                                                               [PUBLISH]

               IN THE UNITED STATES COURT OF APPEALS

                       FOR THE ELEVENTH CIRCUIT

                      ________________________________

                                 No. 95-9603
                      ________________________________
                          D.C. Docket No. CV-494-10


COLONIAL OIL INDUSTRIES, INC.,
COLONIAL TERMINALS, INCORPORATED,

                                           Plaintiffs-Counter-Defendants-
                                           Appellees-Cross-Appellants,

      versus


UNDERWRITERS SUBSCRIBING TO
POLICY NOS. TO31504670 AND TO31504671,

                                           Defendants-Counter-Claimants-
                                           Appellants-Cross-Appellees.



_________________________________________________________________

                  Appeals from the United States District Court
                      for the Southern District of Georgia
_________________________________________________________________

                               (January 26, 1998)

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

HATCHETT, Chief Judge:
      In our prior opinion in this case, Colonial Oil Indus., Inc. v. Underwriters

Subscribing to Policy Nos. TO31504670 and TO31504671, 106 F.3d 960, 966 (11th Cir.

1997), we certified 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 Supreme Court of Georgia has answered the first certified question as follows:

             [W]hen the complaint on its face shows no coverage, but the
             insured notifies the insurer of factual contentions that would
             place the claim within the policy coverage . . . the insurer has
             an obligation to give due consideration to its insured's factual
             contentions and to base its decision on "true facts." [Loftin v.
             United States Fire Ins. Co., 127 S.E.2d 53, 59 (1962).] The
             requirement that an insurer base its decision on true facts will
             necessitate that the insurer conduct a reasonable investigation
             into its insured's contentions. . . . An insurer who fails to
             investigate its insured's contentions and refuses a defense will
             be liable for a breach of the duty to defend if a reasonable
             investigation at the time would have established the potential
             for coverage. . . .

             According to the district court's summary judgment order,
             Underwriters denied coverage because the allegation in the
             Gay complaint that the material contained "waste" and
             "pollution" fell within certain policy exclusions. The district
             court found as a matter of fact, however, that Colonial
             informed Underwriters of its position that the dredge material
             did not contain waste or pollution. The district court correctly

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                held that this triggered [Underwriters'] duty to investigate.
                Because the district court also found that a reasonable
                investigation would have revealed the possible existence of
                coverage, Underwriters breached its duty to defend.

Colonial Oil Indus., Inc. v. Underwriters Subscribing to Policy Nos. TO31504670 and

TO31504671, 491 S.E.2d 337, 338-39 (Ga. 1997) (footnotes and citations omitted).

       The Supreme Court of Georgia has answered the second certified question as

follows:

                The second certified question concerns the insurer's right to
                raise policy defenses to coverage after it has made an
                unjustified refusal to defend. The Georgia Court of Appeals
                held in McCraney v. Fire and Cas. Ins. Co., [357 S.E.2d 327
                (1987)] that the insurer is not estopped to raise policy
                defenses. The rationale for this rule is that when the insurer
                breaches the contract by wrongfully refusing to provide a
                defense, the insured is entitled to receive only what it is owed
                under the contract -- the cost of defense. The breach of the
                duty to defend, however, should not enlarge indemnity
                coverage beyond the parties' contract. . . . Therefore, in this
                case, Underwriters may raise its policy defenses to coverage.

Colonial, 491 S.E.2d 337, 339 (Ga. 1997) (footnotes and citations omitted).

       Although the district court correctly concluded that the Underwriters breached

their duty to defend, the court erred in holding that the Underwriters were estopped from

raising policy defenses to coverage. Accordingly, we reverse the district court's grant of

summary judgment in Colonial's favor and remand for further proceedings consistent with

this opinion.

                              REVERSED and REMANDED.



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