                     United States Court of Appeals,

                            Eleventh Circuit.

                                 No. 95-9603.

 COLONIAL OIL INDUSTRIES, INC., Colonial Terminals, Incorporated,
Plaintiffs-Counter-defendants-Appellees-Cross-Appellants,

                                      v.

      UNDERWRITERS SUBSCRIBING TO POLICY NOS. TO31504670 AND
TO31504671,     Defendants-Counter-claimants-Appellants-Cross-
Appellees.

                             Feb. 27, 1997.

Appeal from the United States District Court for the Southern
District of Georgia. (No. CV-494-10), B. Avant Edenfield, Chief
Judge.

Before HATCHETT, Chief Judge, BIRCH, Circuit Judge, and CLARK,
Senior Circuit Judge.

     PER CURIAM:

     CERTIFICATION FROM THE UNITED STATES COURT OF APPEALS FOR THE

ELEVENTH CIRCUIT TO THE SUPREME COURT OF GEORGIA PURSUANT TO

O.C.G.A. § 15-2-9.

     TO THE SUPREME COURT OF GEORGIA AND ITS HONORABLE JUSTICES:

     This panel of the United States Court of Appeals for the

Eleventh   Circuit    believes    that     this   case   involves   unanswered

questions of state law that are determinative of this appeal, and

we can find no clear, controlling precedents in the decisions of

the Supreme Court of Georgia.       Therefore, we certify the following

questions of law, based on the facts and procedural history recited

below, to the Supreme Court of Georgia for instructions.

                                    FACTS

     Colonial   Terminals,       Inc.,     a   subsidiary   of   Colonial   Oil

Industries, Inc. (collectively, Colonial), operates several cargo
terminals and storage facilities on the Savannah River.               Colonial

uses these facilities for the petroleum products operations of the

parent company as well as for third-party shipping and storage. In

1990, Colonial purchased comprehensive general liability (CGL) and

terminal    liability    insurance       coverage     from    an   insurance

underwriters    cooperative     (the    Underwriters)    through      a    local

insurance agent, Palmer & Cay/Carswell, Inc. (Palmer & Cay), and a

broker in London, England, R.L. Harley Insurance Associates, Ltd.

(Harley).   The policy period covered the occurrence of the events

at issue herein.

     In 1991, Colonial contracted to dredge part of the river in

order to construct a new pier.         Colonial contracted to deposit the

dredged materials on a nearby island owned by Charles Gay. On April

17, 1991, Colonial and Gay signed a "Spoilage Disposal Easement"

permitting Colonial to deposit "clean fill" on Gay's property.1

Palmer & Cay, acting on behalf of the Underwriters, issued a

certificate    of   insurance   on     August   9,   1991,   naming       Gay   as

additional insured for all work performed by or on behalf of

Colonial relating to the dredging and disposal operations.

     Colonial obtained the necessary permits from the United States

Army Corps of Engineers (ACE) and the Georgia Department of Natural

Resources, Environmental Protection Division, and initiated the

dredging in early September 1991.         The ACE's permit described the

materials expected to be deposited as ranging from "firm silty sand

to gray sandy clay."      Gay inspected the disposal site and found

     1
      The easement defined "clean fill" as "material which is in
full compliance with all Environmental Laws, and does not contain
any Hazardous Materials."
that the dredge spoil contained bricks, wire cable and lumber

materials.   Gay had expected Colonial to deposit only "sandbox

quality" sand.    On September 12, 1991, Gay demanded that Colonial

cease the disposal.     Colonial inspected the site and determined

that the spoil came within the terms of the agreement, deciding

that those waste materials present could be separated and removed

at a later date.

     While   Colonial   declined    to    stop      the    disposal   on    Gay's

property, it sent a letter to Palmer & Cay on September 19, 1991,

informing them of Gay's objections.           On October 7, 1991, Palmer &

Cay forwarded the information to Harley.              Harley misplaced the

letter from Palmer & Cay and neglected to inform the Underwriters.

