Effective July 1, 2007, the Georgia legislature has amended O.C.G.A.§ 13-8-2 to invalidate, as void against public policy, any provision in which one party agrees to insure or defend another party for the sole negligence of the second party related to a construction project or agreement. The amended statute is set forth here. House Bill 136 (AS PASSED HOUSE AND SENATE)
The amendment expressly states that the statute does not affect workers compensation policies, project-specific policies, OCIPs (Owner-Controlled Insurance Program), CCIPs (Contractor-Controlled Insurance Program), a builders’ risk policies, owner's or contractor's protective policies, or installation coverage. However, the statute appears to affect maintenance contracts and construction contracts where an OCIP, a CCIP or a project-specific policy is not used.
Section 2 of the amended statute states that it only applies prospectively; that is, it only applies to contracts entered into, extended, or renewed after the effective date of the statute ( July 1, 2007). Because, however, it applies to renewed or extended contracts, in practice, it may apply to many existing contractual arrangements.
The amendment reflects an important change in Georgia law. Under the former statute, a party could not indemnify another on a construction project for the other party’s sole negligence, but could agree to insure the solely negligent party. While many insurers have already changed their policy language in "additional insured" endorsements to purport to eliminate coverage for a "solely negligent" indemnitee or additional insured, the statutory amendment may restrict future coverage for many insureds. Presently, contracts requiring insurance for any claim "arising out of" the contractor’s or subcontractor’s work are common and typically are not deemed limited to situations involving comparative or contributory fault by both the named insured and the additional insured.
The amendment also raises important questions regarding how the statute will be applied to policies or agreements that do not specifically exclude coverage for the “sole negligence” of another. A carrier might argue, incorrectly in our view, language, such as 'arising out of, without a caveat, is overly broad and inconsistent with the amended statute. In addition, insurers and indemnitors may try to use this change in Georgia law to apply to claims submitted or contracts entered into elsewhere, but which have at least some arguable connection with Georgia.