The Georgia Supreme Court ruled that punitive damages a probate judge entered against the conservator could not be levied against the insurance company that provided the surety bond.

The Georgia Supreme Court has ruled the issuer of a surety bond is not responsible for a $150,000 punitive damages award a probate court levied against it and the conservator of an incapacitated woman after the judge determined the conservator had looted the funds.

The finding overturns a Georgia Court of Appeals ruling that left Ohio Casualty Co., which served as the surety for the conservator, on the hook not only for $167,000 in misappropriated funds, but jointly and severally liable for $150,000 in punitive damages as well.

“Our argument was that there’s never been a case in Georgia where a surety was assessed for punitive damages unless the statute calling for the bond—which are required by law—specified that penalties were available,” said Bovis, Kyle, Burch & Medlin partner Tim Burson.

“These bonds are essentially guarantees that guardians and estate administrators will fulfill their fiduciary duties,” he said. “Probate cases like this are ripe for people who don’t just mishandle the estate’s assets, but get sticky fingers and actually take money.

If the lower courts’ rulings had stood, such relatively pricey bonds could have been more difficult for sureties to write, he said.

“These bonds have become among the hardest to get, and they’re getting harder. To conceptualize that we could be responsible for unlimited punitive damages is one of those things that make us take a second look,” said Burson, who represented Ohio Casualty Insurance and parent Liberty Mutual, along with firm partners William Bryant and John Burch.

The attorney for the current conservator, Richard Neville of Cummings’ Neville & Cunat, declined to discuss the case.

Craig Oakes of Lawrenceville’s Bryant & Oakes, who represents the now-replaced conservator, Emanuel Gladstone, said the decision “speaks for itself.”

As detailed in the justices’ ruling and other documents, the case began in 2015 when Forsyth County Probate Court Judge Lynwood Jordan Jr. appointed Gladstone to be the conservator for his wife, Jacqueline, who suffered from dementia.

Jordan set a $430,000 bond that Ohio Casualty posted and appointed an attorney to oversee the management of the conservatorship.

Several months later, the attorney raised concerns that Emmanuel Gladstone had not provided a proper asset management plan and was making unapproved expenditures.

Jordan removed Gladstone and appointed another conservator. Following a hearing, Jordan issued an order finding that—while some of Emmanuel Gladstone’s expenditures were justified—there were improper withdrawals from the account, including $80,000 he withdrew just before Jordan replaced him.

Jordan ordered Gladstone and Ohio Mutual to repay $167,000 and, finding Gladstone breached his fiduciary duty, another $150,000 in joint and several punitive damages.

Ohio Casualty immediately paid the $167,000, Burson said, then both Gladstone and Ohio Casualty filed separate appeals with the Georgia Court of Appeals, with the surety challenging only the punitive damages awarded against it.

In March 2017, the appeals court upheld both the actual and punitive damages award against Gladstone and Ohio Casualty.

In the section dealing with Ohio Casualty’s appeal, the appeals court found that, while the relevant law “requires that a conservator’s bond ‘be in a value equal to the estimated value of the estate,’ if it is secured by a licensed commercial surety, it does not necessarily follow, as the surety argues, that recovery is limited to actual loss.”

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