     Gay filed an action against Colonial in the United States

District Court for the Southern District of Georgia on April 17,

1992, demanding that Colonial remove the spoil.             Gay asserted that

Colonial breached the easement by (1) depositing material other

than the "clean fill" specified in the agreement;                (2) allowing

liquid runoff to flood portions of the island;                and (3) dumping

hazardous materials onto his property.           Gay also claimed damages

for nuisance and trespass.2
     Colonial    forwarded   a   copy    of   the    Gay    complaint      to   the

Underwriters.    The Underwriters argue that they had no notice of

the dispute prior to receiving the complaint.3              On June 16, 1992,

     2
      Gay amended the complaint in August 1992 to claim damages
under the Comprehensive Environmental Response, Compensation and
Liability Act (CERCLA), 42 U.S.C. § 9601 et seq., after the
Underwriters declined to defend Colonial.
     3
      The parties contest whether Palmer & Cay's notification to
Harley in October 1991 constituted notice to the Underwriters
the Underwriters informed Colonial that they would not defend

against Gay's suit, "based on the pleadings in the case which have

been furnished to us," pursuant to the CGL policy's coverage

limitations.     The Underwriters' letter denying coverage claimed

that they had based their decision on the "facts as have been

alleged and thus the facts that are known to us thus far."             The

Underwriters    suggested   that   Colonial   submit   to   a   "standstill

agreement" with them regarding the coverage issue until Colonial

resolved the suit.   The Underwriters also acknowledged that "black

letter law dictates" that they obtain a declaratory judgment

affirming their denial of coverage.      Colonial neglected to respond

to the letter, and the Underwriters did not seek a declaratory

judgment.      On September 18, 1992, Colonial settled with Gay,

agreeing to purchase the property for $900,000 and to pay $850,000

as a settlement, $400,000 of which constituted reimbursement for

attorney's fees.

                            PROCEDURAL HISTORY

     On November 10, 1993, Colonial brought a subsequent defense

and indemnity action against the Underwriters in the Superior Court

of Chatham County, Georgia, seeking (1) reimbursement for the

$850,000 settlement, (2) attorney's fees for the Gay defense, (3)

prejudgment interest, and (4) a 25-percent statutory penalty under

Georgia law.4    The Underwriters removed the action to the United

States District Court for the Southern District of Georgia on



regarding the dispute.
     4
      See O.C.G.A. § 33-4-6 (imposing a penalty for an insurer's
bad faith refusal to pay a covered claim within sixty days).
January 14, 1994.     On August 9, 1994, the Underwriters moved for

summary judgment asserting coverage defenses.5       The district court

denied the Underwriters' motion on January 18, 1995, and directed

Colonial to file a summary judgment motion.        On February 7, 1995,

Colonial complied with the court's request and moved for partial

summary judgment regarding the Underwriters' duties to defend and

indemnify Colonial.

     On August 15, 1995, the district court issued an order denying

both parties' motions in limine regarding evidentiary materials.

In its order, the court analyzed the CGL coverage.         The court also

discussed the Underwriters' duty to defend Colonial, and the

potential waiver and estoppel ramifications arising from a breach

thereof.   The court suggested that the Underwriters' unjustifiable

failure to defend Colonial or obtain a protective declaratory

judgment   constituted   a   waiver   of   the   policy   defenses,   thus

estopping the Underwriters from raising these defenses in the

indemnification action.      Acknowledging that Colonial framed the

estoppel issue differently than the court discussed, however, the

court provided the Underwriters with notice of the estoppel issue

and directed the parties to brief the issue along with the question

of the type and amount of damages. The parties thereafter complied

with the court's directive.

