December 2013
Construction Law Newsletter  
& Georgia Construction Law Update 
Official Publication of the Atlanta Bar Association Construction Law Section
Message from the Chair
By Philip E. Beck, Chair, Construction Law Section  
Smith, Currie & Hancock LLP

Greetings, fellow Atlanta construction lawyers! I will take this opportunity, in the inaugural issue of the Construction Law Section electronic newsletter for the 2013-2014 Atlanta Bar Association year, to deliver this message from the Chair (hopefully not the empty chair made famous by Clint Eastwood at the Republican National Convention, although my detractors might suggest it is worse than empty). It is my honor to serve as your Chair this year and to follow the many excellent Chairs who have preceded me (including Bart Gary, whom I succeeded), confident in the knowledge that I will leave room for improvement for those to follow me.

 

Georgia Follows National Trend By Recognizing Defective Construction as an "Occurrence" Under CGL Policy
By Kent W. Collier 
Sutherland Asbill & Brennan LLP

Insurance coverage related to alleged defective construction is a common issue for construction practitioners. The law in many states is evolving regarding such coverage, and Georgia has recently joined the burgeoning majority of jurisdictions that now hold defective construction is an "occurrence" under a contractor's commercial general liability (CGL) insurance policy. The key holdings of the Supreme Court of Georgia decision in Taylor Morrison, discussed in detail below, are:
  • Defective construction can be an "occurrence" under a CGL insurance policy.
  • Property damage resulting from an occurrence (caused by defective work or otherwise) must be to other non-defective work or property (or loss of use).
  • Business risk exclusions (such as the "Your Work" exclusion) may still apply.
  • The entire insuring agreement (occurrence, property damage, and no exclusions) must be met for an insurer to have the obligation to indemnify and defend.
In Taylor Morrison Services, Inc. v. HDI-Gerling America Insurance Company, 293 Ga. 456, 746 S.E.2d 587 (2013), the Supreme Court of Georgia ruled that damage to the insured's completed work constitutes an "occurrence" under a standard CGL policy. The case involved a class action by homeowners in California against Taylor Morrison, a residential homebuilder, regarding improper construction of concrete foundations, including lack of a gravel base, failure to use adequate moisture barriers, and building foundations with water-to-cement ratios that were too high. HDI-Gerling, Taylor Morrison's CGL carrier, sought a declaratory judgment in federal court in Atlanta that the defective construction could not constitute an "occurrence" under the policy. The District Court issued such a declaration, Taylor Morrison appealed, and the U.S. Court of Appeals for the Eleventh Circuit certified the question to the highest court in Georgia. 
 

 

Surety's Subrogation Claims against State Agency Not Subject to Sovereign Immunity Defense
By Carolyn Thorn Wingfield
Southern Company Services, Inc. 

In a case of first impression, the Georgia Court of Appeals ruled that a surety, as subrogee, could rely on the Georgia Department of Corrections' (GDOC) waiver of sovereign immunity in a breach of contract action. Further, the contract's anti-assignment clauses were not enforceable to the extent they could be construed to prohibit a contractor from assigning to its surety a right of payment from the project owner.

GDOC, in 2008, awarded a contract to Walker Roofing for re-roofing at a state prison, requiring payment and performance bonds, which Developers Surety provided. Walker Roofing and Developers Surety had previously entered into an indemnity agreement in which Walker assigned Walker's right to payment under bonded contracts to the surety, as security against any surety loss under a bond. In 2010, GDOC declared Walker Roofing in default and invoked the payment and performance bonds.

In This Issue
2013-2014 Section Board of Directors

Chair
Philip Edward Beck

Vice Chair-Chair-Elect
Herbert H. Gray III

Secretary/Treasurer
C. Damon Gunnels

Immediate Past Chair
T. Bart Gary

Members at Large
Frank L. Bigelis
Deborah Cazan
R. Daniel Douglass
Mark V. Hanrahan
Frank E. Riggs Jr.
W. Henry Parkman
Christy Sanders
Lynn C. Stewart
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