Brown Mechanical Contractors, Inc. v. Centennial Ins. Co.

• Decision Date: 07 January 1983
• Citation: 431 So.2d 932
• Parties: BROWN MECHANICAL CONTRACTORS, INC. v. CENTENNIAL INSURANCE COMPANY, National Union Fire Insurance Company, et al. GOODNER CONSTRUCTION COMPANY v. CENTENNIAL INSURANCE COMPANY, National Union Fire Insurance Company, et al. MARLEY COOLING TOWER COMPANY v. GOODNER CONSTRUCTION COMPANY, Brown Mechanical Contractors, Inc., Republic Steel Corporation, Centennial Insurance Company, and National Union Fire Insurance Company. CENTENNIAL INSURANCE COMPANY and National Union Fire Insurance Company v. MARLEY COOLING TOWER COMPANY. 81-35, 81-36, 81-78 and 81-79.
• Court: Alabama Supreme Court

Page 932

431 So.2d 932

BROWN MECHANICAL CONTRACTORS, INC. v. CENTENNIAL INSURANCE COMPANY, National Union Fire Insurance Company, et al.

GOODNER CONSTRUCTION COMPANY v. CENTENNIAL INSURANCE COMPANY, National Union Fire Insurance Company, et al.

MARLEY COOLING TOWER COMPANY v. GOODNER CONSTRUCTION COMPANY, Brown Mechanical Contractors, Inc., Republic Steel Corporation, Centennial Insurance Company, and National Union Fire Insurance Company.

CENTENNIAL INSURANCE COMPANY and National Union Fire Insurance Company v. MARLEY COOLING TOWER COMPANY.

81-35, 81-36, 81-78 and 81-79.

Supreme Court of Alabama.

Jan. 7, 1983.

Rehearing Denied March 11, 1983.

Rehearing Denied April 22, 1983.

Foster Etheredge and J. Mark Hart, of Spain, Gillon, Riley, Tate & Etheredge, Birmingham, for Brown Mechanical Contractors.

S.R. Starnes and L. Graves Stiff, III, of Starnes & Atchison, Birmingham, for Goodner Const. Co.

William T. Mills, II and Jack B. Porterfield, Jr., Birmingham, for Marley Cooling Tower Co.

Robert D. Norman and Robert L. Williams, of Norman, Fitzpatrick & Wood, Birmingham, for National Union Fire Ins. Co., and Centennial Ins. Co.

ON APPLICATION FOR REHEARING

BEATTY, Justice.

The original opinion in this case, dated September 24, 1982, is withdrawn, and the following opinion is substituted therefor:

These consolidated appeals arose out of a fire that destroyed a partially built cooling tower and damaged its foundation. The structure was promptly rebuilt but the parties could not agree on which contractor bore the risk of loss of the foundation. This convoluted litigation ensued. It took the form of a declaratory judgment action by the insurers to determine their coverage obligation and to pursue their subrogation rights. The resulting decision dissatisfied everyone except the owner of the cooling tower; all the other parties appealed.

I. FACTS

In December 1978 Marley Cooling Tower Company (Marley) contracted to build a cooling tower for Republic Steel Corporation (Republic). Goodner Construction Company (Goodner) entered into a similar contract with Republic to build a concrete foundation for the cooling tower and to install piping, pumps, electrical connections and instrumentation. Goodner engaged various subcontractors, including Brown Mechanical Contractors, Inc. (Brown), for the piping work.

Under their contracts Marley and Goodner each assumed all risk of loss to "the work" during construction, and each agreed to take precautions for avoiding danger to "any property while on Republic's premises." Accordingly, to cover its risk under the contract, Marley took out an insurance policy from the plaintiffs, Centennial Insurance Company and National Union Fire Insurance Company (insurers). The policy provided up to $5 million in coverage against property loss. (Whether or not Goodner obtained insurance coverage does not appear from the record).

On October 17, 1979, a fire completely destroyed the wooden cooling tower and damaged its appurtenant parts (to which we refer collectively as the foundation). The tower was 88% complete. On the day of the fire, no Marley employees were present, having left the site about ten days earlier for Goodner and its subcontractors to complete their phases of the construction. Accordingly, all agree that Marley did not cause the fire; Marley's liability is based on contract, not tort.

The contract dispute underlying this litigation emerged when Republic sought to hold Marley responsible not only for the loss of the cooling tower ($125,439.00) but also for the damage to the foundation ($47,725.76). Marley disagreed and submitted to the insurers a proof of loss for only the cooling tower while reserving the right to add the foundation damages to its insurance claim should the foundation ultimately be held part of Marley's "work" under the contract.

The parties were unable to resolve this dispute. Meanwhile, Marley, at its own expense, rebuilt the cooling tower (which Republic accepted in satisfaction of its claim for the tower itself), and Goodner repaired the foundation damages (Republic paid for these repairs).

