(Writer’s Note: This is the second of a three-part series about how Georgia’s lack of tort reform has affected the real estate industry. Part One is available to read here.)
When criminals commit violent acts on the private properties of business owners, Georgia’s premises liability laws make those property owners civilly liable for those acts… even if those business owners didn’t participate in those crimes.
Trial attorneys pounce upon these opportunities and take property owners to court.
And the headaches for these businessmen have only just begun.
Three people who hold high-ranking positions in Georgia’s corporate real estate industry describe a system in which juries are far too eager to penalize corporations in civil court. Insurance companies, who know about these jurors and their reputations, pressure property owners to settle before jurors can pass down a devastating nuclear verdict.
“If you can’t get proper insurance, you don’t want to be here [in Georgia]. You don’t want to live here. You don’t want to work at a business here or operate a business here,” said Avi Wolf, the president of a Dunwoody-based property-management company.
“Anything you might do, you are walking on eggshells. Who wants to be part of that?”
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Georgia’s legal environment has deteriorated to the point that it threatens all the other good work policy makers have done over the decades. This can be fixed!
AN UPTICK IN CRIME
“All of the things that have happened [on our properties] in the last five years correspond with overall increases in crime,” said Laurel Hart, who has worked to provide affordable housing for 25 years.
Kevin Carr works for a nationwide third-party management company. He said his properties in Atlanta are especially prone to crime.
Data on the Georgia Bureau of Investigation’s website shows the state’s crime rates have soared the past 10 years in categories that include arsons, burglaries, aggravated assaults, rapes and murders.
In 2015, for instance, Georgia had 606 murders, but in 2023, the most recent year that information is available, the state had 728 murders. Georgia, in 2015, recorded 21,517 aggravated assaults, but by 2023 the number that year had swelled to 27,053.
The only apparent exception to this trend was in the number of robberies. In 2015, Georgia had 11,947 robberies, but by 2023 that number had decreased to 4,280.
“This is a really interesting dynamic that we are in,” Hart said.
“We are fighting crime. We want affordable housing. We want safe neighborhoods, but there are a lot of things that are happening that make that hard.”
Insurance companies, these property owners say, are one part of that equation. These businessmen and women then point to the state government. They said Georgia’s lack of tort reform is where the problems really begin.
“One of the things we are seeing is more and more business owners and property owners do not have firearm and assault and battery coverage, even if they are able to get general liability insurance.” Hart said.
Firearm insurance provides financial protection for legal defense fees, civil liability claims and other costs associated with firearm-related incidents. Assault and battery coverage, meanwhile, provides protections against a number of incidents that business owners may face including injuries, sexual assaults and crimes committed by unwanted guests.
“We are a commercial builder. We cannot get certain assault and battery coverage because of the crime rates in Georgia,” Hart said.
“We cannot get a commercial loan because Fannie [Mae] and Freddie [Mac], who do almost all commercial loans, require you to have that kind of insurance. There is an overall economic impact that means that businesses have difficulty developing and building in Georgia.”
Carr, meanwhile, said that of the nearly 220 properties that his company manages in Georgia, roughly 20 cannot get assault and battery coverage.
“It’s not because it is cost prohibitive,” Carr said.
“It’s because it just isn’t available.”
‘SOMEONE HAS TO PAY’
When it comes to protecting themselves in civil court, property owners say Georgia law is vague about what they may or may not do.
Georgia law can hold a property owner civilly liable if a criminal harms another person at his place of business and a court rules the business didn’t implement adequate measures for security.
That, right now, is legal precedent. This was established by the Georgia Supreme Court when a shooting victim filed a case against CVS after being shot on their property. But people who work in the state’s real estate industry say that implementing reasonable security measures on their property still isn’t enough to shield them from a costly lawsuit.
“Trial lawyers [in Georgia] can have a field day going over anything that we do,” Carr said.
“If you had a car break-in two months ago, if someone comes through and busts a window open and, therefore, three months later someone else commits a violent crime then they will claim that we had a car break-in and didn’t beef up security.”
Juries, Carr went on to say, “can look at that and say ‘Yeah. They should have beefed up security. That’s enough for a judgment.’”
