Allen Cnty. Pub. Library v. Shambaugh & Son, L.P.

• Decision Date: 22 October 2013
• Docket Number: No. 02A04–1302–PL–78.,02A04–1302–PL–78.
• Citation: 997 N.E.2d 48
• Court: Indiana Appellate Court
• Parties: ALLEN COUNTY PUBLIC LIBRARY, Appellant, v. SHAMBAUGH & SON, L.P., Hamilton Hunter Builders, Inc., W.A. Sheets & Sons, Inc., and MSKTD & Associates, Inc., Appellees.

997 N.E.2d 48

ALLEN COUNTY PUBLIC LIBRARY, Appellant,

v.SHAMBAUGH & SON, L.P., Hamilton Hunter Builders, Inc., W.A. Sheets & Sons, Inc., and MSKTD & Associates, Inc., Appellees.

No. 02A04–1302–PL–78.

Court of Appeals of Indiana.

Oct. 22, 2013.

Jonathan H. Nusbaum, Beers Mallers Backs & Salin, LLP, Fort Wayne, IN, Attorney for Appellant.

Brian P. Clifford, Michael L. James, Faegre Baker Daniels, LLP, Fort Wayne, IN, Attorneys for Appellee, Shambaugh & Son. L.P.

James J. Shea, Timothy W. Degroote, Andrew S. Williams, Hunt Suedhoff Kalamaros, LLP, Fort Wayne, IN, Attorneys for Appellee, Hamilton Hunter Builders, Inc.

OPINION

BARNES, Judge.

Case Summary

Allen County Public Library (“the Library”) appeals the trial court's grant of summary judgment in favor of Shambaugh & Son, L.P. (“Shambaugh”), Hamilton Hunter Builders, Inc. (“Hamilton Hunter”), W.A. Sheets & Sons, Inc. (“Sheets”), and MSKTD & Associates, Inc. (“MSKTD”) (collectively “the Defendants”). We reverse and remand.

Issue

The Library raises two issues, which we combine and restate as whether the trial court properly concluded that the Library was contractually prohibited from seeking recovery from the Defendants for pollution remediation costs related to construction work that the Library hired the Defendants to perform.

Facts

In 2004, the Library undertook a capital improvement project to renovate and add to its main library branch building in Fort Wayne. The Library hired Sheets to act as construction project manager and MSKTD to act as project architect. The Library also contracted directly with Shambaugh to perform the project's mechanical, electrical, and fire protection work, and with Hamilton Hunter to perform the project's concrete work.

The Library's contracts with the Defendants were based on a form construction project contract prepared by the American Institute of Architects (“AIA”). The contracts contained various provisions related to insurance and subrogation. Sections 11.3.1, 11.3.1.1, and 11.3.1.2 of the contracts provided:

11.3.1 Unless otherwise provided, the Owner [THE LIBRARY] shall purchase and maintain ... property insurance in the amount of the initial Contract Sum as well as subsequent modifications thereto for the entire Work at the site on a replacement cost basis without voluntary deductibles. Such property insurance shall be maintained, unless otherwise provided in the Contract Documents or otherwise agreed in writing by all persons and entities who are beneficiaries of such insurance, until final payment has been made ... or until no person or entity other than the Owner has an insurable interest in the property required by this Paragraph 11.3 to be covered, whichever is earlier. This insurance shall include interests of the Owner, the Contractor, Subcontractors and Sub-subcontractors in the Work.

11.3.1.1 Property insurance shall be on an “all-risk” policy form and shall insure against the perils of fire and extended coverage and physical loss or damage including, without duplication of coverage, theft, vandalism, malicious mischief, collapse, falsework, temporary buildings and debris removal including demolition occasioned by enforcement of any applicable legal requirements, and shall cover reasonable compensation for Architect's services and expenses required as a resultof such insured loss. Coverage for other perils shall not be required unless otherwise provided in the Contract Documents.

11.3.1.2 If the Owner does not intend to purchase such property insurance required by the Contract and with all of the coverages in the amount described above, the Owner shall so inform the Contractor in writing prior to commencement of the Work. The Contractor may then effect insurance which will protect the interests of the Contractor, Subcontractors and Sub-subcontractors in the Work, and by appropriate Change Order the cost thereof shall be charged to the Owner. If the Contractor is damaged by the failure or neglect of the Owner to purchase or maintain insurance as described above, without so notifying the Contractor, then the Owner shall bear all reasonable costs properly attributable thereto.

