Archive for September, 2010

Georgia Court of Appeals Upholds Plain Language of Indemnity Agreement for Construction Surety Bonds

The Court of Appeals of Georgia recently ruled in favor of an issuer of construction surety bonds seeking to recover the amount the issuer spent completing work on certain projects after the contractor defaulted. Cagle Construction, LLC v. Travelers Indemnity Company, 2010 WL 3326800 (Ga.App. Aug. 25, 2010). The Court found that under the general indemnity agreement executed by the parties, liability under the bonds was trigged at the time the contractor was declared to be in default and the evidence was sufficient to establish the amount of the contractor’s liability.

Cagle Construction was the contractor for four projects for the Georgia Department of Defense (GDOD). The insurer issued construction surety bonds on behalf of Cagle, guaranteeing that Cagle would complete each project and pay suppliers and subcontractors in the event of default. Before construction began, Cagle executed an indemnity agreement in partial consideration for the issuance of the bonds. The agreement provided that Cagle would indemnify the insurer against every claim, demand, liability, suit, judgment, and expense that the insurer might pay or incur as a result of having issued the bonds. It also provided that in the event of any breach, delay, or default asserted by GDOD or if Cagle is suspended or has stopped work on any contract covered by the bonds, the insurer would have the right to take possession of any part of the contracted work.

Prior to full completion of all four projects, GDOD dismissed Cagle and issued a demand to the insurer to complete the projects. The insurer filed suit against Cagle seeking reimbursement for expenses incurred in finishing the contracted work. The insurer moved for summary judgment and filed an affidavit stating that it had paid or incurred over $780,000.00 in claim payments, completion costs, and attorney and consultant fees, and that Cagle had failed to reimburse the insurer. Attached to the affidavit was a summary of all expenses and costs associated with the projects. The trial court granted summary judgment to the insurer for the total amount.

On appeal, the Court of Appeals of Georgia affirmed the trial court, finding that the language of the indemnity agreement was clear and unambiguous. The Court pointed out that the agreement plainly stated that a “default asserted by GDOD in any said bonds” authorized it to take possession of the work, triggering the liability of Cagle for its losses and expenses to the insurer as surety. Furthermore, the agreement provided that “[i]n the event of payment by [the insurer], [Cagle] agree[s] to accept the voucher or other evidence of such payment as prima facie evidence of the propriety thereof, and of [Cagle’s] liability therefor to [the insurer].” Therefore, the Court held that the summary of expenses attached to Travelers’ affidavit constituted sufficient “other [such] evidence” to establish the propriety of such expenses and costs as well as Cagle’s liability. Finally, the Court rejected Cagle’s contention that the amounts charged by the insurer were unreasonable, holding that guesses or speculation which raise merely a possibility “are not sufficient to create even an inference of fact for consideration on summary judgment.”

For more information, please contact Denny Brown at (404) 633-9230.

Georgia Statute on Apportionment, as Amended by the Tort Reform Act of 2005, Provides for Apportionment of Damages Among Defendants Even When the Plaintiff is Not at Fault

O.C.G.A. § 51-12-33, as amended by the Georgia Tort Reform Action of 2005, addresses the apportionment of damages among the parties to a tort action. Prior to the amendment, the statute permitted apportionment, but only where the plaintiff was partially at fault. If the plaintiff was not at fault, then the liability of the defendants was joint and several. The amendment divided O.C.G.A. § 51-12-33 into two subsections. Subsection (a) provides for the reduction of damages if the plaintiff is to some degree at fault. Subsection (b) provides in relevant part as follows:

Where an action is brought against more than one person for injury to person or property, the trier of fact, in its determination of the total amount of damages to be awarded, if any, shall after a reduction of damages pursuant to subsection (a) of this Code section, if any, apportion its award of damages among the persons who are liable according to the percentage of fault of each person …

After the amended statute went into effect, a dispute arose as to whether O.C.G.A. § 51-12-33 still required fault on the part of the plaintiff before apportionment among the defendants would apply. In Cavalier Convenience, Inc. v. Sarvis, __ Ga.App. __, Case No. A10A0538, A10A0539, 2010 WL 2698381 (July 9, 2010), the Georgia Court of Anppeals found that O.C.G.A. § 51-12-33, as amended, was clear and unambiguous and held that apportionment among the defendants is required even if the plaintiff is not at fault. “Given the ‘if any’ clause so placed in that portion of OCGA § 51-12-33(b) italicized above, it is clear from that subsection’s plain language that the legislature did not intend for apportionment to be limited to those cases wherein the plaintiff was to some degree at fault.”

For more information, please contact Denny Brown at (404) 633-9230.

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