     On November 6, 1995, the court granted Colonial summary

judgment and awarded Colonial $1,284,381.48. The court reiterated


     5
      Specifically, the Underwriters contended that the waste,
disposal and contamination exclusions precluded coverage of the
Gay action. These provisions excluded coverage for liability due
to the disposal of contaminated or polluted dredge materials.
its finding in the August 15 order, holding that the Underwriters

breached their duty to defend in (1) relying solely on the terms of

the Gay complaint in declining to defend Colonial, and (2) failing

to obtain a declaratory judgment affirming their decision.       The

court held, citing Loftin v. United States Fire Insurance Co., 106

Ga.App. 287, 127 S.E.2d 53 (1962), that Georgia law imposes a duty

on an insurer to investigate and thus does not permit the insurer

to rely solely on the terms of the complaint in determining its

duty to defend.    As a result of the Underwriters' unjustified

breach, the court estopped them from raising policy defenses in the

indemnification action.   The court recognized thatMcCraney v. Fire

& Casualty Insurance Co., 182 Ga.App. 895, 357 S.E.2d 327 (1987),

and Eason v. Weaver, 557 F.2d 1202 (5th Cir.1977), reject the

complete estoppel doctrine, but the court distinguished those cases

on the ground that the plaintiffs therein were not in direct

privity with the insurer.   The court awarded Colonial settlement

and defense costs, and prejudgment interest.     The court denied,

however, Colonial's request for the 25-percent statutory penalty.

As to that issue, the court held that the Underwriters' actions did

not warrant a penalty because they had not acted in bad faith.   The

court later granted the Underwriters' motion to amend the judgment

and denied Colonial attorney's fees for the coverage suit, reducing

the judgment to $1,148,052.90. The Underwriters appeal and Colonial

cross-appeals the rulings of the district court.

                            DISCUSSION

      It is well-settled under Georgia law that the insurance

contract determines whether the insurer has a duty to defend its
insured.   See Great Am. Ins. Co. v. McKemie, 244 Ga. 84, 259 S.E.2d

39, 40 (1979).   It is less clear, however, what duty Georgia law

imposes on an insurer to investigate a third-party's claim against

its insured in order to determine whether the insurer is required

to defend the action.     Georgia law also remains unclear on the

issue of whether, and to what extent, an insurer should be estopped

from raising coverage defenses following a breach of its duty to

defend.    We ask the Georgia Supreme Court to address these two

issues.

      The Underwriters contend that Georgia law does not impose a

duty on an insurer to investigate—in order to determine whether the

policy language imposes a duty to defend—a claim brought against

its insured beyond the third party's complaint and supporting

materials.   The Underwriters rely primarily on   McKemie.   In that

case, a landlord sued her insurer for wrongful refusal to defend a

suit that tenants brought against her.    After the trial court held

that the complaint failed to allege liability covered under the

policy, the Georgia Court of Appeals reversed, holding that the

insurer had a duty to defend because "later-revealed facts" could

have arisen to impose a duty to defend.   The Georgia Supreme Court

reversed the appeals court, however, holding that the law only

requires an insurer to rely on "the information it had at the

outset" to determine its duty to defend.     McKemie, 259 S.E.2d at

40.   The decision noted the distinction between groundless suits,

which the insurer is obligated to defend, and suits "which, even if

successful would not be within the policy coverage."   McKemie, 259

S.E.2d at 40 (citation omitted).
     The Underwriters find support in the McKemie decision for the

proposition that an insurer need only look to the four corners of

the complaint to determine its duty to defend.    See McKemie, 259

S.E.2d at 41 ("[T]he allegations of the complaint are looked to to

determine whether a liability covered by the policy is asserted.")

(internal quotation marks omitted).      McKemie also noted with

approval Morgan v. New York Casualty Co., 54 Ga.App. 620, 188 S.E.

581 (1936), in which "the complaint showed on its face that the

injuries were not covered by the policy."   McKemie, 259 S.E.2d at

40 n. 3. In addition, the Underwriters assert that McKemie places

the burden on the insured, not the insurer, to discover facts

creating the duty to defend.     See McKemie, 259 S.E.2d at 41 (if

insured finds later-revealed facts creating coverage, "she [is]

under a duty to send this information to [the insurer] and again

call upon it to defend").      Finally, the Underwriters point to

supporting language from the Georgia courts of appeals suggesting

that McKemie supports the conclusion that Georgia adheres to the

exclusive pleading rule. See Al Who Enters. Inc. v. Capitol Indem.

