Florida International Indemnity Company, Plaintiff-appellee, v. the City of Metter, Georgia, Defendant-appellee,the Metter/candler County Recreation Department, Myroncolley, Defendants,juanita Googe, Individually and As Temporary Administratrixof the Estate of Kenneth Harold Googe, Deceased, Haroldgooge, Jr., Shirley Diane Sparks, Andrew Ray Googe, Howardmichael Googe and Linda Kay Googe, Defendants-appellants, 952 F.2d 1297 (11th Cir. 1992)

The resolution of this appeal requires us to certify two questions of law to the Supreme Court of Georgia concerning the standing of persons injured by municipalities to sue for reformation of municipal liability insurance contracts. Before reaching this issue, we will dispose of the other issues raised by this case.

The City of Metter owned a pool that the Metter/Candler County Recreation Department operated and in which a boy, Kenneth Harold Googe, was drowned in June 1986. Googe's survivors sued the City of Metter, claiming that a lifeguard, Myron Colley, was negligent in leaving his station and was the proximate cause of the injury.

The Georgia courts eventually held that the City was not liable, because the Recreation Department was not its agent and the pool was not a joint operation between the City and the Recreation Department. The complaint was then amended to include the Recreation Department, which the Georgia courts found not liable under the doctrine of sovereign immunity, unless the Recreation Department was insured.

Florida International Indemnity Company had issued a policy to the City for insurance coverage between October 30, 1985 and September 30, 1986. Florida International, a non-resident of Georgia, sought a declaratory judgment in federal court that it was not liable to indemnify the Recreation Department for its negligence, if any, for the drowning because the City was the only named insured under the policy.¹  The City filed a response supporting Florida International's position.² 

The district court found that the Recreation Department was not covered under the terms of the policy and that Googe's survivors could not have the contract reformed to include the Recreation Department.

Googe's survivors have raised three issues in this appeal: (1) Whether a case or controversy was presented by Florida International's declaratory judgment action? (2) Whether the district court erred in failing to find that the Recreation Department qualified as an "other insured" under the terms and conditions of the policy? (3) Whether the district court erred in failing to reform the insurance contract to cover the Recreation Department and Myron Colley? We find that the third issue requires us to certify certain questions to the Supreme Court of Georgia. Before framing the certificate, we dispose of the first two issues. After receipt of the answers to the certified questions, assuming the Supreme Court of Georgia accepts the questions, no other issues will be before this court.

The essence of the first issue is that, because Florida International sued the City and the Recreation Department, and the City and the Recreation Department did not oppose the suit, the case was not sufficiently adversarial. However, at the time the suit was filed the Georgia courts had not yet found the Recreation Department to be conditionally immune from suit, and Googe's survivors successfully intervened and opposed Florida International based on their own adverse interests. The district court properly took jurisdiction.³ 

The Googe survivors next argue that the insurance contract covered the Recreation Department, as the contract states, "Each of the following is an insured under this insurance to the extent set forth below: ... (d) any person (other than an employee of the named insured) or organization while acting as real estate manager for the named insured...." They contend that, while the Recreation Department was not managing all of the City's real estate, it clearly was managing the real estate of the pool grounds.

The contractual language cited by Googe's survivors may be relevant to the question of whether the parties to the contract intended to insure the operations of the swimming pool. However, an examination of the pleadings before the district court indicates that this issue was not raised below. The claim is therefore waived.⁴ 

CERTIFICATION FROM THE UNITED STATES COURT OF APPEALS FOR

THE ELEVENTH CIRCUIT TO THE SUPREME COURT OF

GEORGIA PURSUANT TO ARTICLE VI, SECTION

VI, PARAGRAPH IV OF THE

GEORGIA CONSTITUTION.

TO THE SUPREME COURT OF GEORGIA AND ITS HONORABLE JUSTICES:

It appears to the United States Court of Appeals for the Eleventh Circuit that this case involves questions of Georgia law that are determinative of the cause but unanswered by controlling precedent of the Supreme Court of Georgia or any other Georgia appellate court. We therefore certify the questions for resolution by the Supreme Court of Georgia.

The style of the case in which this certificate is made is as follows: Florida International Indemnity Company, Plaintiff-Appellee, versus The City of Metter, Georgia, Defendant-Appellee, The Metter/Candler County Recreation Department, Myron Colley, Defendants, Juanita Googe, Individually and as Temporary Administratrix of the Estate of Kenneth Harold Googe, Deceased, Harold Googe, Jr., Shirley Diane Sparks, Andrew Ray Googe, Howard Michael Googe, and Linda Kay Googe, Defendants-Appellants, Case No. 90-8302, filed in the United States Court of Appeals for the Eleventh Circuit, on appeal from the United States District Court for the Southern District of Georgia.

