new class of beneficiaries to automobile liability insurance contracts [as accident coverage which has since been repealed].3

Cotton States Mut. Ins. Co. v. Starnes, 260 Ga. 235, 237, 392 S.E.2d 3 (1990).

 Third-party beneficiary status in Richards results under the policy when he obtains a judgment against the insured.   However, while there is a cause of action for failure to settle a case vested in the insured upon rendering an excess verdict over policy limits, Driskell v. Empire Fire &c. Ins. Co., 249 Ga.App. 56, 62-63(4), 547 S.E.2d 360 (2001),4 a potential third-party beneficiary has no greater rights than the insured.  Payne v. Twiggs County School Dist., supra;  Allstate Ins. Co. v. Hendrix, 222 Ga.App. 865, 866, 476 S.E.2d 644 (1996).   Absent an action for bad faith vested in the insured and an assignment of such action to the plaintiff, the plaintiff has no right to such an action.   In this case, the policy provides that the insured cannot sue the insurer under the liability provisions thereof until after judgment or by agreement of the parties.5  Neither of these events having occurred, the state court did not err in granting State Farm's motion to dismiss for lack of standing in Richards.  “The existence of an actual controversy is fundamental to a decision on the merits by this court.”   Bowers v. Bd. of Regents &c. of Ga., 259 Ga. 221-222, 378 S.E.2d 460 (1989);  see also Project Control Services, Inc. v. Reynolds, 247 Ga.App. 889, 891(1), 545 S.E.2d 593 (2001) (“Our review of [an order] grant [ing] a motion to dismiss is de novo.   A motion to dismiss may be granted only where a plaintiff would not be entitled to relief under any set of facts that could be proven in support of its claim.  [Cit.]”).

Judgment affirmed.


1.   More than $95,000 separated the parties, Richards submitting a demand package to State Farm in the amount of $100,000 and State Farm offering to settle for $4,500.

2.   OCGA § 9-2-20(b) provides that “[t]he beneficiary of a contract made between other parties for his benefit may maintain an action against the promisor on the contract.”

3.   The Motor Vehicle Accident Reparations Act, Ga. L. 1974, p. 113 (codified as amended at OCGA §§ 33-34-1 through 33-34-17) was repealed by Ga. L.1991, p. 1608, § 1.12, effective October 1, 1991.   The present Motor Vehicle Accident Reparations Act is codified as OCGA § 33-34-1 through 33-34-8.

4.   In Driskell, among other things, we held that[a]n automobile liability insurance company may be liable for damages to its insured for failing to adjust or compromise the claim of [the] person injured by the insured and covered by its liability policy, where the insurer is guilty of negligence or of fraud or bad faith in failing to adjust or compromise the claim to the injury of the insured.   Hence, where a person injured by the insured offers to settle for a sum within the policy limits, and the insurer refuses the offer of settlement, the insurer may be liable to the insured to pay the verdict rendered against the insured even though the verdict exceeds the policy limit of liability.   The reason for this rule is that the insurer “may not gamble” with the funds of its insured by refusing to settle within the policy limits.(Citations omitted.)  Driskell v. Empire Fire &c. Ins. Co., supra;  compare OCGA § 33-4-7 (duty in insurer to make good faith effort to settle property damage claims with claimant to protect the insured).

5.   Although the policy in issue is not of record, on appeal, State Farm avers that such policy contains standard language to this effect.


ANDREWS, P.J., and MILLER, J., concur.

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