Employers Mut. Cas. Co. v. A.C.C.T., Inc.
| Decision Date | 09 September 1997 |
| Docket Number | No. C0-97-7,C0-97-7 |
| Citation | 568 N.W.2d 530 |
| Parties | EMPLOYERS MUTUAL CASUALTY COMPANY, an Iowa corporation, subrogee of Miller-Dwan Medical Center, Respondent, v. A.C.C.T., INC., Appellant. |
| Court | Minnesota Court of Appeals |
Syllabus by the Court
The waiver clause of the American Institute of Architects Abbreviated OwnerContractor Agreement does not bar a subrogation claim by an owner's insurer for damages allegedly caused by the contractor to property not worked upon by the contractor and not the subject of the construction contract.
Charles R. Tuffley, Michele A. Chapnick, Morrison, Mahoney & Miller, Southfield, MI; and Joseph F. Lulic, Hanson, Lulic & Krall, Minneapolis, for respondent.
Jennifer Kjos Fackler, Peter E. Lind, Foster, Waldeck & Lind, Ltd., Minneapolis, for appellant.
Considered and decided by HUSPENI, P.J., and KALITOWSKI and THOREEN, JJ. *
Employers Mutual Casualty Company (insurer), as the insurer of Miller-Dwan Medical Center (owner), brought a subrogation action against A.C.C.T., Inc. (contractor) to recover losses incurred in connection with fire damages to the medical center. The district court denied the contractor's motion for summary judgment, but certified to this court as important and doubtful the question of whether the waiver clause of the contract between the owner and contractor bars the insurer's subrogation claim for damages allegedly caused by the contractor to property the contractor did not work on that was not the subject of the construction contract.
On June 15, 1993, Miller-Dwan Medical Center (owner) contracted with A.C.C.T., Inc. (contractor) to perform asbestos abatement in certain areas of the medical center. The contract is a pre-printed American Institute of Architects Abbreviated Owner-Contractor Agreement (AIA contract). Article 7 of the contract described the "Work" involved as follows:
7.4 The term "Work" means 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 a part of the Project.
The parties allocated insurance responsibilities in the following manner:
17.1 The Contractor shall purchase * * * and maintain * * * insurance for protection from claims under workers' or workmen's compensation acts and other employee benefits acts which are applicable, claims for damages because of bodily injury, including death, and from claims for damages, other than to the Work itself, to property which may arise out of or result from the Contractor's operations under the Contract, whether such operations be by the Contractor or by a Subcontractor or any one directly or indirectly employed by any of them.
17.2 The Owner shall be responsible for purchasing and maintaining the Owner's usual liability insurance. Optionally, the Owner may purchase and maintain other insurance for self-protection against claims which may arise from operations under the Contract. The Contractor shall not be responsible for purchasing and maintaining this optional Owner's liability insurance unless specifically required by the Contract Documents.
17.3 Unless otherwise provided, the Owner shall purchase and maintain * * * property insurance upon the entire Work at the site to the full insurable value thereof. This insurance shall be on an all-risk policy form and shall include interests of the Owner, the Contractor, Subcontractors and Sub-subcontractors in the Work and shall insure against the perils of fire and extended coverage and physical loss or damage including, without duplication of coverage, theft, vandalism and malicious mischief.
17.6 The Owner and Contractor waive all rights against each other * * * for damages caused by fire or other perils to the extent covered by property insurance obtained pursuant to this Article 17 or any other property insurance applicable to the Work * * * .
(emphasis added). The owner elected not to purchase a separate "builder's risk" policy with coverage limited to "the entire Work at the site." Instead, the owner chose to rely on its existing "all-risk" property insurance to satisfy its obligations under article 17 to provide property insurance for the "Work."
On January 19, 1994, a fire broke out on the sixth floor of the building on which the contractor was working, causing damages not only to parts of the building covered by the contract but to other areas as well. The owner's insurance carrier, Employers Mutual Casualty Company (insurer), paid the owner for the damages, and then sued the contractor by way of subrogation for alleged negligence and breach of contract.