In addition to the facts set out above concerning the coverage of the swimming pool, we note that the City requested coverage for the pool and disclosed that the pool was operated jointly with the Metter/Candler County Recreation Department. Florida International's underwriter stated that he intended to cover the pool when he wrote the policy and that Florida International collected a premium for insuring the pool.⁵  Prior to the issuance of the policy in question, the Recreation Department had maintained a separate liability insurance policy, but the coverage was apparently dropped when the City received its coverage from Florida International. The executive secretary of the Recreation Department stated that her understanding was that the Recreation Department and the pool were covered by the City's policy.⁶  After Kenneth Googe's drowning, Florida International set up a reserve fund to cover the loss and paid money totaling $1,759.00 into the reserve.⁷ 

Georgia law provides that " [a]n honest mistake of the law as to the effect of an instrument on the part of both contracting parties, when the mistake operates as a gross injustice to one and gives an unconscionable advantage to the other, may be relieved in equity."⁸  The district court found that there was a mutual mistake in this case. The district court wrote,

The Googe defendants claim that it was the intent of the parties at the time the contract of insurance was entered into that the risks attendant to operating the pool where Kenneth Googe drowned be covered under the policy. The Googe defendants have presented substantial evidence that such was the case.... It appears that at the time the parties entered into the insurance contract they believed that the pool was a joint operation between the City, which owned the facilities, and the Department, which operated them. It further appears that the plaintiff charged and collected (without hesitation) a premium based upon the risk attendant to the pool's operation. Both the deposition of the underwriter and the City's application for insurance indicate this.⁹ 

However, the district court refused to reform the contract, finding that Googe's survivors were not parties to the contract, and thus no party suffered a "gross injustice" under the Georgia statute.

Although no case is clearly on point, our understanding of Georgia's third-party beneficiary doctrine leads us to believe that Googe's survivors may have sufficient standing to ask for reformation of the contract.

Georgia courts have long followed a general policy of forbidding suits against insurers by parties who are not at least third-party beneficiaries of insurance contracts, that is, non-parties to insurance contracts who hold legally enforceable rights thereunder.¹⁰  It is arguable that a suit by injured persons such as the Googe plaintiffs against liability insurance companies for recovery come within the scope of Georgia's holdings with respect to intended third party beneficiaries.¹¹  This policy is justified by the rationale that injured persons receive only an "incidental benefit" from the payment of claims by tortfeasors' insurance companies, as opposed to payment by tortfeasors themselves.¹² 

However, when a judgment against the insured already has been achieved, an injured person may sue the tortfeasor's insurance company directly.¹³  The Georgia courts have also allowed suit directly against liability insurers in the case of certain kinds of mandatory liability insurance, reasoning that third-party beneficiary rights have been created in the public.¹⁴  An enigma is created by the unique facts of this case combined with Georgia sovereign immunity law which permits a judgment against a municipality only if, and to the extent of, liability insurance. This is discussed infra.

Once parties have achieved the status of at least third-party beneficiaries, courts in Georgia and elsewhere have determined that they may also sue for reformation. Georgia cases indicate that third-party beneficiaries of life insurance contracts may be able to seek reformation against insurance companies.¹⁵  Georgia precedent also reflects that it may be appropriate for a third party to an automobile insurance policy to seek reformation in the case of mutual mistake as to the owner of the automobile.¹⁶  We hesitate in determinatively finding that third-party beneficiaries of liability contracts may seek reformation in Georgia, in part because of Georgia decisions from the first half of this century (not much cited since) indicating that privity of contract is required to support an action for reformation.¹⁷ 

Other state courts have held that third-party beneficiaries may sue insurance companies for reformation of liability contracts. For example, in Binswanger v. Employers' Liability Assurance Corp.,¹⁸  a Missouri court held that an injured person who tripped on a wire in front of a funeral home could seek to have the funeral home's liability coverage reformed to reflect the insured's true name. At the time the suit was instituted, the funeral home had gone into bankruptcy and all of its assets had been distributed. In Binswanger, the policy contained a provision providing for suit against the insurance company in case of bankruptcy; the plaintiff had sued the funeral home but the judgment was returned unsatisfied. The court found that the plaintiff was a third-party beneficiary of the liability contract. The court wrote:

