Atlanta Bar Association Blog

Surety's Subrogation Claims against State Agency Not Subject to Sovereign Immunity Defense

Posted by: Carolyn Wingfield on Mar 20, 2014
Section News: Construction Law

In a case of first impression, the Georgia Court of Appeals ruled that a surety, as subrogee, could rely on the Georgia Department of Corrections' (GDOC) waiver of sovereign immunity in a breach of contract action. Further, the contract's anti-assignment clauses were not enforceable to the extent they could be construed to prohibit a contractor from assigning to its surety a right of payment from the project owner.

GDOC, in 2008, awarded a contract to Walker Roofing for re-roofing at a state prison, requiring payment and performance bonds, which Developers Surety provided. Walker Roofing and Developers Surety had previously entered into an indemnity agreement in which Walker assigned Walker's right to payment under bonded contracts to the surety, as security against any surety loss under a bond. In 2010, GDOC declared Walker Roofing in default and invoked the payment and performance bonds.

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