Hart, meanwhile, said that her properties have high-definition security cameras. Management rents out units to Atlanta Police Department officers for “little or no rent” for additional safety.
“No matter what you implement in terms of security, you may be subject to one of these nuclear verdicts because of the laws in Georgia that put you out of business or make it impossible for you to obtain insurance,” Hart said.
The largest ever judgment against a private business in all of Georgia’s history was against the Ford Motor Company, a sum of $1.7 billion, in a case that originated out of Gwinnett County.
“Juries look at things as if someone has to pay,” Carr said.
“The perp, even if he is guilty on the criminal side, does not get assigned the proper apportionment because he doesn’t have the deep pocket.”
Jurors in the CVS case awarded the shooting victim nearly $43 million. Wolf previously said that someone jumped over a full-perimeter fence at one of his properties and shot a woman multiple times. The victim survived and sued Wolf’s company. The plaintiff’s attorneys, Wolf said, have threatened to send in the lawyer who handled the CVS case unless he settles. This is a case that, if it goes to trial, would take place in Fulton County.
Carr said he and his colleagues in the real estate industry “get cornered into settlements because even insurance companies don’t want to get in front of that sympathetic jury.”
“We have payouts that are exorbitant that are quite constant simply because of the vague nature of the law,” Carr said.
“There are no rules for us to follow.”
THE BIGGER TARGET
“The insurance companies don’t want the case in front of a jury,’ Carr said.
“That’s why so many incidents [on private properties] are not known. Because they would go before what I like to call ‘jackpot justice juries.’ The adjusters in the insurance world will settle before they take on the risk of getting that case into court.”
The property owner may have done nothing wrong, but insurance companies still pressure him to settle.
Wolf speaks of yet another person who broke into one of his properties.
“This person was known to be dangerous. We tried arresting him. The police showed up, and they told us that we can’t do that. Then they gave my guys, my security, a citation. Then the next week this person murdered somebody,” Wolf said.
“Now I am the one who is being held responsible but, really, I should pass the blame on to DeKalb County. Why should I be responsible for that? I have done everything, more than a property owner would do. By the way, this person was a known criminal. He had 20 prior arrests. Insurance would rather settle it for $1 million than risk it going to court.”
Carr said he has seen verdicts against property owners that range between $5 million to $10 million “that take the property, our company or even our industry down.”
Hart said that “the more insurance you have, the bigger the target you are.”
“If you are paying all of your profit toward insurance premiums, which are required in order to maintain commercial loans, then you have less money to make the safety improvements that you need to make,” Hart said.
THE SUNSHINE STATE
In 2018, the American Tort Reform Association (ATR) named Florida the nation’s No. 1 Judicial Hellhole. Four years later, in 2022, ATR ranked Georgia the No. 1 Judicial Hellhole.
Florida, which neighbors Georgia, enacted tort reforms into law in 2023.
“Florida looked at what was happening in their state and said ‘This is nonsense. This is out of control,’” Carr said.
“People here cannot get insurance. We put in peepholes on all of our doors. We have deadbolts on all of our doors. We have video cameras that are working, and, if you do all of these things, then [I think] you have met the standard to keep the premises secure.”
Hart said that Florida’s tort reform “establishes what is reasonable for property owners to do on their property as opposed to saying [as it is in Georgia] that if a crime is foreseeable then you need to stop it.”
RULES TO LIVE BY
Hart said these problems with Georgia’s tort system have prompted “an exodus of insurance carriers in this state.”
“In 2019 we had $25 million of excess insurance, and we were paying about $25,000 for that extra $15 million of coverage. That’s not a lot of money. By 2021, we could only afford $7 million of excess coverage, and it cost us $1.8 million. By 2023 we were paying $3.3 million for our general liability coverage, and we could only afford $2 million of excess coverage,” Hart said.
“We are mission-oriented, so we have gone along with that, but it does mean that we have less money because the cost of improvements for security is expensive as well. We have one property where we have 125 cameras, for instance, and pay $18,000 a month for our camera system.”
Carr, summing everything up, said he has a short and simple message for any and all Georgia state legislators.
“[When it comes to what we are and are not civilly liable for], give us some rules to abide by,” Carr said.
“This way we can proclaim that we are doing our jobs.”
