Omstead v. BPG Inspection, LLC et al.

In Omstead v. BPG Inspection, LLC, S23G0771, the Georgia Supreme Court recently affirmed a court of appeals decision holding that a one-year limitation period contained in a home inspection contract was enforceable and not void as a matter of public policy.

Facts

Plaintiff Jessique Omstead brought a wrongful death claim against BPG Inspections, Inc. (“BPG”) and one of its inspectors after a retaining wall at their newly purchased home collapsed and killed her husband.

On February 13, 2020, the Omsteads entered a contract with BPG for an inspection of a home they wished to purchase. The contract contained a limitations provision that stated:

YOU MAY NOT FILE A LEGAL ACTION, WHETHER SOUNDING IN TORT (EVEN IF DUE TO OUR NEGLIGENCE OR OTHER FAULT), CONTRACT, ARBITRATION OR OTHERWISE, AGAINST US OR OUR EMPLOYEES MORE THAN ONE YEAR AFTER THE INSPECTION, EVEN IF YOU DO NOT DISCOVER A DEFECT UNTIL AFTER THAT.

After two separate inspections, BPG did not discover nor disclose any defect that it had found in the subject retaining wall. After the inspections, the plaintiffs consummated the purchase of the home. Over the following year, the plaintiffs noticed cracking in the wall and that it lacked holes for proper drainage.

In July 2021, over a year after BPG’s inspection, Mr. Omstead went out to the retaining wall during a rainstorm to divert some of the runoff away from the wall. The wall collapsed during these efforts causing fatal injuries.

In July 2021, Mrs. Omstead brought the subject action alleging negligence, fraud, breach of contract, and breach of express and implied warranties. BPG filed a motion for summary judgment seeking to enforce the limitations provision contained in their contract with the plaintiff.

Conversely, the plaintiff filed a motion for summary judgment of her own seeking the court to find that the limitations period was void as a matter of public policy, and in the alternative, that the clause did not apply to the plaintiff’s personal injury claims when construed strictly against BPG. The trial court granted the plaintiff’s motion and denied the defendant’s concluding that the provision did not apply to the wrongful death claim, and to the extent it did, the provision would be void as a matter of public policy.

The Georgia Court of Appeals reversed the grant of the plaintiff’s motion with an order to the trial court to grant the defendant’s motion.

Issues & Holdings

The Georgia Supreme Court granted review to resolve two issues:

1. Whether it was proper for the court of appeals to approve of a contract provision for a home inspection that limits the inspector’s liability for claims arising out of any breach of its legal or contractual duties to a year.
2. Whether such a provision is void as a matter of public policy.

The Court held that the court of appeals properly enforced the provision and that such provision was not void as a matter of public policy.

Reasoning

First, the Court considered the enforcement of the one-year limitation against Ms. Omstead by evaluating three main arguments. First, Omstead argued the limitation applies only to contract claims and not claims in tort. However, the court found the contract language unambiguously covers both tort and contract claims. Second, Omstead argued the limitation functions as a statute of repose, prohibited by Georgia law, and voids her wrongful death claim before it accrued at her husband’s time of death. The court disagreed, citing long-standing precedents upholding contractual time limitations that are shorter than those provided by statute while reiterating its reluctance to interfere with the parties’ right to contract. Third, Omstead argued the limitation undermines professional standards of conduct, but the court found no statutory basis to treat home inspectors similarly to licensed professionals such as dentists and doctors. Thus, the Court held that the one-year limitation was properly enforced by the lower appellate court.

Next, the Court examined whether a one-year limitation clause in a contract was void due to public policy. The Court relied on its precedent which has held that a contract is generally not void from being contrary to public policy unless: (1) consideration that supports the agreement is illegal or contrary to good morals; (2) the contract is effectuated to achieving an illegal or immoral purpose; or (3) the General Assembly has expressly provided that the type of contract at issue is void. Omstead argued that the one-year limitation was against public policy because it allegedly violated OCGA § 13-8-2 (b), which voids clauses requiring a party to indemnify or “hold harmless” another for their own negligence in construction-related contracts.

The Court did not consider whether a contract for inspection fell within the scope of the statute, holding even if the inspection agreement fell under the statute, the one-year limitation did not require Omstead to indemnify or hold BPG harmless. Instead, the Court held that unlike in previous cases where indemnification and similar provisions shifted liability to the innocent party, the subject contractual provision only limited the time to file a suit relating to the transaction, without transferring any liability to Omstead.

Thus, the Court concluded that the clause did not violate public policy and upheld its validity.

Conclusion

The Omstead decision emphasizes Georgia’s willingness to interpret and enforce contracts with the intentions of the parties firmly in mind.

While this framework is good policy in many contexts, in situations such as these, particularly those with unequal sophistication and bargaining power between the parties, leaves notions of fairness to be desired. As Justice Peterson puts it in his concurring opinion, decisions like these “leave a nagging sense that there is something missing from the law.”

From a practical standpoint, in tort claims arising out of the performance of professional services, the practitioner should acquire the underlying service contract as soon as possible. Doing so may enable counsel to bring suit within the contractual limitations period and not fight the uphill battle of convincing the court to void or alter the limitations provision.

However, in cases such as Omstead, where the contractual limitation period has expired, there may still be other strategies to deploy to get around it. When a claim falls outside of the contractual limitation period, counsel should:

1. Consider whether the contract is void in its entirety because it attempts to avoid statutory professional standards of conduct applicable to your client’s contract. See e.g. Emory University v. Porubiansky, 248 Ga. 391 (1981);
2. Consider whether the other defenses may render the limitation provision void, such as unconscionability of the limitation period;
3. Consider whether the limitation acts as an impermissible statute of repose in violation of the due process requirements of the federal and state constitutions. See e.g. Clark v. Singer, 250 Ga. 470 (1983); and
4. Consider whether the contract is contrary to public policy either by statute or because it is for an illegal or immoral purpose.

Otherwise, your client’s claim may fall victim to the stringent enforcement of a seemingly innocuous boilerplate limitation language in everyday service contracts.

Citation:  Omstead v. BPG Inspection, LLC, et al., S230771, 903 S.E.2d 7 (Ga. June 11, 2024)