Bd. of Comm'rs of the Cnty. of Jefferson v. Teton Corp.
| Decision Date | 04 February 2014 |
| Docket Number | No. 72A04–1302–CT–00055.,72A04–1302–CT–00055. |
| Citation | 3 N.E.3d 556 |
| Parties | The BOARD OF COMMISSIONERS OF the COUNTY OF JEFFERSON, Appellant, v. TETON CORPORATION, Innovative Roofing Solutions, Inc., Gutapfel Roofing, Inc. and Daniel L. Gutapfel, Appellees. |
| Court | Indiana Appellate Court |
OPINION TEXT STARTS HERE
Julia Blackwell Gelinas, Maggie L. Smith, Frost Brown Todd, LLC, Indianapolis, IN, Attorneys for Appellant.
Richard T. Mullineaux, Crystal G. Rowe, Kightlinger & Gray, LLP, New Albany, IN, Attorneys for Appellee, Teton Corporation.
Scott L. Tyler, Eric T. Eberwine, Waters, Tyler, Hoffmann & Scott, LLC, New Albany, IN, Attorneys for Appellee, Innovative Roofing Solutions, Inc.
Grover B. Davis, James T. Flanigan, McClure, McClure & Davis, Indianapolis, IN, Attorneys for Appellees, Gutapfel Roofing, Inc. and Daniel L. Gutapfel.
The Board of Commissioners of Jefferson County (“Jefferson County”) appeals the Scott Circuit Court's entry of summary judgment in favor of Teton Corporation, Innovative Roofing Solutions, Inc., Gutapfel Roofing Inc., and Daniel L. Gutapfel (collectively “the Appellees”). The trial court determined that Jefferson County waived its right to subrogate damages pursuant to the terms of the American Institute of Architects Contract (“the AIA Contract”) it entered into with the general contractor, Teton.
On appeal, Jefferson County raises the following dispositive issue: whether the trial court erred when it determined that the County waived its right to subrogate damages to non-Work property. We conclude that Jefferson County waived its right to subrogate any and all claims covered by its property insurance, and therefore, we affirm the trial court.
In 2008, Jefferson County decided to repair and renovate the courthouse in Madison, Indiana. An architect was hired to design the renovation, and the renovation involved repairs to the roof of the courthouse, its flashing, gutters, and downspouts. Jefferson County accepted Teton Corporation's bid for the repairs. Teton subcontracted with Innovative Roofing to furnish labor and materials for the roofing work. Innovative Roofing sub-subcontracted with Gutapfel Roofing to repair the courthouse's downspouts.
Jefferson County's agreement with Teton Corporation incorporated a form construction project contract prepared by the American Institute of Architects (“AIA”). The relevant AIA contractual provisions relating to insurance and subrogation provide:
11.3.1 Unless otherwise provided, the Owner [Jefferson County] 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 result of 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.
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11.3.3. Loss of Use Insurance. The Owner, at the Owner's option, may purchase and maintain such insurance as will Insure the Owner against loss of use of the Owner's property due to fire or other hazards, however caused. The Owner waives all rights of action against the Contractor for loss of use of the Owner's property, including consequential losses due to fire or other hazards however caused.
11.3.5 If during the Project construction period the Owner insures properties, real or personal or both, adjoining or adjacent to the site by property insurance under policies separate from those insuring the Project, or if after final payment property insurance is to be provided on the completed Project through a policy or policies other than those insuring the Project during the construction period, the Owner shall waive all rights in accordance with the terms of Subparagraph 11.3.7 for damages caused by fire or other perils covered by this separate property insurance. All separate policies shall provide this waiver of subrogation by endorsement or otherwise.
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11.3.7 Waivers of Subrogation. The Owner and Contractor waive all rights against [ ] each other and any of their subcontractors, sub-subcontractors, agents and employees, each of the other ... 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 they have to the proceeds of such insurance held by the Owner as fiduciary....
Appellant's App. pp. 585–86. The AIA contract also defines the term “Work” as Id. at 571.
Jefferson County did not obtain separate property (or builder's risk) insurance for the courthouse project, but relied instead on its existing property and casualty insurance policy with St. Paul Fire and Marine Insurance Company. Jefferson County also did not inform Teton Corporation that it did not intend to obtain separate insurance for the project. The AIA contract also required Teton to obtain contractor's liability insurance.
On May 20, 2009, during the renovation, a devastating fire occurred at the JeffersonCounty Courthouse, which caused over six million dollars in damage. Per the terms of its insurance policy, St. Paul made payments to Jefferson County for damages caused by the fire.
Thereafter, on May 16, 2011, Jefferson County filed a complaint against the Appellees alleging negligence, breach of implied warranties, and breach of contract. Specifically, Jefferson County alleged that Appellee Gutapfel Roofing's negligence was the primary cause of the fire, but also alleged that Appellees Teton Corporation and Innovative Roofing were negligent as well.
All Appellees later filed separate motions for summary judgment. Each Appellee's motion argued that Jefferson County agreed to provide insurance for the project, and the County waived its subrogation rights against the Appellees; therefore, Jefferson County was not entitled to recover damages from the Appellees that were caused by the fire. Jefferson County responded to the Appellees' motions and also filed its own motion for partial summary judgment. The trial court held a hearing on the motions on September 25, 2012.
On November 21, 2012, the trial court granted the Appellees' motions for summary judgment and determined that as a result, Jefferson County's motion for partial summary judgment concerning the issue of vicarious liability was moot. The trial court issued the following pertinent findings of fact to support its decision:
4. The Plaintiff was obligated to provide insurance to cover the remodeling project, commonly referred to as builder's risk insurance. Plaintiff chose not to obtain a separate policy and instead the property was covered by the general policy of insurance maintained by Jefferson County.
5. In addition to the requirement for the Plaintiff to provide insurance for the project is the provision found in section 11.3.7 of the contract between Plaintiff and Defendant, Teton Corporation. In summary form that provision of the contract provided for a mutual waiver of the right of subrogation between the Plaintiff and Defendant, Teton Corporation, and all “subcontractors, sub-subcontractors, agents and employees....”
6. Of these facts there is no genuine issue in dispute. The contractual provisions reflect the agreement that Plaintiff as owner was to provide insurance and that insurance, along with the insurance maintained by the various Defendants, would be the source of compensation in the event of a loss and each and every party would waive the right to seek recovery of the loss covered by the policy of insurance.
7. Contractual provisions such as those existing in the present case do not reflect an effort to avoid or escape responsibility. On the contrary, such provisions serve a public interest by defining the costs to which a party obligates itself, allocating risk and thereby reducing litigation.
Jefferson County subsequently filed a motion to correct error arguing...
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