The section new year is off to a good start. We have had good attendance at the monthly meetings and the slate for the rest of the year includes an ethics/professionalism program in January by member George Sewell and our annual legislative up-date by Mark Woodall of the Georgia Chapter of the AGC in February. We plan to publish two more newsletters before the year ends in June 2013. We depend on your help with case notes and articles for the newsletter. Please share with Frank Bigelis and me any ideas for the newsletter or future programs. Remember to sign up for our Holiday party on December 4, 2012 at Ri Ra. See you there.

  A recent decision by the Ninth
  Circuit, following similar holdings
  in the First and Fourth Circuit
  Courts of Appeals (as well as
  the District Courts in other
  Circuits), ruled that false cost
  estimates, including those which
  are knowingly underbid, submitted in support of bids on federal government contracts may be a "false or fraudulent claim" under the Federal False Claims Act ("FCA").  31 U.S.C. §§ 3729-3733 (2010).   General contractors and subcontractors need to be made aware of these possible FCA violations as these decisions may have a major effect on bidding on federal government projects.

In Hooper v. Lockheed Martin Corp., 688 F.3d 1037 (9th Cir. 2012), a decision from August 2012, involved a contract for the development and purchase of software and hardware used to support launch operations at Vandenberg Air Force Base and Cape Kennedy. Among other causes of action, a former employee of Lockheed alleged Lockheed intentionally lowered its initial estimate to do the work. The former employee was the relator (an individual permitted under the FCA to file suit on behalf of the United States seeking damages from those who file false claims for government funds) and alleged that Lockheed violated the FCA by knowingly underbidding the contract. Id. at 1041.

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Georgia courts interpreting statutes regulating occupational licensing have long distinguished statutes that require a license as a revenue measure from those statutes that seek to regulate business in the interest of the public.  If the licensing statute was intended to protect the public, and a business fails to procure a license before engaging in the regulated business, then Georgia law holds such contracts void and unenforceable. Accordingly, the status of a contractor's license can become a powerful tool for opposing parties in litigation.  Any owner, or fellow contractor, facing a lawsuit from a contractor should always check the license of the contractor seeking to enforce the contract.  If they lacked the appropriate license to perform the work, the Court can hold the contract void and unenforceable. 

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Georgia Department of Transportation v. Crooms, addressed whether the Department of Transportation (DOT) was immune from its alleged failure to maintain a road. 316 Ga. App. 536, 729 S.E.2d 660 (2012).

The Georgia Tort Claims Act waives sovereign immunity of the State and its departments with certain exceptions. The exception in O.C.G.A. § 50-21-24(10) preserves the DOT's sovereign immunity from negligent design claims, as long as the design met generally accepted standards in place when the design was made. This immunity does not include the DOT's failure to maintain the road, but it does provide immunity from claims that the DOT failed to upgrade the road to make it safer.

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Under Georgia law, an insurer has three options when faced with a claim of coverage while a lawsuit is pending against the insured. First, an insurer can defend the claim, thereby waiving its policy defenses and claims of non-coverage. Hoover v. Maxim Indem. Co., 291 Ga. 402, 404, 730 S.E.2d 413, 416 (2012) (internal citations omitted). Second, an insurer can deny coverage and refuse to defend, leaving policy defenses open for future litigation. Id. Or third, an insurer can defend under a reservation of rights. Id. at 405, 730 S.E.2d at 416. A "reservation of rights" is a legal term of art in insurance law, and it allows an insurer to provide a defense to its insured while still preserving the option of litigating and ultimately denying coverage. Id. If an insurer chooses to defend its insured under a reservation of rights, at a minimum, the reservation of rights must fairly inform the insured that, notwithstanding the insurer's defense of the action, it disclaims liability and does not waive defenses available to it against the insured. Id. In addition, a reservation of rights is only available to an insurer who undertakes a defense of its insured while questions remain about the validity of coverage. Id. This means that under Georgia law, an insurer cannot both deny a claim outright and attempt to reserve the right to assert different or additional defenses in the future in support of its decision to deny coverage. Id.

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In Reininger v. O'Neill, 316 Ga. App. 477, 729 S.E.2d 587 (2012), the purchasers of a home ("the Reiningers") filed suit against the previous owner-seller ("the O'Neills") after they discover a water leak in the basement of their home.   

The parties' Purchase Agreement contained an As-Is Clause which stated that the "Property is being sold 'as is,' with all faults..." Id. at 478, 729 S.E.2d at 589. The Purchase Agreement also contained a Merger Clause that stated, "No representation, promise or inducement not included in this Agreement shall be binding upon any party hereto."  Id. Prior to selling the home, Mr. O'Neill made repairs to the basement after he noticed that water was accumulating in the basement after heavy rainfalls. Within the Purchase Agreement, the O'Neills admitted that there had been water leakage and/or accumulation, and that repairs had been made to control water leakage in the basement, though did not reveal the specific details of that repair.  Mr. O'Neill also verbally told Mr. Reininger that there had been a leak in the basement. Id. at 479, 729 S.E.2d at 590. 

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