Insured Had No Knowledge of Homeowner Policy; He Was Covered Anyway

An interesting ruling just took place in Georgia in the case, Southern Trust Insurance Company v. Cravey.¹ In Southern Trust, the issue arose whether an insured was a third-party beneficiary under a homeowners insurance policy he did not obtain on his own behalf, know of, or make any payments toward.

The Plaintiff, Ronald E. Cravey (“Cravey”), primarily resided on the property until 2011. In 2013, Cravey entered into a rent-to-own contract with Kim Clark (“Clark”) and Jay Floyd (“Floyd”). The contract was a rent-to-own, and ownership would be transferred to Clark and Floyd upon Cravey’s receipt of $92,500.00. Cravey maintained a homeowners’ insurance policy on the property with Auto-Owners. Although Clark and Floyd were supposed to obtain renters insurance under the agreement, they instead obtained a separate homeowners insurance policy through Southern Trust. Cravey was named as an additional insured under the Southern Trust policy, but he was initially unaware of such.

A loss occurred on the property as the result of a fire. Cravey submitted a claim to Auto-Owners, and the latter paid the claim. Cravey did not file a claim with Southern Trust.

Auto-Owners then sought to compel Southern Trust to pay its portion of the claim. When Southern Trust refused, Auto-Owners sued. The trial court granted summary judgement for Auto-Owners. The court found that although Southern Trust had notified Clark it had cancelled the policy, it had failed to cancel the policy with Cravey since Cravey was not notified of the cancellation.

Southern Trust appealed, arguing that since Cravey did not initially have knowledge of the policy and Clark did not have apparent authority to obtain the policy on Cravey’s behalf, he was not a valid insured under the policy. Auto-Owners maintained that Cravey was a third-party beneficiary under the contract.

The appellate court affirmed the trial court’s ruling, holding that Cravey was a third-party beneficiary under the policy. The appellate court also found that Auto-Owners could bring a subrogation claim against Southern Trust seeking contribution for its portion of the claim.
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¹ Southern Trust Ins. Co. v. Cravey, No. A18A0301 (Ga. Ct. App. May 14, 2018).