Legal Challenge to Georgia Appeals Court Decision Exposing Subcontractors to Third-Party Claims
by: Mark A. Cobb
As members of the American Subcontractor’s Association (“ASA”), the Cobb Law Group is pleased to pass along the following information from a recent ASAToday weekly news bulletin:
“ASA is asking the Georgia Supreme Court to overturn a decision that ASA warned ‘could result in increased liability to subcontractors, and the potential for greatly increased litigation costs and exposure’ in the Peach State and elsewhere. In a brief filed on July 2, ASA and other construction industry associations that joined the brief urged the high court to disallow third-party claims for damages related to work-related injuries that are normally addressed within the workers’ compensation system. In the underlying case, City of Atlanta, et al., Defendants-Appellants, vs. The Estate of Mack Pitts, the estate of a sub-subcontractor’s employee sued for recovery of damages from upper-tier contractors and the project owner after the employee was struck and killed by the sub-subcontractor’s vehicle and it was discovered that the sub-subcontractor had not obtained a contractually required $10 million automobile liability insurance policy. A trial court had entered a wrongful death judgment against the driver and the sub-subcontractor, but rejected the estate’s argument that the employee was a “third-party” beneficiary of the city’s ‘Owner’s Controlled Insurance Program,’ which was incorporated into the contracts and whose purpose was “to provide one master insurance program that provides broad coverages with high limits that will benefit all participants involved in the project.” An appeals court, however, held that employees such as Pitts working on the project were ‘participants’ and thus third-party beneficiaries of the contract entitled to sue all the other project contractors, even though the subcontracts contained a ‘No Third-Party Beneficiaries’ clause. ASA’s brief stated: ‘If it stands, the Court of Appeals’ decision will likely lead to successive waves of litigation seeking recovery from deep pockets in the construction process irrespective of fault or causation, as injured parties seek to capitalize upon the expanded application of the ‘third party beneficiary’ theory and the Court’s gutting of the workers’ compensation exclusive remedy defense.’
We’ll keep you up-to-date on the result!