The contractor moved for summary judgment based on the waiver clause of the contract, and the insurer moved to amend the complaint to include an additional gross negligence claim. The district court denied both parties' motions and certified to this court as important and doubtful the application of the waiver clause of the contract.
1. Does the waiver clause of the contract bar the insurer's subrogation claim for damages allegedly caused by the contractor to areas of the building not the subject of the construction contract?
2. Is the term "Work" ambiguous as to render summary judgment improper?
On appeal from a summary judgment, the reviewing court must determine (1) whether there are any genuine issues of material fact, and (2) whether the district court erred in its application of the law. City of Virginia v. Northland Office Properties Ltd. Partnership, 465 N.W.2d 424, 427 (Minn.App.1991) (citation omitted). In reviewing the record, the court must view the evidence in the light most favorable to the party against whom summary judgment was granted. Id.
A court must interpret a contract according to the intent of the parties as manifested by the words used therein. Dr. Ward's Medical Co. v. Kallio, 173 Minn. 462, 463, 217 N.W. 369, 369 (1928). In construing a contract, a court should apply the construction that will give each part of the instrument some effect. Independent Sch. Dist. No. 877 v. Loberg Plumbing & Heating Co., 266 Minn. 426, 436, 123 N.W.2d 793, 799-800 (1963). Whether a contract is ambiguous is a question of law. City of Virginia, 465 N.W.2d at 427 (citation omitted).
The interpretation of a contract is a question of law if no ambiguity exists, but if ambiguous, it is a question of fact and extrinsic evidence may be considered. "On appeal, a reviewing court may make a determination of whether a contract is ambiguous without deference to the trial court's determination." "A contract is ambiguous if it is reasonably susceptible to more than one construction."
Id. (citations omitted).
A party may appeal to this court "if the trial court certifies that the question presented is important and doubtful, * * * from an order which denies a motion for summary judgment." Minn. R. Civ.App. P. 103.03(h). Because Minnesota courts have not considered the waiver clause contained in the AIA form contract and its interpretation affects significant rights of the parties, the district court properly certified the provision to this court for interpretation.
In the AIA contract, the owner and contractor in article 17.6 (the waiver clause), article 17.1 (), and article 17.3 () have agreed on an allocation of their respective risks and insurance obligations pertaining to the possibility of property damage occurring during the contract and to the contractor's potential liability resulting from its operations.
The insurer argues that under the contract the owner must provide property insurance protection covering the contractor's Work (article 17.3) and the contractor must provide liability insurance covering whatever property damage it may cause other than to the Work itself (article 17.1). The waiver clause, according to the insurer, does not bar the owner's insurer from proceeding against the contractor for damage to non-work property allegedly caused by the contractor's negligence.
The contractor contends that the broad language in the waiver clause of the contract prevents the owner's insurer from proceeding against the contractor for its negligence not only for damage occurring to the Work but also to areas outside the Work. Thus, under these facts, where a fire allegedly arising out of the contractor's operations resulted in damage both to the Work and areas outside the Work, the contractor argues the owner's insurance carrier's right to subrogate is barred.
The district court agreed with the insurer's position and denied the contractor's motion for summary judgment. In reaching its decision, the district court relied on S.S.D.W. Co. v. Brisk Waterproofing Co., 76 N.Y.2d 228, 557 N.Y.S.2d 290, 556 N.E.2d 1097 (1990), which concerned the same article 17 in a similar fact situation. In S.S.D.W. Co., the owner of an apartment building contracted with a builder to do some corrective work, and a fire broke out causing extensive damages not only to areas of the building covered by the contract but to other areas as well. After paying the owner for the damages, the owner's insurer filed a subrogation action against the builder seeking reimbursement. The court construed the standard AIA contract and concluded that because the intent of the waiver provision was limited to waiving claims to the work, the insurer could bring a suit against the builder for negligent damage to property outside the scope of the work. Id. at 233-34, 557 N.Y.S.2d at 293, 556 N.E.2d at 1100. The court analyzed the waiver clause in this manner:
The waiver clause (art. 17.6) bars the claim of the owner's subrogee to the extent that...
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Employers Mut. Cas. Co. v. A.C.C.T., Inc.
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