Corp., 217 Ga.App. 423, 457 S.E.2d 696, 698 (1995);     Brayman v.

Allstate Ins. Co., 212 Ga.App. 96, 441 S.E.2d 285, 285-86 (1994);

Hames Contracting, Inc. v. Georgia Ins. Co., 211 Ga.App. 852, 440

S.E.2d 738, 739 (1994);       Glens Falls Ins. Co. v. Donmac Golf

Shaping Co., 203 Ga.App. 508, 417 S.E.2d 197, 198 (1992); Cantrell

v. Allstate Ins. Co., 202 Ga.App. 859, 415 S.E.2d 711, 712 (1992);

Batson-Cook Co. v. Aetna Ins. Co., 200 Ga.App. 571, 409 S.E.2d 41,

42 (1991);   Presidential Hotel v. Canal Ins. Co., 188 Ga.App. 609,

373 S.E.2d 671, 672 (1988).
     In response, Colonial argues that the insured's notice to the

insurer that the "true facts" bring the claims within the coverage

provisions of the policy imposes a duty on the insurer to conduct

a reasonable investigation of the claim.    Colonial relies on the

decision in Loftin for support.   Loftin involved an insured's suit

against his insurer seeking reimbursement for attorney's fees that

the insured paid after the insurer refused to defend.   In finding

for the insured, the Georgia Court of Appeals held that "when the

complaint against the insured alleges untrue facts placing the

claim within an exception in the policy, but the true facts, known

or ascertainable to insurer, are within coverage, the insurer is

obligated to defend the suit."    Loftin, 127 S.E.2d at 59.

     It is the term "ascertainable" upon which Colonial bases its

argument.   Colonial contends that   Loftin requires an insurer to

conduct a reasonable investigation when the insured provides notice

that the claim actually falls within the policy's coverage. 6    As

Loftin stated, "[w]ith respect to an exception to the duty to

defend, this burden [on an insurer to prove that an exception

exists] is not carried merely by proving that the allegations of

the complaint allege[ ] facts excluding the claim from the policy."

Loftin, 127 S.E.2d at 58.     Colonial argues that    McKemie also

provides support for this proposition through its discussion of

"true facts."   Moreover, Colonial asserts that the cases which the

Underwriters cite should be distinguished because they fail to cite


     6
      Colonial also avers that the duty to defend arises where
the third-party's complaint contains covered claims and
noncovered claims pleaded in the alternative, as in the Gay
complaint.
Loftin or discuss factual situations where the insured charges that

the   allegations    in   the    complaint       falsely     preclude    coverage.

Colonial avers that the decisions of the Georgia courts of appeals

support imposing a duty to investigate.                 See Associated Petroleum

Carriers, Inc. v. Pan American Fire & Cas. Co.,                 117 Ga.App. 714,

161 S.E.2d 411, 413 (1968);            State Farm Mut. Auto. Ins. Co. v.

Keene, 111 Ga.App. 480, 142 S.E.2d 90, 91-92 (1965).                 Furthermore,

Colonial argues that a duty to investigate provides protection for

the insured, while the insurer can obtain a declaratory judgment or

stipulate   to   a   reservation       of     rights,    neither    of   which   the

Underwriters chose to pursue.               Finally, Colonial contends that

public policy requires the imposition of a duty to investigate

because a contrary rule would allow insurers to rely unreasonably

on the averments of a third party rather than its insured.

       The second issue we certify is whether the Underwriters'

failure to defend here effectuates a waiver of the defenses and

exclusions available pursuant to the policy, and thus estops them

from raising such policy defenses.              The Underwriters contend that

the Georgia courts of appeals have consistently rejected the

complete    estoppel theory.            See    Keene,     142   S.E.2d   at   92-93

(specifically rejecting complete estoppel theory);                  see also Aetna

Cas. & Sur. Co. v. Empire Fire & Marine Ins. Co., 212 Ga.App. 642,

442 S.E.2d 778, 783 (1994);            Moore v. State Farm Mut. Auto. Ins.

Co., 196 Ga.App. 755, 397 S.E.2d 127, 129 (1990);                    Robertson v.

