Georgia Federal Court Determines State Court Judgment Entered After Parties Executed a General Release Is Not “Loss”

The United States District Court for the Middle District of Georgia, applying Georgia law, has held that an insurer had no obligation to pay a judgment against its insured in an underlying personal injury lawsuit because the insured and the claimants had previously entered into a settlement and had executed a general release, such that the later judgment against the insured did not qualify as “Loss” under the policy. Ironshore Specialty Ins. Co. v. Logan, 2024 WL 3638369 (M.D. Ga. Aug. 2, 2024).

An insured rehabilitation facility purchased a Long Term Care Organizations Professional Liability, General Liability and Employee Benefits Liability Insurance Policy. A resident of the facility fractured her hip when a facility employee was moving her to the shower, prompting a personal injury lawsuit against the insured facility. On March 20, 2020, the claimants settled their claims with the insured and executed a release, which discharged all claims against the insured. Despite the executed release, the claimants continued to prosecute their purported claims, resulting in a $2.1 million judgment being entered against the insured facility. The claimants then pursued payment from the facility’s insurer under the policy.

In the coverage litigation that followed, the insurer argued that the judgment did not constitute “Loss” under the policy, which by definition requires that judgment be an amount that the insured is “legally obligated to pay,” because the insured facility had already been fully released in connection with the claims and thus had no legal obligation to pay. Accordingly, argued the carrier, the policy did not provide coverage for the judgment.

The court agreed with the insurer, explaining that, at the time of the judgment, the insured had already settled with the claimants and had been fully released. As such, the claimants could not enforce the judgment against the insured facility and thus could not seek recovery under the policy in connection with such judgment. To that end, the court confirmed that a party who releases an insured from liability has no legal claim against the insurer. Accordingly, the carrier argued the policy did not provide coverage for the judgment.