The American Subcontractors Association applauded a Nov. 27 decision by the Supreme Court of Georgia vacating an appeals court’s decision that, if left standing, would have permitted injured employees to sidestep the workers’ compensation system and sue construction firms and project owners for damages.
In a 4-3 decision, the high court rejected the appeals court’s decision and ordered the court to reconsider the case, finding that “the Court of Appeals misapplied or failed to apply several fundamental principles of contract law in its consideration of these cases.”
The high court specifically rejected the appeals court’s conclusion that owner-controlled insurance contract addenda and insurance programs provide injured employees with the legal status of “third-party beneficiaries” entitled to sue for damages.
“Subcontractors and their employees rely on the integrity, stability and responsiveness of workers’ compensation insurance when injuries occur,” said 2012-13 ASA President Walter Bazan Jr., Bazan Painting Company, St. Louis, Mo. “Allowing parties to bypass the workers’ compensation system and file new types of lawsuits based on unfounded legal theories would have been a costly mistake that defeated the purpose of the system. ASA applauds the Georgia Supreme Court for reining in the Court of Appeals and ordering it to reconsider this case based on specific, reasoned analysis based on established law.”
ASA and other construction industry associations joined in an amici curiae brief filed on July 2 that warned of greatly increased litigation costs and exposure that would result if the Court of Appeals’ decision stood: “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.”
In the case, City of Atlanta 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.”
The appeals court held that employees such as Pitts working on the project were “participants” and thus third-party beneficiaries entitled to sue all the other project contractors, even though the subcontracts contained “No Third-Party Beneficiaries” clauses.
In its brief, ASA warned: “Construction risk management in Georgia will forever change if this decision stands, as it will likely cause contracting parties to avoid including insurance requirements in their contracts.”
Founded in 1966, ASA amplifies the voice of, and leads, trade contractors to improve the business environment for the construction industry and to serve as a steward for the community. The ideals and beliefs of ASA are ethical and equitable business practices, quality construction, a safe and healthy work environment, and integrity and membership diversity.
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