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.

Estate of Mack Pitts, et al. v. City of Atlanta, et al., Part III

In this case arising from the death of a subcontractor's employee who was struck by a vehicle driven by a sub-subcontractor's employee, the Georgia Court of Appeals ruled that the general contractor and a subcontractor were liable to the decedent's estate due to their breach of contractual duties to ensure that the sub-sub maintained the required minimum level of auto insurance. The basis for the ruling was a finding that the decedent was a third party beneficiary of the project contractual insurance requirements and that the estate was claiming breach of contract, not asserting a claim for personal injury. Accordingly, the exclusive remedy of workers comp did not bar the estate's claims.

Georgia Court of Appeals Rules Limitation of Liability Clause Unenforceable

Any business in Georgia that relies on a contractual limitation of liability provision should review that provision in light of the Georgia Court of Appeals decision in a case involving a home security company. A divided court affirmed the $8.6 million verdict in favor of the plaintiff homeowner who was sexually assaulted in a home invasion, ruling unenforceable a $250 limitation of liability clause in the contract between the homeowner and the monitoring company.

The factual circumstances giving rise to the claim are set out at length in Monitronics International, Inc. v. Veasley; Veasley v. Monitronics International, Inc., 323 Ga. App. 126, 746 S.E.2d 793 (Ga. App. 2013). In short, while the plaintiff was at work, with her home security system armed, an intruder entered, spent the day in the house (triggering several internal motion alarms), and assaulted her after she returned home from work. The issue presented to the jury was not one of breach of contract by the monitoring company, but of negligence in performing extra-contractual duties assumed when its representative talked to the plaintiff by phone regarding an alarm triggered when she entered her home that evening, approximately 20 minutes before the attack (the representative provided misinformation as to the reason for the alarm and failed to inform her of the multiple alarms throughout the day).

International Arbitration in Atlanta
By Glenn P. Hendrix, Arnall Golden & Gregory, LLP 
Edited by R. Daniel Douglass, Stites & Harbison PLLC

International arbitration is the leading method for resolving cross-border business disputes, in part because companies engaged in international business naturally fear litigating in foreign courts. Arbitration allows parties to resolve disputes in a neutral forum before arbitrators of their choosing. An international treaty also makes it easier to enforce an arbitration award across borders than a court judgment. While the United States has no treaties with any other country for the enforcement of court judgments, over 150 countries, including the U.S. and most of its major trading partners, are parties to the U.N. Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "New York Convention").

"What Keeps Design Professionals (and their E and O Claims Reps!) Awake at Night?" 
Mark Chen, AIA, Director of Design, Heery International 
Deirdre Chriss, Claims Consultant, CNA 
Dan Maas, AIA, Principal, ai3, Inc. 
Doug Robinson, P.E., Principal, Managing Director, 
Walter P. Moore

Hal Gray, Ragsdale Beals Seigler Patterson & Gray, LLP

Atlanta Bar Association Construction Law Section Breakfast 
November 20, 2013

Deirdre's Top Ten List of Potentially Tearful Situations 
By Deirdre Chriss 
CNA Claim Consultant 
Professional Services & Private Company Management Liability Claims

10. Poor client selection by the Insured, generating a claim opportunity for the claimant;

9. Improper project selection (inexperience in working with projects such as the one being considered, challenging partners/Owners involved in the project, inadequately budgeted project for the proposed design/construction objectives );

8. No contract for performance of services, particularly when it involves a difficult project that consists of factors in Item 9;

7. Onerous contract for professional services (indemnifications, warranties, higher degree of standard of care);

In This Issue
2013-2014 Section Board of Directors

Philip Edward Beck

Vice Chair-Chair-Elect
Herbert H. Gray III

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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