App. p. 317. Section 11.3.7 of the contracts further provided:

Waivers of Subrogation. The Owner and Contractor waive all rights against each other and against the Construction Manager, Architect, Owner's other Contractors and own forces described in Article 6, if any, and the subcontractors, sub-subcontractors, consultants, agents and employees of any of them, for damages caused by fire or other perils to the extent covered by property insurance obtained pursuant to this Paragraph 11.3 or other property insurance applicable to the Work, except such rights as the Owner and Contractor may have to the proceeds of such insurance held by the Owner as fiduciary....

Id. at 317.

As indicated by its capitalization, “the Work” was a term of art specifically defined by the AIA contract and referred to “the construction and services required by the Contract Documents, whether completed or partially completed, and includes all other labor, materials, equipment and services provided or to be provided by the Contractor to fulfill the Contractor's obligations. The Work may constitute the whole or part of the Project.” Id. at 315. Also, in addition to the Library's obligation to procure property insurance under the contract, each of the Defendants was obligated to:

purchase ... such insurance as will protect the Contractor from claims set forth below which may arise out of or result from the Contractor's operations under the Contract and for which the Contractor may be legally liable, whether such operations be by the Contractor or by a Subcontractor or by anyone directly or indirectly employed by any of them, or by anyone for whose acts any of them may be liable:

* * * * * *

5. claims for damages, other than to the Work itself, because of injury to or destruction of tangible property, including loss of use resulting therefrom....

Id. at 316.

Before work on the project began, the Library obtained a “Builders Risk Plus” insurance policy from Great American Insurance Group (“Great American”) to specifically cover the library renovation and addition jobsite. Id. at 360. The property covered by the policy included:

building materials and supplies, equipment, machinery and fixtures ... fences, foundations, excavations, underground pipes, drains, paving, and/or pilings at any construction job-site covered by this Coverage Form ... which is, or intended to become, a permanent part of the structure(s) at the job-site(s) described in the Declarations.Id. at 369. Excluded from the scope of the policy's coverage was “water, land (including land on which the property is located), grading or fill....” Id. The policy's general limit of coverage was $54,920,000. However, the policy also contained a specific “coverage extension” for “Pollutant Clean Up and Removal” to cover expenses to extract pollutants “from land or water at a job-site” resulting in loss to “Covered Property.” This coverage carried its own separate policy limit of $5,000. Id. at 371.

One part of the library renovation and addition project required Shambaugh to permanently install an emergency diesel generator and two diesel fuel storage tanks—one 1,000 gallon tank and one fifty gallon “day” tank—in the library's basement. Hamilton Hunter poured the concrete floor supporting the generator and tanks, and which also covered copper piping connecting the “day” tank and generator. Part of the concrete pouring process required Hamilton Hunter workers to create a wooden form for the concrete and drive steel stakes into the ground. In December 2007, the Library discovered that a hole in the copper piping had caused approximately 3,000 gallons of diesel fuel to leak into the ground underneath the library. The Library believes that the hole was caused by a Hamilton Hunter employee having driven a steel stake through the pipe.¹ The Library undertook to investigate and clean up the leaked fuel. The Library filed a claim with Great American related to the cleanup. Great American covered the claim and paid the Library $5,000, in accordance with the policy limits for pollution cleanup.

In 2010, the Library sued the Defendants to recover costs associated with the diesel fuel cleanup. The Library asserted in its complaint that it had incurred approximately $490,000 in cleanup-related expenses thus far, with the costs expected to increase. On July 9, 2012, Shambaugh moved for partial summary judgment, which was joined by Hamilton Hunter. The motion asserted that the Library had waived its ability to seek recompense for the diesel fuel cleanup by the AIA contract's provisions quoted above—in particular Section 11.3.7—and its obtaining of pollution cleanup insurance coverage from Great American and payment from Great American.

On September 26, 2012, the trial court granted Shambaugh's and Hamilton Hunter's motion for partial summary judgment. On January 22, 2013, the trial court entered an order finding that Sheets and MSKTD also were entitled to summary judgment and that it was entering final judgment in favor of all of the Defendants. The Library now appeals.

Analysis

We review a trial court's summary judgment ruling de novo. Miller v. Dobbs, 991 N.E.2d 562, 564 (Ind.2013). We will affirm a grant of summary judgment “ ‘only if there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law.’ ” Id. (quoting Overton v. Grillo, 896 N.E.2d 499, 502 (Ind.2008)); see alsoInd. Trial Rule 56(C). We must construe all evidence and resolve all doubts in favor of the non-moving party, so as to avoid improperly denying that party's day in court. Id.

Resolution of this case turns primarily upon interpretation of the parties' contracts. “The construction of a contract is particularly well-suited for de novo appellate review, because it generally presents questions purely...