Court Opinion

ID: 9565636
Source: CourtListenerOpinion
Date Created: 2023-08-21 19:24:53.706721+00
Date Added: 2024-06-11T09:19:48.477034
License: Public Domain

MELTON, Justice,
dissenting.
The majority opinion correctly states that, as a matter of law, “[the] complete avoidance of liability to third parties for sole negligence in a building contract is exactly what OCGA § 13-8-2 (b) prohibits.” The majority also concludes that, as a matter of fact, “the clause at issue in this case does not exculpate PEC from all monetary liability.” This finding of law and finding of fact should compel the conclusion that the clause in issue, which does not allow the complete avoidance of liability, is not a clause prohibited by OCGA § 13-8-2 (b). The majority, however, by relying on inapplicable case law and by prejudging PEC’s negligence before any trial has occurred, reaches the opposite conclusion. I must, therefore, respectfully dissent.
1. OCGA § 13-8-2 (b) governs indemnification and “hold harmless” clauses which, by definition, hold a contractor harmless from liability resulting from its sole negligence.9 A hold harmless clause is *210an “[ajgreement or contract in which one party agrees to hold the other without responsibility for damage or other liability arising out of the transaction involved.” Black’s Law Dictionary 731 (6th ed. 1990). The clause in question here does not hold PEC harmless or without responsibility, it merely limits PEC’s liability to pay damages. Irrespective of the contract between Lanier and PEC, PEC remains fully responsible and liable to third parties foreseeably injured by any negligent act committed by PEC. Samuelson v. Lord, Aeck & Sergeant, Inc., 205 Ga. App. 568, 572 (2) (a) (423 SE2d 268) (1992) (“Independently of the contract to design a building or premises, an architect or engineer owes a general duty to use reasonable care not to harm third persons who, it is reasonably foreseeable, might be harmed by a negligent architectural design.”). Such an injured third party could bring suit against PEC, and PEC would be liable to pay the extent of any damages awarded to that third party. If that payment, however, exceeded the amount of PEC’s fees, it might then seek to enforce its contract with Lanier. This is the nature of a limitation of liability clause. Valhal Corp. v. Sullivan Assoc., 44 F3d 195, 202 (II) (B) (3rd Cir. 1995). An indemnity or hold harmless clause, on the other hand, would require Lanier to wholly absolve PEC of responsibility for its actions, necessitating that Lanier would have to defend any claim against PEC as the party to whom any third party would look for recourse. That simply is not the case here. PEC remains liable for its negligence, despite the fact that its damages have been capped. As a result, OCGA § 13-8-2 (b) is not applicable. See Piedmont Arbors Condo. Assn. v. BPI Constr. Co., 197 Ga. App. 141 (397 SE2d 611) (1990). Other states with similar statutes have reached this same result. See, e.g., 1800 Ocotillo, LLC v. The WLB Group, Inc., 217 Ariz. 465 (176 P3d 33) (2008); Fort Knox Self Storage v. Western Technologies, 140 N.M. 233 (142 P3d 1) (2006); Valhal Corp. v. Sullivan Assoc., supra.
As the Court in Valhal Corp., supra at 202 (B) (1) explained:
The law recognizes different methods by which a party can limit his/her exposure to damages resulting from his/her negligent performance of a contractual obligation. An exculpatory clause immunizes a person from the consequences of his/her negligence. Similarly, an indemnity clause holds the indemnitee harmless from liability by requiring the indemnitor to bear the cost of any damages *211from which the indemnitee is held liable. The instant clause has no such consequence. The clause before us does not bar any cause of action, nor does it require someone other than [PEC] to ultimately pay for any loss caused by [PEC’s] negligence. [PEC] remains liable for its own negligence and continues to be exposed to liability up to a .. . ceiling. Thus, the amount of liability is capped, but [PEC] still bears substantial responsibility for its actions.
(Citations and footnote omitted.)
To reach its conclusion, the majority both prognosticates the result of a future trial in this case and relies on case law which fails to support its conclusion. In order to find that the contract clause in question could not possibly expose PEC to any liability from third parties, the majority states: “In this case, the $80,514 threshold has already been met insofar as Lanier has expended a quarter of a million dollars to repair the drainage system. As a result, PEC will be able to recover from Lanier losses for all future third-party claims.” This statement relies on a series of facts never proven: (1) that PEC has been negligent in some way; (2) that, due to this negligence, PEC is liable to Lanier for damages; and (3) that PEC’s liability to Lanier for damages is at least the full amount of its fees ($80,514). There has been no trial in this case, only a grant of partial summary judgment to PEC finding that “[Lanier’s] damages, if any, are limited to a maximum of $80,514.00.” (Emphasis supplied.) As a result, the majority errs both by prejudging PEC’s negligence to be in excess of its fees and by basing its analysis on this premature judgment.
