Does a Denied Auto Crash Claim Render an Insurance Policy “Invalid”?

An insured motorist bought a vehicle from a car dealership, and within a week, he crashed his car in a collision while fleeing the police in Virginia. His vehicle was deemed a total loss. After he failed to pay the remainder of the financed amount for the car, and the dealership’s insurance company denied their claim, the Dealership filed a lawsuit against the insurance company and the motorist, seeking, inter alia, a declaratory judgment as to the insurance company’s coverage. The Dealership and the insurance company filed cross-motions for summary judgment, and the trial court granted the Dealership’s motion and denied the insurance company ‘s motion.

The insurance company filed an appeal, which hinges on whether a denied claim renders an insurance policy “invalid.”


The motorist paid a $4,000 down payment and financed the remainder of the $23,000 sales price to get the car from the Dealership in January 2020. A finance company approved the terms and purchased the note from the Dealership. To buy the vehicle, the motorist presented evidence of an insurance policy to the Dealership.

Three days after he purchased the vehicle, while fleeing police in Virginia, he crashed and totaled the car. The motorist was later found guilty of violating Virginia Criminal Code § 46.2-817.

The finance company tried to contact the motorist to complete the loan validation process, but he didn’t respond and stopped making payments. The finance company subsequently rejected the note and returned it to the Dealership.

The Dealership made a claim for the vehicle under the motorist’s insurance policy. That policy provided that claims for the motorist’s property damage were excluded from coverage “while the motorist or anyone driving with his permission is using his insured auto in an illegal trade or transportation or fleeing a law enforcement agency.” Because the motorist was trying to escape the police when the vehicle sustained a total loss, the insurer denied the claim.

Prior to selling the motorist the automobile, the Dealership obtained an automobile physical damage insurance policy from the insurance company. The Dealership submitted a claim for the motorist’s vehicle to the insurance company but the insurance company denied the claim, stating that the loss didn’t fall within the policy’s coverage. The Dealership then filed a declaratory judgment action against the insurance company. This appeal followed the grant of summary judgment to the Dealership.

The Dealership’s policy with the insurance company provided coverage for insured vehicles until the vehicle was sold or leased by the Dealership. However, the policy also contained a spot delivery extension, which provided:

coverage for the Dealership’s financial interest in a covered vehicle sold by the Dealership and delivered to the purchaser, but for which the Dealership has not been fully paid, and where the purchaser provided the Dealership evidence of insurance prior to delivery, which proved to be invalid at the time of loss to the covered vehicle.

“Evidence of insurance” was defined in the insurance policy as: “a binder, policy, insurance certificate or other written documentation that has been issued by an authorized agent or representative of the insurance company covering such vehicle.”

Here, there was no dispute that the Dealership sold the vehicle to the motorist, and before it provided delivery to him, he showed the Dealership evidence of insurance. Also, there was no dispute that the Dealership wasn’t fully paid. The only dispute at issue is whether the motorist’s own policy was invalid at the time of the loss.

The insurance company argued that the trial court incorrectly interpreted the term “invalid” in its insurance policy, and that the motorist’s policy was valid, but merely excluded coverage for the incident as the motorist was fleeing police at the time of the crash.

Is the Insurance Contract Language Clear and Unambiguous?

Chief Judge Amanda H. Mercier wrote in the Court’s interpretation of the insurance policy, it’s important to note that “an insurance policy is simply a contract, the provisions of which should be construed as any other type of contract.”

The Chief Judge explained that the construction of a contract, and thus an insurance policy, is a question of law for the court. The Court will apply a three-step process in the construction of the contract, the first of which is to determine if the instrument’s language is clear and unambiguous. If the language is unambiguous, the court simply enforces the contract according to the terms, and looks to the contract alone for the meaning.

Further, O.C.G.A. § 13-2-2 (2) states that:

Words generally bear their usual and common signification; but technical words, words of art, or words used in a particular trade or business will be construed, generally, to be used in reference to this peculiar meaning. The local usage or understanding of a word may be proved in order to arrive at the meaning intended by the parties.

Here, the insurance company policy didn’t define the term “invalid.” When a contract term isn’t expressly defined, the court will look to the usual and common meaning of the term. In a 2009 case, the court looked to a dictionary for the meaning of the term “invalidate” and found the definition: “to render of no force or effect,” after consulting Webster’s New International Dictionary. And Black’s Law Dictionary defines “invalid contract” as “[a]n agreement that is either void or voidable.”

The judge said that while a dictionary is a useful tool for narrowing the range of meanings ordinarily attributed to a term, a dictionary doesn’t always provide a complete answer. The Court of Appeals will also review its prior decisions in which an insurance policy was rendered invalid, such as if an insured makes misrepresentations in a policy application, or fails to properly notify the insurance company of a claim, or fails to cooperate with the insurance company in the investigation of a claim. In the 2009 decision, the Court found that a policy is invalid when coverage “applies but becomes invalidated (and thus of no force or effect) through the actions of the insured.”

The motorist’s policy didn’t contain a coverage exclusion for fleeing police for a bodily or property injury to others. Therefore, had the motorist caused a bodily or property injury to another while fleeing the police, that third party’s claim wouldn’t have been excluded, and the claim would have been paid. But the motorist’s act of fleeing the police didn’t invalidate his insurance policy. Rather, the property damage to his own vehicle fell within a policy exclusion, but his policy was of full force and effect at the time of the occurrence.

Quoting a 2008 Supreme Court case, the Chief Judge wrote that “under Georgia law, insurance companies are generally free to set the terms of their policies as they see fit so long as they do not violate the law or judicially cognizable public policy. Thus, a carrier may agree to insure against certain risks while declining to insure against others.” Here, the insurance company set the terms of its policy and didn’t extend coverage for spot delivery unless the purchaser had an invalid insurance policy at the time of the loss.

“Where the contractual language unambiguously governs the factual scenario before the court, the court’s job is simply to apply the terms of the contract as written, regardless of whether doing so benefits the carrier or the insured.”

Here, the insurance policy language unambiguously didn’t cover such claims unless the purchaser’s insurance policy was invalid at the time of the loss. The motorist’s policy wasn’t invalid at the time of the loss, and therefore, the Court of Appeals held that the trial court erred by granting summary judgment to the Dealership and denying summary judgment to the insurance company. The judgment was reversed. General Sec. Indem. Co. v. Gerald Jones Ford, LLC, 2024 Ga. App. LEXIS 233 (Ga. App. June 18, 2024).

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