It is difficult to imagine how the rights of Fleeman-McNeill Funeral home can be adversely affected by a reformation of the policy. No effort is being made to change the contract but merely to cause the evidence of the contract, the writing, to speak the truth. Plaintiff being entitled to sue upon the contract was entitled to the benefit of the true contract and was, therefore, entitled to have the evidence of that contract corrected.¹⁹ 

Other state courts have found that third-party beneficiaries of liability insurance contracts may sue to reform liability contracts.²⁰  Applying Florida law in a diversity action, this court has found that third-party beneficiaries may sue to reform fire insurance contracts.²¹  It thus appears that a number of jurisdictions do find it appropriate to allow third-party beneficiaries to reform insurance contracts.²² 

We have not been able to discover any Georgia law on the specific question before us: Whether persons injured by municipalities have sufficient beneficial interests to be allowed to respond to an insurer's suit for declaratory judgment by seeking reformation of municipal liability insurance contracts, where no action would otherwise lie. Despite Georgia's general rule that liability claimants are not third-party beneficiaries of liability contracts, sound judicial policy may indicate that suits directly against liability insurers of local government entities for the sole purpose of reformation should be allowed.

This is so because the operation of Georgia's sovereign immunity laws may create sufficient beneficial interests in those who are injured by Georgia's local government entities to allow them to sue for reformation. A provision of the Georgia constitution of 1983 waived the sovereign immunity of the state and its departments and agencies, including municipalities, to the extent of the coverage of any liability insurance.²³ 

A sufficient beneficial interest in injured persons may be thus created by such liability insurance contracts so as to allow suit for reformation because, without the insurance, injured persons must go remediless. Given the waiver of sovereign immunity for municipalities with liability insurance, it perhaps may not be claimed by liability insurance companies that injured persons receive only an "incidental benefit" from the existence of municipal liability insurance. Such persons' rights to come into court and to seek redress are governed completely by the question of whether tortfeasor governmental entities have procured insurance. The very act of seeking insurance by an entity that possesses conditional sovereign immunity confers a fundamentally important benefit upon the public--the right to sue--that is far beyond any "incidental benefit" derived from the payment of claims by insurance companies. The evidence in this case indicates that both the City of Metter and the County Recreation Department intended that the operation of the pool be insured for liability coverage.

Moreover, Georgia's conditional immunity policy appears to bring persons injured by municipalities within the traditional definition of third-party beneficiaries:

In order for a third party to have standing to enforce a contract ... it must clearly appear from the contract that it was intended for his benefit. The mere fact that he would benefit from performance of the agreement is not alone sufficient.²⁴ 

Municipal liability insurance contracts create a right in the public to sue and accordingly constitute the equivalence of a legislative statement that the public may sue the government for negligence. By procuring liability insurance, municipalities assume a legal obligation to defend themselves from those they have injured.²⁵  Thus, it would seem that it "clearly appear [s]" from all municipal liability contracts that they are intended for the public's benefit and that those injured by municipalities may be third-party beneficiaries of such contracts, at least for purposes of reformation.²⁶ 

Tortfeasors whose liability policies do not provide coverage as the result of a mutual mistake of law or fact normally have strong incentives to seek reformation of the faulty contract themselves.²⁷  But because the right to sue municipalities is conditioned on the existence of liability insurance, it would seem necessary to allow injured persons to sue insurance companies directly for reformation. Otherwise, persons who are injured by municipalities may find that they are without recourse as a result of drafting errors in municipalities' insurance contracts. Because municipalities may benefit from such errors, in that they are able to avoid completely the hassle, stigma, and higher premiums resulting from being sued, municipalities may not have the requisite interest to seek reformation of unartfully drawn liability contracts themselves. Although the contract is one paid for by the public, neither the insured nor the insurer may have adequate incentives to protect the public good.²⁸  This would seem to be just such a case. It therefore may be wise public policy to allow injured persons to act as "private attorneys general" and to seek reformation of public liability insurance contracts.

Having found no Georgia decisions on this point, we conclude that it is an open question of Georgia law whether a person injured by a municipality has a beneficial interest in the municipality's liability contract sufficient to provide standing to seek reformation.²⁹  We accordingly certify the following questions.

Are the Googe survivors third-party beneficiaries of the City of Metter's municipal liability insurance policy?

If so, may they seek reformation of the insurance policy as third-party beneficiaries?

Our formulation of these questions is not intended to restrict the consideration by the Supreme Court of Georgia of the issues involved.³⁰ 

The Clerk of the Court is directed to transmit this certificate, as well as the entire record and the briefs of the parties, to the Supreme Court of Georgia. Pending that Court's answers to the preceding questions, all further proceedings in this appeal are STAYED.

QUESTIONS CERTIFIED.