Towns & Law: Supreme Court Ruling Sides With Sovereign Immunity

Supreme Court Ruling Sides With Sovereign Immunity

Decision Allows Cities to Purchase Higher Coverage Limits

BEFORE 2005, GEORGIA LAW DID NOT REQUIRE municipalities to insure the city’s motor vehicles. If a city chose to purchase automobile liability insurance, it waived sovereign immunity up to the limits of the applicable policy. This created a public policy issue because cities that opted not to purchase insurance would receive the full protection of sovereign immunity, and an injured party would have no recourse to collect damages. Cities that demonstrated more financial responsibility by purchasing insurance were seemingly punished. In response, the General Assembly amended O.C.G.A. § 33-24-51 and enacted O.C.G.A. § 36-92-2.

O.C.G.A. § 36-92-2 provides limited waivers of sovereign immunity with various dollar limits based on the number of persons injured and the date when the accident occurred regardless of whether a city (or county) purchased automobile liability insurance. The waiver amounts were graduated over time, topping out at $500,000 per person, $700,000 per accident and $50,000 for destruction of property per accident for all accidents occurring on or after Jan. 1, 2008.

Further, O.C.G.A. § 36-92-2(d) provides the waiver increases to the extent that a city is covered by a policy that exceeds the statutory waiver amount. For example, if a city carried a liability limit of $1 million immunity was waived to this higher amount. Most insurance policies cities purchase have limits that exceed the statutory waiver amount.

Until the Supreme Court of Georgia’s recent ruling in Atlantic Specialty Insurance Company v. City of College Park, 313 Ga. 294 (2022), it was unclear whether a city could retain its sovereign immunity at the statutory levels of $500,000, $700,000 and $50,000 by purchasing an automobile liability policy that excluded coverage above the amounts of the statutory waiver found in O.C.G.A. § 36-92-2. In that case, the city of College Park purchased automobile liability policies with limits of $5 million. Significantly, the policies contained additional provisions, also known as endorsements, that attempted to retain the city’s sovereign immunity by contract.

In Atlantic, three people were tragically killed by a driver who was being pursued by a College Park police officer. In the wrongful death case against the city, the city asserted sovereign immunity as a defense — seeking to limit the waiver of sovereign immunity to $700,000 contained in O.C.G.A. § 36-92-2. The trial court and the Georgia Court of Appeals refused to apply the endorsements in the policy, resulting in a waiver of the city’s immunity in the amount of $5 million.

In a unanimous decision, the Georgia Supreme Court ultimately held that the immunity endorsements were enforceable, and the plaintiffs’ recovery was capped at $700,000 based on state law and the terms of the insurance policy. The court reasoned that “under a plain reading of the endorsements, the insurance that the city purchased does not cover claims for damages to which the defenses of sovereign and governmental immunity do apply.” (emphasis in original). Accordingly, the court enforced the “bargained-for policy limits” and limited the city’s waiver of immunity to the $700,000 contained in O.C.G.A. § 36-92-2. In this decision, Georgia’s highest court finally answered a question long left unanswered by Georgia law: Can a municipality retain its sovereign immunity by purchasing insurance policies that exclude coverage of claims for which sovereign immunity would apply? The answer was a re-

Can a municipality retain its sounding yes. The court based sovereign immunity by purchasing its ruling on a prior ruling of the insurance policies that exclude cov- Georgia Court of Appeals and erage of claims for which sovereign expanded that decision even immunity would apply? further to include automobile The answer was a resounding yes policies. The impact of the decision is far reaching. Cities will now be able to purchase higher limits of coverage in automobile and non-automobile insurance policies without fear that this would waive the city’s sovereign immunity. GIRMA cities immediately reaped the benefit of the decision upon their May 1 renewal because GIRMA adopted an exclusion to apply the Atlantic precedent for the benefit of its Members. Cities that participate in the GIRMA program can avail themselves of the Atlantic decision and will be able to retain sovereign immunity to fullest extent available on state law claims and will only waive immunity in the amount of $500,000 per person, $700,000 per accident, and $50,000 for property damage claims per accident. This will allow cities to carry higher limits on claims for which sovereign immunity is not available (such as federal claims and nuisance claims) without sacrificing the defense of immunity on most state law claims.