II. PROCEEDINGS BELOW

The insurers filed the present declaratory action in time to prevent the statute of limitations from barring their subrogation claim. Named as defendants were Goodner, Brown, Republic and Marley. The insurers sought a declaration that they owed no coverage for the foundation damages, that upon payment of the cooling tower loss they would be subrogated to Marley's rights of recovery and that the negligence of Goodner and Brown caused the fire. The insurers prayed for a judgment in their favor against the defendants responsible for the fire.

Marley's answer included a counterclaim against the insurers, seeking coverage under the policy for what it might owe Republic for the foundation. Marley filed a cross-claim against Goodner and Brown, alleging that their negligence caused the fire, and claiming $173,164.76 as damages for both the cooling tower and foundation. Later, Marley added a cross-claim against Republic for $16,975.00, the difference between the insurance proceeds and the contract price for the completed cooling tower. This amount Republic had withheld as a credit against Marley's possible liability for the foundation damages.

Republic's answer to the insurers alleged that the foundation damages were not covered by the policy. Republic filed a cross- -claim against Goodner and Brown for negligently causing both the tower and foundation losses. Later, Republic amended this cross-claim to seek from Goodner alone the foundation damages, based on Goodner's contractual obligation to assume the risk of loss of its work during construction.

Goodner, in its answer to the insurers, denied negligence and raised as a defense the claim that the action was premature and nonjusticiable because the insurers had made no payment to their insureds that would give rise to any subrogation interest. In its answer to Republic's cross-claim, Goodner demanded a jury trial. Finally, Goodner filed a cross-claim against Brown, seeking indemnification under their contract for any damages arising out of the subcontractor's work.

The trial court, after a nonjury trial, resolved these issues in a detailed opinion as follows. First, the trial court rejected Goodner's defense that the action was premature by finding that a justiciable controversy was presented and that the insurers were entitled to subrogation. Second, the court found Marley responsible to Republic under their contract for the foundation damages as well as for the damages to the cooling tower. The court noted that the latter claim was satisfied when Republic accepted the rebuilt cooling tower from Marley, and the former claim ($47,726.76) was subject to a credit of $16,935.00 for the unpaid contract price. Third, the court found that the insurers owed Marley coverage for both the cooling tower and the foundation. Fourth, the trial court found that the proximate cause of the fire was the negligence of Goodner and Brown, who were thus jointly and severally liable to the insurers for the full amount of damages. Fifth, the trial court found as a matter of law that the contract between Goodner and Brown did not require Brown to provide indemnification for Goodner's own negligence.

III. ISSUES

The issues on appeal and our resolution of them are as follows. (A) We reject the contention of Goodner and Brown that the subrogation claim is premature and nonjusticiable. (B) We reject Goodner's claim that it was entitled to a jury trial on the negligence issues. (C) We reverse the trial court's holding that Marley was contractually responsible for the foundation damages and accept Marley's contention that its liability is limited to the cooling tower. Accordingly, we need not consider whether the insurance coverage could extend to the foundation damages. (D) We affirm the trial court's holding that Goodner's and Brown's lack of care was the proximate cause of the fire. (E) We find no reversible error in three evidentiary rulings that Brown disputes. (F) We affirm the trial court's denial of indemnity from Brown to Goodner.

A. SUBROGATION

Goodner and Brown argue that no justiciable controversy exists, because the insurers lack standing to bring this subrogation action until they have paid their insured, Marley. Goodner and Brown rely on the rule in Aetna Insurance Company v. Hann, 196 Ala. 234, 236, 72 So. 48, 50 (1916), that "the right [of subrogation] does not arise until the surety has either paid or offered to pay the debt or demand for which the principal is liable." On the other hand, they recognize "the power of the court to decide in one lawsuit the issues of the insurers' subrogation and liability on a policy of insurance" when liability has not been established nor payment yet made, Barnes v. Tarver, 360 So.2d 953, 956 (Ala.1978), citing Liverpool & London & Globe Ins. Co. v. Federal Land Bank, 233 Ala. 591, 173 So. 91 (1937). However, Goodner and Brown cite dictum in the Liverpool case that requiring prepayment or tender by the insurer "would be well supported if this were an original bill whose equity depended upon the assertion of that claim." 233 Ala. at 593, 173 So. at 91. The authority cited for this proposition is Aetna Insurance Company v. Hann, supra. Goodner and Brown conclude that the present declaratory judgment action is an original bill barred under Hann, in contrast to the insurer's third party claims against subrogation defendants, which were permitted in Liverpool and Barnes, supra.

The flaw in this argument is that the rule making payment a prerequisite to subrogation is for the benefit of the insured. As explained in Aetna Insurance Company v. Hann, supra, an insured's "demand against the wrongdoer must be satisfied so as to relieve him of trouble and risk; and it is this securing of satisfaction by the insured which gives the insurer the right to be subrogated to the...