With regard to the case law cited by the majority, none of those cases supports the majority’s ultimate conclusion. Each and every case deals with a situation in which one party wholly indemnifies and holds harmless the other party. Smith v. Seaboard Coast Line R. Co., 639 F2d 1235 (5th Cir. 1981) (railroad indemnified and held harmless for all liability and damages); Frazer v. City of Albany, 245 Ga. 399 (265 SE2d 581) (1980) (agreement to indemnify and hold harmless from any and all losses); Hartline-Thomas, Inc. v. Arthur Pew Constr. Co., 151 Ga. App. 598 (260 SE2d 744) (1979); Borg-Warner Ins. Finance Corp. v. Executive Park Ventures, 198 Ga. App. 70 (400 SE2d 340) (1990) (agreement holding parties harmless from any and all liability and damages); Federated Dept. Stores v. Superior Dry wall & Acoustical, 264 Ga. App. 857 (592 SE2d 485) (2003) (agreement indemnifying and holding party harmless from entire responsibility and liability). None of the cases involves a situation like the one at hand, where liability has been capped. Instead of supporting the majority opinion, they make it clear that OCGA § 13-8-2 (b) governs *212clauses which purport to wholly indemnify or hold harmless a party. Again, no such clause is involved here.
Smith v. Seaboard Coast Line R. Co., supra, actually supports the conclusion in this dissent. In Smith, the district court determined that OCGA § 13-8-2 (b) was not applicable to a lease agreement (as opposed to a construction contract) in which a railroad lessor was held harmless for any damages it might cause to a shed on the leased property resulting from the railroad’s sole negligence. In making this determination, the district court observed:
[A]s a general rule, a party can protect himself by contract from liability for the consequences of his own negligent acts. As to contracts relating to the construction or maintenance of buildings, however, this statute changes this common law rule and, thus, should be strictly construed.
Strictly construed, OCGA § 13-8-2 (b) applies expressly to “hold harmless” clauses. It does not apply to limitation of liability clauses.
In reaching the opposite result, the majority overlooks the differences between indemnity and hold harmless provisions on the one hand and limitation of liability clauses on the other hand. Those very real differences
preclude [the majority’s] assumption that a statute expressing a prohibition against indemnity and hold harmless provisions [such as OCGA § 13-8-2 (b)] announces a public policy against something as distinct and accepted as limitation of liability clauses. Indeed,... such an assumption has the practical effect of amending this statute.
Valhal Corp., supra, 44 F3d at 205 (2). Without inherent authority or authorizing precedent, the majority so amends OCGA § 13-8-2 (b) today.
Nonetheless, in some cases, damages may be capped at such a nominal level that a party may, in effect, be immunized from almost all liability for its negligent acts. In this instance, the clause in question might violate OCGA § 13-8-2 (b) as an improper indemnity clause. In this case, however, the cap on damages, namely the entire fee earned by PEC, is not so nominal as to comprise an indemnity clause. To the contrary, the loss of all fees to an engineer is significant for several reasons: (1) it would result in working for free on a project despite the expenditure of time, energy, and other resources; (2) the engineer may have foregone other income producing projects in order to complete the project in question; and (3) the engineer might not only lose fees but also be subject to professional *213censure by the appropriate review board. Therefore, under these circumstances, PEC’s limitation of liability to the full extent of its fees is “not so drastic as to remove the incentive to perform with due care.” Valhal Corp., supra, 44 F3d at 204. The majority’s analysis, on the other hand, would seem to operate as a blanket prohibition precluding any limitation of liability between the parties whatsoever.
2. The contract clause in question in this case is also in compliance with the public policy underlying OCGA § 13-8-2 (a). That statute provides: “A contract which is against the policy of the law cannot be enforced.” “[T]he delicate and undefined power of courts to declare a contract void as contravening public policy[, however,] should be exercised with great caution, and only in cases free from substantial doubt.” (Citation omitted.) Foster v. Allen, 201 Ga. 348, 349 (40 SE2d 57) (1946).
A contract cannot be said to be contrary to public policy unless the General Assembly has declared it to be so, or unless the consideration of the contract is contrary to good morals and contrary to law, or unless the contract is entered into for the purpose of effecting an illegal or immoral agreement or doing something which is in violation of law.
