CONSTRUCTION LAW UPDATE
Winter 2007
By: Michael J. Rust & Christopher M. Ziegler

1. Acceptance Doctrine

Layfield v. Department of Transportation, 2006 WL 3393152 (November 27, 2006)

A motorist was injured when he lost control of a vehicle in a rain storm and crashed into a tree. Plaintiff sued the Georgia DOT and the road re-surfacing company alleging the re-surfacing work caused water to pool on the road. Plaintiff could not remember what happened, but there was some evidence to show that the re-surfacing company's work caused water to puddle and pool up on the road. This evidence of negligence resulted in a reversal of a grant of summary judgment to the contractor.

The contractor also argued that the Georgia DOT had accepted the contractor's work and, therefore, the contractor was absolved of liability. However, evidence showed that the work may not have been accepted. Therefore, the road contractor was not entitled to summary judgment.

2. Additional Insured Endorsements

Ryder Integrated Logistics, v. Bellsouth Telecommunications, Inc., 277 Ga. App. 679 (2006)

Last year, the Georgia Court of Appeals decided the case of Ryder dealing with the additional insured endorsement typical to most commercial general liability insurance policies. Specifically, the Court reviewed the ISO Additional Insured Form in existence prior to 2004 which provided:

WHO IS AN INSURED (Section III) is amended to include as an insured the person or organization shown in the schedule, but only with respect to liability arising out your ongoing operations performed for that insured.

It should be noted that in 2004, ISO eliminated the “arising out of” language and the new form now specifies that coverage applies only to injury or damage “caused in whole or in part” by acts or omission of the named insured.

In Ryder, the underlying claim arose out of injuries suffered by a Ryder employee at a Bellsouth facility. The employee was a truck driver for Ryder and was injured while unloading bags of scrap wire at a Bellsouth facility. The employee sued Bellsouth alleging that he was injured as a result of Bellsouth’s sole negligence in the maintenance of their property. Ryder and Bellsouth entered into a contract in which Ryder was to provide Bellsouth with transportation and logistical services. The contract provided that Ryder would indemnify Bellsouth from any and all claims made by any of Ryder’s employees, and that Ryder was to maintain commercial general liability insurance which named Bellsouth as an additional insured.

Bellsouth tendered the claim to Ryder and insurer, Republic, both of whom refused to defend or indemnify Bellsouth. Bellsouth subsequently filed a third-party action against Ryder and Republic alleging breach of contract. Bellsouth argued that it was entitled to coverage by virtue of its additional insured status. Ryder’s CGL policies additional insured endorsement named as an insured “any person or organization for whom the NAMED INSURED is obligated by written agreement to provide liability insurance but only . . . with respect to liability arising out of your operations”

The trial court found that the additional insured endorsement afforded coverage for premises liability claims. Further, Republic had a duty to defend and indemnify Bellsouth.

On appeal, Bellsouth argued that its only liability, pursuant to the endorsement, was in a situation in which the injury arose out of Ryder’s operations. As Bellsouth’s employee alleged that his injuries were due to Bellsouth’s negligent maintenance of the premises, therefore, Ryder and Republic had no coverage and no obligation to defend. The Georgia Court of Appeals affirmed the trial court and held that the phrase “arising out of your operations” means arising out of a “business transaction” or work performed by Ryder. The Court found that when he was injured, the employee was performing work at the Bellsouth site pursuant to a business transaction with Ryder and therefore Ryder was obligated by his contract to make Bellsouth an additional insured and the employee’s injuries arose out of that transaction.

3. Arbitration

International Fidelity Insurance Company v. BNC Contractors, 2007 WL 128813 (N.D. Ga. 2007)

This case involves a contract dispute between a contractor and subcontractors. Some of the claims asserted were subject to arbitration, but others were not. The plaintiff argued that arbitration should not be compelled and the civil case should not be stayed, but the Court disagreed indicating that arbitration was compelled and a stay must be issued as to the arbitrable claims.

4. Course and Scope of Employment

Gassaway v. Precon Corporation, 280 Ga. App.351 (2006)

In Gassaway, our firm was successful in defending the defendant contractor against claims arising out of a serious automobile accident. Precon was performing work in South Carolina and its employee traveled from another State to the jobsite where he was to begin working for several months. Precon’s employee asked his supervisor if he could take an extended lunch break to look for a place to live. On the way back from his lunch break, while turning into the jobsite, Precon’s employee caused the accident in question.

Plaintiff argued that this case was governed by the “traveling salesman rule” or as it is more technically known, “continuous employment doctrine.” Under these theories, when an employee is at work for a job out of State, he or she is always “on the job” for purposes of vicarious liability. We were successful in convincing the trial court and the Court of Appeals that these doctrines should only apply to workers’ compensation cases where there is more of a public policy interest and that an employee is on the job. The Court of Appeals overruled its prior cases applying continuous employment doctrine and the traveling salesman rule to tort cases.

5. Damages

Massey v. Butts County, 281 Ga. 244 (2006)

A landowner sought review of a zoning board's issuance of a building permit. The Georgia Supreme Court held that the landowner must show "special damages" in order to seek the equitable relief requested, i.e., reversal of the zoning decision. Because the landowner could not show any damages, his attack on the zoning decision was denied.

