Damage to Other Property Caused by Negligent Construction is a Covered “Occurrence” But Damage to Insured’s Work As Described in Construction Contract is Not a Covered “Occurrence”

In Forster v. State Farm Fire & Cas. Co., 2010 WL 4751714 (Ga.App., 2010), the insured entered into a contract to sell a home to the buyers. The contract also provided that the insured would perform certain renovations to the home. The buyers contended that when the closing took place, a number of renovations had not yet been completed or had been completed improperly. Subsequently, the buyers filed suit against the insured, asserting claims for breach of contract and breach of warranty. The buyers also asserted a claim for negligent construction. The insurer sought a declaratory judgment to determine whether the insured’s policies provided coverage for the buyers’ claims. The trial court granted summary judgment to the insurer.

On appeal, the Georgia Court of Appeals affirmed in part and denied in part the trial court’s ruling. The Court found that no coverage existed for damage to the renovation project itself as described in the contract and that the insurer had no duty to defend the buyers’ claims. However, the Court held that “negligently performed faulty workmanship that damages other property may constitute an ‘occurrence’ under the policy.” Accordingly, the insurer would have a duty to provide coverage to the extent that any defects in the work incidentally damaged other property not included in the renovation project. Because it was unclear which of the claimed damages related strictly to the work contemplated by the parties’ agreement and which might relate to other property, the Court affirmed summary judgment as to any defects that constituted a breach of contract or breach of warranty but reversed summary judgment as to any claims for damages to other property.

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

Court Imposes Strict Requirements for Unilateral Reduction of Income Benefits

An employer may unilaterally reduce an employee’s temporary total disability (“TTD”) benefits to temporary partial disability (“TPD”) benefits if the employee fails to return to work within one year after the treating physician releases the employee to work with restrictions. Under O.C.G.A. § 34-9-104(a)(2), the employer must provide notice to the employee that he or she has been released to return to work with restrictions within 60 days of the employee’s release. An employer may unilaterally reduce benefits by filing a form indicating the reason for the reduction. Board Rule 104 further provides that the employer must send the appropriate form to the employee “with an attached medical report…no later than 60 days after the date that the employee was determined able to return to work….”

The Georgia Court of Appeals recently held that an employer could not use a subsequently prepared release to comply with the 60-day period and cure a prior untimely notice. Kaolin v. Blackshear, 2010 WL 3565709 (Ga.App. 2010).

On May 24, 2001, the claimant was injured at work and the employer began paying TTD benefits. On June 11, 2001, the claimant’s doctor released him to return to work with restrictions. In January 2002, the employer informed the claimant that his TTD benefits would be reduced to TPD payments effective June 4, 2002. The employer, however, never actually reduced the claimant’s benefits, presumably because it failed to send appropriate notice within the 60-day period. Instead, it obtained a new release, dated December 31, 2002, from another physician who conducted an evaluation in August 2002. On January 14, 2003, the employer notified the claimant that his benefits would be reduced on December 31, 2003. On February 8, 2008, the employer suspended TPD payments because the claimant had been paid the maximum amount.

In October 2008, the claimant requested that his TTD benefits be reinstated because he had never been timely notified of the unilateral reduction. Finding that the June 2001 release and the December 2002 release were substantively the same, the Board concluded that the employer failed to provide notice within 60 days of the June 2001 release and reinstated the claimant’s TTD benefits.

On appeal, the Georgia Court of Appeals held the notice was invalid not because it was similar to the previous notice, but because it was issued more than 60 days from the time the restrictions were “determined.” The statutes and rules assure that a unilateral suspension of benefits is based upon a reasonably concurrent determination of the claimant’s condition, not a mere reaffirmation of an otherwise untimely examination. Here, the notice was generated over five months from the last medical evaluation. Therefore, regardless of when the notice was articulated, it could not have been based upon any determination within the 60-day period. Employers and insurers should make sure to strictly adhere to the 60-day notice provision in order to comply with the statutory requirements for unilateral reduction of benefits. Failure to do so may result in reinstatement of benefits, even with a valid release.

For more information, please contact Timothy Buckley III, Esq. at (404) 633-9230.