Fraud Exception to Statute of Repose for Construction Defects Does Not Apply Where Injury Occurred Outside the Statutory Period

The Supreme Court of Georgia recently held that a homebuilder, who allegedly concealed a construction defect, was shielded by the statute of repose where the plaintiff’s injuries occurred more than eight years after the construction of a faulty deck. Rosenberg v. Falling Water, Inc., 2011 WL 977816 (Ga., 2011).

On March 28, 2002, Rosenberg purchased a home built by Falling Water in 1994. On August 31, 2005, Rosenberg fell and sustained serious injuries when the back deck collapsed. Rosenberg sued Falling Water, alleging it had negligently constructed the deck and committed fraud by hiding the defective construction by using certain bolts that made it appear that the deck was properly attached to the house. Falling Water moved for summary judgment, asserting that Rosenberg’s claims were barred by O.C.G.A. § 9-3-51(a), which prohibits recovery for personal injuries resulting from a construction defect of an improvement to real property more than eight years after “substantial completion of such an improvement.” Rosenberg argued that because Falling Water committed fraud, it should not be allowed to assert the statute of repose defense.

The statute of repose should not be applied to relieve a defendant of liability for injuries which occurred during the period of liability, but which were concealed from the plaintiff by the defendant’s fraud. In other words, the defendant is not allowed to cause the plaintiff to miss the deadline imposed by the statute or repose and then use that same statute to defeat the plaintiff’s otherwise viable action. The Supreme Court of Georgia declined to extend this exception in Rosenberg because the plaintiff was injured years after the statute had expired. Therefore, Rosenberg never had a viable cause of action to pursue. Additionally, Falling Water had taken no action to prevent Rosenberg from discovering a cause of action or to discourage Rosenberg from filing a lawsuit. Under the plain language of the statute, the Court held, Rosenberg’s claims were barred because they accrued more than eight years after the construction was completed.

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

Faulty Workmanship Constitutes “Occurrence” Under Commercial General Liability Policy

The Supreme Court of Georgia recently held that an insured’s faulty workmanship constitutes an “occurrence” within the meaning of the insured’s commercial general liability policy. American Empire Surplus Lines Ins. Co. v. Hathaway Development Comp., Inc., 2011 WL 768117 (Ga., 2011).

In American Empire, Hathaway, a general contractor, sued Whisnant, its plumbing subcontractor, for costs of repairs and damage to surrounding properties caused by Whisnant’s faulty workmanship. After obtaining a default judgment, Hathaway sought payment from American Empire, Whisnant’s insurer. American Empire denied liability, asserting that Hathaway’s claim was not covered under Whisnant’s policy because it did not arise out of an “occurrence,” defined under the policy as “an accident, including continuous or repeated exposure to substantially the same, general harmful conditions.” In granting summary judgment to American Empire, the trial court held that Whisnant’s negligent workmanship could not be deemed an “accident.” The Georgia Court of Appeals reversed, holding that because Whisnant caused damage to surrounding properties, Whisnant’s acts constituted “occurrences” within the meaning of the policy. American Empire appealed.

Because Whisnant’s policy did not define the term “accident,” the Georgia Supreme Court looked to the commonly accepted meaning of the term. When used in an insurance policy, an “accident” is deemed to be “an event happening without any human agency, or, if happening through such agency, an event which, under circumstances, is unusual and not expected by the person to whom it happens.” It also means “an unexpected happening rather than one occurring through intention or design.” Applying this definition, the Court found that policies with similar “occurrence” language provided coverage for “the risk that…defective or faulty workmanship will cause injury to people or damage to other property.” Because Whisnant’s faulty workmanship caused damage to neighboring properties, such acts constituted an “occurrence” under Whisnant’s policy. In affirming the decision of the Court of Appeals, the Supreme Court held that an occurrence can arise where faulty workmanship causes unforeseen damage to other property. The Court also rejected the notion that Whisnant’s acts could not be deemed accidents because they were performed intentionally, holding that a deliberate act, performed negligently, is an accident if the effect is not the intended or expected result.

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