EMPLOYERS'FIRE INSURANCE CO., BOSTON, MASS. v. Behunin

• Decision Date: 02 November 1967
• Docket Number: Civ. A. No. 67-C-138.
• Citation: 275 F. Supp. 399
• Parties: EMPLOYERS' FIRE INSURANCE COMPANY, BOSTON, MASSACHUSETTS, a corporation, Plaintiff, v. Gage BEHUNIN d/b/a Gage Behunin Company, and Otto Buehner and Company, Incorporated and Grant Marsh, Partners d/b/a Buehner Schokbeton Company, previously known as Buehner Concrete Products, Defendants and Third-Party Plaintiffs, v. BOULDER SCHOOL BOARD, BOULDER VALLEY SCHOOL DISTRICT, RE-2, BOULDER, COLORADO, Third-Party Defendant.
• Court: U.S. District Court — District of Colorado

275 F. Supp. 399

EMPLOYERS' FIRE INSURANCE COMPANY, BOSTON, MASSACHUSETTS, a corporation, Plaintiff, v. Gage BEHUNIN d/b/a Gage Behunin Company, and Otto Buehner and Company, Incorporated and Grant Marsh, Partners d/b/a Buehner Schokbeton Company, previously known as Buehner Concrete Products, Defendants and Third-Party Plaintiffs, v. BOULDER SCHOOL BOARD, BOULDER VALLEY SCHOOL DISTRICT, RE-2, BOULDER, COLORADO, Third-Party Defendant.

Civ. A. No. 67-C-138.

United States District Court D. Colorado.

November 2, 1967.

Zarlengo, Mott & Carlin, William J. Baum, Denver, Colo., for plaintiff.

Weller, Friedrich & Hickisch, William H. Hazlitt, Denver, Colo., for defendant Gage Benhunin.

Calvert & Calvert, David R. Calvert, Aurora, Colo., for defendants Buehner Concrete Products.

Martin, Brotzman, Caplan & Knapple, Gerald A. Caplan, Boulder, Colo., for third-party defendant.

MEMORANDUM OPINION AND ORDER

(DISPOSITION OF MOTION FOR SUMMARY JUDGMENT)

WILLIAM E. DOYLE, District Judge.

Employers' Fire Insurance Company, as assignee of the claims of its insured, Boulder School Board, initiated this action against Gage Behunin and Buehner Schokbeton Company for damages allegedly caused by the defendants' negligence. We have jurisdiction by virtue of diversity of citizenship (28 U.S.C. § 1332). The matter is presently before the Court on defendant Behunin's motion for a summary judgment of dismissal under Rule 56(b) of the Federal Rules of Civil Procedure.

The facts are as follows. On August 20, 1963, Mellwin Construction Company entered into a contract with the Boulder School Board to build Southern Hills Junior High School in Boulder, Colorado. The contract specifications required Mellwin Construction to take out a builders' risk insurance policy covering loss and damage to the building during the process of its construction, and further required all subcontractors to pay a portion of the total insurance premiums to be decided by the ratio of their subcontract prices to the total insurance carried. The policy was to be made payable to the "Boulder School Board as Trustee," and the contract required the School Board to pay all insurance proceeds to the interested contractors as they completed the repairing of destroyed or damaged work. On December 27, 1963, a builders' risk policy was acquired from Employers' Fire Insurance Company in accordance with the contract requirements.

On September 1, 1963, Mellwin Construction entered into a subcontract with defendant Buehner Schokbeton Company which bound the latter to supply and install prestressed and precast concrete beams and columns for the building. Approximately a month later, Buehner Schokbeton Company in turn entered a subcontract whereby defendant Gage Behunin agreed to install the beams and columns for the project. In accordance with contract specifications, Behunin paid his proportionate share of the builders' risk insurance premiums.

In the following months the participating contractors began construction of the school, but during the night of January 17, 1964, the partially completed building was heavily damaged when its supporting beams and columns collapsed during a severe wind storm. Pursuant to the insurance policy, Employers' Risk Insurance Company paid $22,437.08 to the "Boulder School Board as Trustee," and this amount was apparently paid out to the interested contractors from time to time as they completed the reconstruction of the damaged property.

On March 23, 1967, Employers' Fire Insurance Company, as assignee of the School Board's claims against the defendants, filed the present action. Defendant Behunin immediately filed a motion for summary judgment. His claim is that he was an insured party under the insurance policy because the contract specifications required him to pay a proportionate part of the premiums and extended insurance benefits to him. The insurance company opposes this motion on the grounds that the policy failed to name Behunin as an insured party and did not incorporate the contract specifications beneficial to him.¹ Thus, the decisive legal question is whether the School Board could extend the benefit of its insurance policy to a third party without the express knowledge and consent of the insurance company.²

This question is somewhat unique, but it has been treated in analogous cases which involve insurance on the shipment of goods by common carriers. In the past, it was apparently common practice for carriers to incorporate a clause in their bills of lading giving them the benefit of any insurance on the goods being shipped. Such benefit-of-insurance clauses were uniformly upheld by the courts.³ See, e. g., Phoenix Ins. Co. v. Erie & W. Transp. Co., 117 U.S. 312, 321, 6 S.Ct. 750, 1176, 29 L.Ed. 873 (1886); Pennsylvania R. Co. v. Burr, 130 F. 847 (2 Cir. 1904); Roos v. Philadelphia W. & B. R. Co., 199 Pa. 378, 49 A. 344 (1901). These courts held that after payment of the insurance proceeds, the insured party had no right to sue the carrier to whom insurance benefits had been extended. Since the insured had no claim against the extended beneficiary, the insurer acquired no derivative rights by subrogation or assignment. Platt v. Richmond, Y. R. & C. R. Co., 108 N.Y. 358, 15...