Central Mut. Ins. Co., 165 Ga.App. 167, 299 S.E.2d 894, 895 (1983).

The   Underwriters    argue     that    the    Georgia     courts    have   instead

accepted a more limited estoppel doctrine, which precludes the
insurer from objecting to the outcome of the litigation against its

insured or the manner in which the parties concluded the action.

See McCraney v. Fire & Cas. Ins. Co., 182 Ga.App. 895, 357 S.E.2d

327, 328 (1987) (insurer estopped from contesting determination of

liability against insured);          Argonaut Ins. Co. v. Atlantic Wood

Indus., Inc., 187 Ga.App. 471, 370 S.E.2d 765, 770 (1988) (insurer

estopped from exercising "no action clause" contained in the

policy), rev'd on other grounds, 258 Ga. 800, 375 S.E.2d 221

(1989);       Georgia S. & Fla. Ry. Co. v. United States Cas. Co., 97

Ga.App. 242, 102 S.E.2d 500, 502 (1958) (insurer estopped from

challenging good faith settlement).        As stated in Aetna, "[w]hile

it is true that an insurer loses its opportunity to contest the

negligence of the insured or the injured person's right to recover

by refusing to defend, the insurer does not lose its right to

contest the insured's entitlement to a recovery under its policy."

Aetna, 442 S.E.2d at 783.

       Colonial counters that Georgia law estops an insurer who

unjustifiably declines to defend its insured.             Cf. Loftin, 127

S.E.2d at 59.        Colonial contends that the cases the Underwriters

cite    can     be   distinguished   because   they   involve   claims   of

third-party subrogees against the insurer, rather than claims of

first-party insureds as in the case at bar.           Colonial also argues

that case law exists to support the complete estoppel theory.

Colonial specifically looks to the decision in Keene, which held

that "[b]y an unjustified refusal to defend an action against the

insured the insurer becomes subject to certain new and positive

obligations, including liability for the amount of the judgment
rendered against the insured."      Keene, 142 S.E.2d at 92.       Finally,

Colonial contends that the cases applying the doctrine of partial

estoppel to liability, settlements and no-action clauses provide

support for complete estoppel.

     We, therefore, request the assistance of the Georgia Supreme

Court to resolve the estoppel issue.       It appears to this court that

the Georgia courts of appeals oppose the complete estoppel doctrine

and we acknowledge that previous decisions of this circuit have

refused to estop insurers from raising policy defenses.                  See

Spencer v. Assurance Co., 39 F.3d 1146, 1149 n. 5 (11th Cir.1994);

Stahl   v.   Northern   Assurance   Co.,   716   F.Supp.   626,   630   n.   2

(M.D.Ga.1989), aff'd, 894 F.2d 413 (11th Cir.1990);               Eason v.

Weaver, 557 F.2d 1202, 1206 (5th Cir.1977). We note, however, that

the Georgia Supreme Court has not yet ruled on this issue, and we

prefer to defer to its authority on matters of state law.

        Accordingly, we certify the following questions to the

Supreme Court of Georgia:

1)   Does an insurer have a duty to conduct a reasonable
      investigation of facts outside those presented in the
      complaint, or otherwise presented to the insurer by its
      insured, prior to determining whether to defend a claim
      brought against the insured?

2) To what extent does Georgia law estop an insurer from raising
     coverage defenses after the insurer, without performing an
     investigation into the third-party's allegations, seeking a
     declaratory judgment, or stipulating to a reservation of
     rights, refuses to defend the insured?

The phrasing of these questions is to be used for guidance and is

not intended to limit the Supreme Court of Georgia in considering

the issues presented or the manner in which it gives its answers.

Martinez v. Rodriquez, 394 F.2d 156, 159 n. 6 (5th Cir.1968).            The
clerk of this court shall transfer this certificate, the briefs of

the parties and the entire record in this case to the Supreme Court

of Georgia for assistance in answering these questions.

     QUESTIONS CERTIFIED.