U.S. v. Skanska USA Building, Inc., 2006 WL 3476661 (11th Cir. 2006)

The GSA hired Skanska to build a new federal courthouse in Jacksonville, Florida. Skanska contracted with Southeastern Enterprise Group to build the roof. A water leak was discovered in the building. Southeastern determined that it was not the roof leaking, but it was improper installation of concrete on the parapet walls. Skanska refused to allow Southeastern to finish its job and instead insisted that Southeastern fix the leak. Southeastern refused because it was not within the scope of its contract to fix the leak. Southeastern sued Skanska to collects its portion of the payment bond.

The Court held that there was sufficient evidence to support the jury's finding that Skanska wrongfully prevented Southeastern from completing the roof.

6. Faire Business Practices Act

Tismann v. Linda Martin Holmes Corporation, 281 Ga. 137 (2006)

Defendant Martin Holmes built a house for plaintiff Tismann. Plaintiff discovered building code violations and was awarded money at arbitration. Subsequently, plaintiff sued seeking damages under Georgia's Fair Business Practices Act. Plaintiff based his claim on alleged conflicting language in the contract which was allegedly deceptive.

The Court ruled that, "To be deceptive, a business practice must have the tendency or capacity to deceive." Even if the contractual language in this case was deceptive, the plaintiff had the opportunity to read the language and he should have been aware of the alleged discrepancy in the contract. Also, under the Act, the plaintiff must show that he relied on the deception. In this case, the plaintiff could not show that he relied on the allegedly deceptive language in the contract and his action was barred. Also, when the alleged violation of the Fair Business Practice Act is a misrepresentation, the consumer must show that he exercised due diligence to ascertain the falsity of the statement. Otherwise, the cause of his injury is his own lack of proper diligence.

7. Indemnification

Carolina Cas. Ins. Co. v. R.L. Brown & Associates, Inc. 2007 WL 174336 (N.D.Ga. 2007.)

R.L. Brown was the architect on a building project. R.L. Brown was sued for alleged defects. R.L. Brown filed a third-party complaint against subcontractors seeking indemnity and contribution.

The court discussed the law of indemnity in Georgia. Generally, one joint-tortfeasor may not maintain an action for indemnity against another joint-tortfeasor. However, where the negligence of one is passive and the negligence of the other is active, then the passive joint-tortfeasor may maintain an action for indemnity against the active tortfeasor.

In this case, it was unclear as to whether the negligence of some parties was active or passive, thus a jury trial was required.

8. Insurance

Living Legends Retirement Center v. Lexington Insurance Company, 2006 WL 3473673 (11th Cir. 2006)

Plaintiff sued its commercial property insurer for breach of contract after the insurer denied a storm water damage claim. The insurer contended that the policy excluded surface water damages on a "causes of loss special form" which appeared as an attachment to the policy declarations. The insured argued that the declarations did not incorporate the special form, but the Court disagreed and upheld the jury verdict for the insurance company. In short, the insurance contract was not ambiguous and it clearly stated the coverages.

9. Liens

SAKS Associates v. Southeast Culvert, Inc., 638 S.E. 2d 799 (2006)

A supplier of pipes and other drainage goods filed a materialman's lien against a parcel of property, i.e. the property owner, after non-payment by the contractor. The contractor went into bankruptcy, so the vendor filed the lien against the property itself.

The court held that a lienholder is not required to commence suit against the contractor to perfect its lien. In certain circumstances under Georgia law, O.C.G.A. § 44-14-361.1(a), the materialman need not commence an action against the contractor and may instead bring an action directly against the property owner. Bankruptcy is one such instance.

10. Premises Liability

Arco v. Chitwood, 282 Ga. App. 156 (2006)

This is a slip-and-fall case involving a static defect on stairs. Plaintiff lost her balance at the top of the stairs and fell. Plaintiff admitted she was negligent, but also contended that her injuries were caused by improper spacing of side rails of the stairs. She presented an engineering report that concluded the side rails were too far apart, in violation of applicable building codes. She was injured when her foot became stuck between the rails, breaking her leg.

The Georgia court granted summary judgment to the defendant because the plaintiff had been up and down those stairs previously and was presumed to have equal knowledge of their condition. Even if the stairs were not built to code, the equal knowledge rule would still preclude her recovery.

Nevitt v. CMD Reality Investment Fund, 2006 WL 3082466 (November 1, 2006)

In Nevitt, Georgia Court of Appeals reversed a defense verdict in favor of the defendant property owner in a trip and fall action defended by our firm. The reversal was based on evidentiary grounds and has created some new, bad law, with regards to statements made by plaintiffs prior to the institution of litigation.

The Plaintiff, Mr. Nevitt, had written a letter with a settlement demand to the Defendant prior to instituting suit. In that letter, Mr. Nevitt gave an account of the mechanism of his injury which was different to what he testified to at trial. That letter was introduced into evidence at trial as a contradictory statement and for impeachment purposes and the sections with regards to settlement were omitted. Further, a recorded statement had been taken by the insurance adjustor prior to institution of litigation in which Mr. Nevitt, again, gave a different account of how he fell from what he testified to at trial.

The Court of Appeals, unfortunately, found that both the letter and the statement should not have been admitted into evidence. The Court, we believe incorrectly, found that the recorded statement was premised upon a representation to Mr. Nevitt that it was necessary for evaluation of the case for settlement purposes. The letter sent by Mr. Nevitt was also for settlement purposes. Therefore, neither should be admissible under the Georgia Statue making inadmissible admissions or statements made with a view to compromise. O.C.G.A. § 24-3-7.

An application for certiorari to the Georgia Supreme Court has been filed and is supported by the Georgia Defense Lawyers Association and others.