Camp v. Aetna Ins. Co., 170 Ga. 46, 50-51 (152 SE 41) (1930).
Although professional engineering is a licensed profession controlled by the State and in which the State holds a strong interest,10 the contractual limitation of liability at issue in this case does not violate public policy for several reasons. First and foremost, the contract does not actually relieve PEC from acting with the appropriate standard of care for professional engineers. The contract states:
PEC shall perform services for [Lanier] in a professional manner, using the degree of care and skill ordinarily exercised by and consistent with the standard of competent consultants practicing in the same or similar locality of the site. This warranty is in lieu of all other warranties, either express or implied.
Therefore, even with regard to Lanier, PEC is required to act with the requisite standard of care imposed by law upon all professional engineers. Second, the contract neither eliminates nor reduces PEC’s exposure to claims by members of the general public. Irrespective of any limitations in its contract with Lanier, PEC’s duty of *214reasonable care towards third parties who might foreseeably be harmed by its design, if negligent, remains viable and actionable if breached. See, e.g., Samuelson, supra. Therefore, even though PEC’s exposure to damages may ultimately be capped, PEC still has a substantial incentive to act with the appropriate standard of care to avoid potential exposure to members of the public other than Lanier.11 Third, both parties to this contract, one a professional construction firm and the other a professional engineering firm, were sophisticated business associations with extensive experience and knowledge about the services which were the subject of the agreement. As a result, the contract in question is the result of informed bargaining by savvy parties of equal footing. Finally, the contract in question was not a standardized adhesion contract in either the terms it contained or in the way that it was negotiated between the parties. The agreement was voluntarily entered into without being forced upon either party in any way. For all of these reasons, it cannot be said, clear from all doubt, that the contract clause in question violates public policy, and this situation is not one in which this Court should exercise the delicate and undefined power to declare otherwise. See, e.g., Orkin Exterminating Co. v. Stevens, 130 Ga. App. 363 (203 SE2d 587) (1973); Piedmont Arbors, supra. See also Valhal Corp., supra.
Decided June 30, 2008
Reconsideration denied July 25, 2008.
James C. Morton, for appellant.
Although Lanier contends that this matter is controlled by Emory Univ. v. Porubiansky, 248 Ga. 391 (282 SE2d 903) (1981), that case is distinguishable. Porubiansky dealt with an agreement containing an exculpatory clause in which a patient completely waived her rights to bring a malpractice action against the dentist who treated her. Unlike this matter, Porubiansky presented a situation involving the healing arts in which the parties were of unequal footing and all liability had been waived. That simply is not the case here. To the contrary, this matter concerns only a limitation of liability agreed upon by savvy businessmen of comparable bargaining power.
I am authorized to state that Justice Hines joins in this dissent.
*215Greenfield, Bost & Kliros, William L. Bost III, Michael W. Lord, for appellees.
Shapiro, Fussell, Wedge & Smotherman, H. Fielder Martin, Stephen L. Wright, Freeman, Mathis & Gary, T. Bart Gary, Katie W. Barber, Webb, Tanner, Powell, Mertz & Wilson, Anthony O. L. Powell, Bondurant, Mixson & Elmore, H. Lamar Mixson, Lisa R. Strauss, Deborah J. LaFetra, Elizabeth A. Yi, amici curiae.

 This opinion addresses only the version of OCGA § 13-8-2 (b) applicable to these parties at the time they entered into the contract in question. This version of the statute provides that the parties to a construction contract may not enter into agreements “purporting to indemnify or hold harmless” one of the parties. Ga. L. 1990, p. 1676, § 1. Effective July 1, 2007, however, OCGA § 13-8-2 (b) has been revised to encompass construction contracts “purporting to *210require that one party to such contract or agreement shall indemnify, hold harmless, insure, or defend the other party to the contract.” Ga. L. 2007, p. 208, § 1. The 2007 version of the statute is not applicable to these parties, and, as such, I do not consider any effect it may have upon construction contracts such as the one now in question before this Court.

 See OCGA § 43-15-1 et seq.

 Moreover, PEC retains an incentive to act with the appropriate standard of care in order to avoid possible sanctions imposed by the State Board of Registration for Professional Engineers and Land Surveyors. See OCGA §§ 43-15-6 through 43-15-19.