Copper Mountain, Inc. v. Ind. Systems, Inc.

• Decision Date: 16 March 2009
• Docket Number: No. 08SC28.,08SC28.
• Parties: COPPER MOUNTAIN, INC., Petitioner v. INDUSTRIAL SYSTEMS, INC.; and Amako Resort Construction (U.S.), Inc., Respondents.
• Court: Colorado Supreme Court

208 P.3d 692

COPPER MOUNTAIN, INC., Petitioner v. INDUSTRIAL SYSTEMS, INC.; and Amako Resort Construction (U.S.), Inc., Respondents.

No. 08SC28.

Supreme Court of Colorado, En Banc.

March 16, 2009.

Jacobs Chase Frick Kleinkopf & Kelley, LLC, Elizabeth L. Harris, Ann B. Frick, Denver, Colorado, Attorneys for Petitioner.

Montgomery Little Soran & Murray, PC, Daniel P. Murphy, Michael J. Decker, Littleton, Colorado, Attorneys for Respondent Industrial Systems, Inc.

The Hustead Law Firm, PC, Patrick Q. Hustead, Melissa W. Shisler, Denver, Colorado, Attorneys for Respondent Amako Resort Construction (U.S.), Inc.

Justice HOBBS delivered the Opinion of the Court.

We granted certiorari to review the court of appeals' published opinion in Copper Mountain, Inc. v. Industrial Systems, Inc., No. 06CA0560, ___ P.3d ____, 2007 WL 4198390 (Colo.App. Nov.29, 2007). The issue for determination is whether a provision in a contract between Copper Mountain, Inc. ("Copper") and Amako Resort Construction (U.S.), Inc. ("Amako") bars Copper's claims against Amako and Amako's subcontractor, Industrial Systems, Inc. ("Industrial"), for fire-related damages to a ski lodge that Amako and Industrial were renovating.¹ The court of appeals affirmed the trial court's determination that a waiver clause in the contract precludes Copper's claims against Amako and Industrial. We reverse.

We hold that the contract does not bar Copper's claims against Amako and Industrial for damages to property that was not part of the contractual Work, despite the fact that Copper insured the damaged property under an existing policy covering the Work. Under paragraph 11.4.7 of the contract, Copper waived rights against Amako for damages caused by fire "to the extent covered by property insurance obtained pursuant to this Paragraph 11.4 or other property insurance applicable to the Work...."² We conclude that this clause only bars claims for damages to the contractual Work, and does not bar claims for damages to non-Work property. We further conclude that the waiver provision of paragraph 11.4.5 only applies to project Work addressed by paragraph 11.4.7.

In Town of Silverton v. Phoenix Heat Source System, Inc., 948 P.2d 9, 12 (Colo App.1997),³ the court of appeals held that a provision parallel to paragraph 11.4.7 did not bar the owner's claims for damages to non-Work property, and the presence of a provision parallel to paragraph 11.4.5 did not foreclose such a conclusion. We determine that Silverton was correctly decided, and we choose to follow it. In this case, the plain language and contextual setting of paragraphs 11.4.7 and 11.4.5 demonstrate that Copper did not waive its claims for damages to non-Work property.

I.

Copper hired Amako to perform renovations on and build an addition to the Union Creek Lodge at Copper Mountain Resort. On August 10, 2001, Copper and Amako entered into a standard American Institute of Architects ("AIA") Owner-Contractor Agreement to govern the construction. Amako subcontracted with Industrial to build the steel framework for the addition.⁴

The Work of the contract is defined by paragraph 1.1.3 as "the construction and services required by the Contract Documents, whether completed or partially completed, and ... all other labor, materials, equipment, and services provided or to be provided by the Contractor to fulfill the Contractor's obligations."⁵

Several relevant provisions of the contract set forth Amako's responsibilities concerning liability and insurance. Paragraph 3.3.2 provides that Amako "shall be responsible to [Copper] for acts and omissions of [Amako's] employees [and] Subcontractors ... and their agents and employees...." Paragraph 10.2.5 requires Amako to "promptly remedy damage and loss (other than damage or loss insured under property insurance required by the Contract Documents)" that Amako or its subcontractors caused to the Work, or to other property at or adjacent to the site, such as structures not designated for removal, relocation, or replacement during the construction.⁶ Pursuant to article 11 ("Contractor's Liability Insurance") and paragraph .5 of article 11, Amako agreed to procure insurance to protect Amako from claims "which may arise out of or result from [Amako's] operations under the Contract and for which [Amako] may be legally liable, whether such operations be by [Amako] or by a Subcontractor," including "[c]laims for damages, other than to the Work itself, because of injury to or destruction of tangible property...."

