In a Georgia insurance dispute case involving a breach of the duty to defend the insurance company was criticized for not bringing a declaratory judgment action.
The court reaffirmed Georgia’s strong policy preference for defending insureds while filing a declaratory judgment to clarify coverage. “Under Georgia law, an insurer faced with a decision regarding how to handle a claim of coverage while a possible insured faces a lawsuit has three options: (1) defend the claim, thereby waiving its policy defenses and claims of non-coverage; (2) deny coverage and refuse to defend, avoiding the expense of litigation, but exposing the insurer to penalties for breach of contract; or (3) defend under a reservation of rights, preserving the option of litigating and ultimately denying coverage.”
Additionally, the court stated the strong preference for declaratory judgments, “Further, unlike the more diligent insurers…Columbia never filed a declaratory judgment action in this case. Instead of curing the breach, the Court views Columbia’s later attempt to defend Patterson as further confirmation that Columbia blatantly ignored Georgia’s strong policy preference for defending possible insureds while filing a declaratory judgment to clarify coverage.”