Georgia Court of Appeals’ Opinion Threatens Construction Warranties Lasting Longer than 8 Years

A recent Georgia Court of Appeals’ opinion applying Georgia’s construction statute of repose (O.C.G.A. § 9-3-51(a)) to contract claims and express warranty claims could threaten construction warranties lasting longer than eight years in the state of Georgia, which could have negative implications for healthcare providers.

In Southern States Chemical, Inc. et al. v. Tampa Tank & Welding, Inc. et al., A19A0960 (Ga. Ct. App. Oct. 31, 2019) (“Southern III”), Southern States contended that the defendant contractors had warrantied their work renovating Southern States’ above-ground chemical storage tank for 45 years.  When the tank ruptured after only 9.5 years, the contractors refused to honor their warranties.  The Court of Appeals upheld the trial court’s grant of summary judgment for the defendants, stating, among other things, that because Southern States’ claim for breach of defendants’ express, written warranties was brought outside the eight-year repose period, the statute of repose applicable to deficient improvements to realty barred Southern States’ claims.

Southern States has asserted that the Court of Appeals’ ruling is improper for several reasons.  As an initial matter, Southern States has argued that the Court of Appeals erred in applying Georgia’s statute of repose in O.C.G.A. § 9-3-51(a) to contract claims for breach of warranty in the first place, because the statute is limited to tort claims. See Benning Constr. Co. v. Lakeshore Plaza Enters. 240 Ga. 426, 429 (1977); National Service Industries v. Ga. Power Co., 294 Ga. App. 810 (2008).

But the most troublesome aspect of the opinion is its potentially negative effects on public policy. On its face, the Court of Appeals’ ruling applies to all improvements to real estate, not just industrial structures. Therefore, if the decision stands and is not limited by future courts, it could have adverse implications for the healthcare industry in Georgia.  For example, hospitals and nursing homes regularly purchase warranties longer than eight years on their construction projects, including radiation vaults in hospitals, and on roofs and other hospital and nursing home components, such as HVAC systems and elevators. Without these protections, the owners and operators of these facilities could be faced with increased expense for repairs and replacements if the warranties are not enforceable after the eight-year mark.

Plaintiff Southern States, an AGG client, has filed a petition asking the Georgia Supreme Court to reverse this ruling.  If the Supreme Court declines to take the case or to reverse or limit the Court of Appeals decision, property owners should review their warranties on improvements to real estate to evaluate their enforceability.  Property owners should also consider contacting their state representatives to push for a clarification to the Georgia statute.