Copper's responsibilities for procuring insurance are set forth in paragraph 11.4.1:

Unless otherwise provided, [Copper] shall purchase and maintain ... property insurance written on a builder's risk "all-risk"[⁷] or equivalent policy form in the amount of the Initial Contract Sum, plus value of subsequent Contract modifications and cost of materials supplied or installed by others, comprising total value for the entire Project at the site on a replacement cost basis without optional deductibles.

If Copper did not purchase insurance to cover the Work, Amako could "effect insurance [to] protect the interests of [Amako and its subcontractors] in the Work," and charge that cost to Copper, pursuant to paragraph 11.4.1.2.

The contract includes the following waiver of legal rights in paragraph 11.4.7:

The Owner and Contractor waive all rights against [ ] each other and any of their subcontractors ... for damages caused by fire or other causes of loss to the extent covered by property insurance obtained pursuant to this Paragraph 11.4 or other property insurance applicable to the Work....

Finally, paragraph 11.4.5 of the contract further delineates the waiver of Copper's claims for damages as follows:

If during the Project construction period the Owner insures properties, real or personal or both, at 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 11.4.7 for damages caused by fire or other causes of loss covered by this separate property insurance.

Copper chose to comply with paragraph 11.4.1 by adding a "Newly Acquired Property and Property Under Construction" endorsement to its general Ski Areas Property Coverage ("SAPC") insurance policy, rather than by purchasing a separate insurance policy to cover the Work.⁸ The SAPC policy insured the Work and the Union Creek Lodge, and provided general liability and property insurance for all of the North American resorts owned by Copper's parent company, Intrawest, Inc., including Copper Mountain Resort.

On November 26, 2001, while Industrial was performing welding work, a fire broke out at the Union Creek Lodge. The fire caused significant damage to the existing lodge and its contents. All real and personal property damaged in the fire was covered under the SAPC insurance policy, though Copper was responsible for paying the policy's $1 million deductible.

Copper sued Amako and Industrial in the District Court for Summit County for negligence, negligent supervision, breach of contract, and indemnification, seeking approximately $1 million in damages. Amako and Industrial asserted that paragraphs 11.4.7 and 11.4.5 of the contract barred Copper's suit.

Copper moved the trial court for a determination that paragraph 11.4.7 does not bar claims for damages to property other than the Work.⁹ The trial court denied Copper's motion, and granted Amako's and Industrial's cross-motions for summary judgment. The trial court held that paragraphs 11.4.5 and 11.4.7 of the contract barred Copper from recovering for damages suffered in the fire. The trial court distinguished and declined to apply Silverton.¹⁰ It stated that the "exhaustive judicial inquiry" into the scope of Work demanded by Silverton would subvert the purposes of the waiver clause — that is, to promote certainty as to liability, limit interruptions to work, reduce litigation, and cover property damage claims under the owner's all-risk builder's policy.

The court of appeals affirmed the trial court's judgment. Copper Mountain, No. 06CA0560, op. at 696. It disagreed with Silverton, holding that paragraph 11.4.7 applied to all damaged property covered under Copper's SAPC policy. Id. at 696-97. The court of appeals gave three reasons for its decision:

First, the general waiver clause "waive[d] all rights against [contractors] ... for damages caused by fire ... to the extent covered by insurance obtained pursuant to this Paragraph 11.4 or other property insurance applicable to the Work." (Emphasis added.) The emphasized language does not define waived claims by what property is harmed, that is, the work, but by the policy of insurance "applicable to the Work" that pays for the damage.

Second, paragraph 11.4.1 of the contract states the requirements for obtaining property insurance that is applicable to the work. "Unless otherwise provided," Copper was to purchase an "`all risk' or equivalent policy" to protect its, Amako's, and Industrial's interests in the work. Thus, Copper could have purchased an all-risk policy limited to the work to satisfy its obligations under the contract, or, as it chose to do, it could have relied on its existing SAPC policy.

Third, other clauses in the contract show the parties intended to waive claims for damages beyond those defined by the work. Paragraph 11.4.5 provides that, if Copper insured property separate from the project that was located "at or adjacent to the site," claims for damages to that property would also be waived.

Id. at 696 (internal citations omitted). The court of appeals did not further explain this reasoning or the significance it ascribed to Copper's decision to rely on its existing SAPC policy.

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