Independent School Dist. No. 877 v. Loberg Plumbing & Heating Co.
| Citation | 266 Minn. 426,123 N.W.2d 793 |
| Decision Date | 11 October 1963 |
| Docket Number | No. 38735,38735 |
| Parties | INDEPENDENT SCHOOL DISTRICT NO. 877, Appellant, v. LOBERG PLUMBING & HEATING COMPANY et al., Defendants, Loberg Plumbing & Heating Company, and Edward S. Kern and Frank Persons, individually and dba The Kerntile Company, Respondents. |
| Court | Supreme Court of Minnesota (US) |
Syllabus by the Court
1. Exculpatory provisions of a building construction contract exonerating a contracting party from liability for damages resulting from his own negligence, not in contravention of public policy, are valid and enforceable.
2. Provisions of a building construction contract stipulating that the owner and contractor are to be liable for damages suffered because of any wrongful act or neglect other than damages suffered from fire, and which require the owner to effect and maintain fire insurance upon the structure being constructed to 100 percent of the insurable value on a Builders Risk Completed Value Form endorsement on a standard fire policy, Held intended to exonerate the contractor from liability for alleged negligence in causing a fire, not only during the period of construction but for the duration of the contract, including a 1-year guarantee period.
Robins, Davis & Lyons and Harding A. Orren and Lawrence Zelle, Minneapolis, for appellant.
Meagher, Geer, Markham & Anderson, M. J. Coyne and O. C. Adamson II, Arthur H. Lindeman, Minneapolis, for respondents.
Plaintiff, upon dismissal of its action as to certain defendants, appeals from an order denying its motion for a new trial.
The problem presented concerns the interpretation of a building construction contract to ascertain the intention of the parties with respect to the contractor's liability for alleged negligence in causing a fire which extensively damaged a school building after the construction was substantially completed and the building was accepted and in use by plaintiff.
In the spring of 1956, plaintiff entered into a contract with Patch and Erickson, architects, relating to the construction of a new elementary school in the city of Buffalo, Minnesota. Under this contract, plans and specifications were drafted by Robert D. Hanson, an employee of Patch and Erickson. Afer approval of such plans by the school board of plaintiff, bids were solicited and accepted. Thereafter, in November 1656, pursuant to the contract with the architects, construction contracts incorporating the plans and specifications were similarly drafted and executed by the plaintiff and the successful bidders. Defendant Loberg Plumbing & Heating Company (hereinafter Loberg) contracted for the plumbing and heating work. Defendants Edward S. Kern and Frank Persons, doing business as The Kerntile Company, furnished the acoustical tile used in the construction as a subcontractor.
In September 1957, the building was occupied for school purposes although construction was not completed. On November 13, 1957, plaintiff, by its school board, inspected the new building and accepted it as completed, subject to 'punch lists' of certain items which inspection revealed were to be corrected by various contractors, including Loberg, before final payment. On December 27, 1958, Loberg's 'punch list' items were certified as completed, and final payment was authorized and made to Loberg shortly after January 20, 1958. Sometime after payment, on January 30, 1958, a leak developed in the plumbing. Plaintiff called upon Loberg to make repairs in accordance with § 2.30 of the construction contract under which the contractors guaranteed all workmanship and material for a period of one year after acceptance of the work. (The guarantee required the contractors, upon notice, to immediately proceed to repair any defects or replace any faulty material during the guarantee period.) Sometime after completion of the repairs, a fire occurred which damaged the building to the extent of $173,366.92.
At the time of the fire, plaintiff was insured against loss by fire and other named perils under several policies of insurance in which it alone was named as insured. After the insurers had made full payment for all damages claimed, plaintiff commenced this action against Loberg, one of its employees, several other contractors, and the architect, alleging that the fire was caused by negligence in repairing the defect in the plumbing and in specifying and installing nonfireproof acoustical tile. Defendants denied liability and interposed various defenses, including the defense that the terms of the construction contract exonerated them from liability to plaintiff for damage or destruction of the property by fire, however caused. The two defendants involved in this appeal also counterclaimed for damages claimed to result from plaintiff's breach of the construction contract by failing to maintain fire insurance in which they were named as joint insureds with the plaintiff. 1 As the matter comes before us, we are concerned solely with reviewing the trial court's decision that the contract exonerated the defendants from liability for negligently causing the fire. The court, with the parties' acquiescence, declined at this time to rule on the merits of defendants' counterclaim.
From the evidence submitted at trial, the court determined that Loberg's repair of the leaking pipe, although after completion, acceptance, and payment, was in the performance of a contractual obligation; that the parties to the contract intended to impose upon plaintiff the obligation to maintain fire insurance, with the contractors named as joint insureds; and that they also intended to exonerate the contracting parties from any liability for damages by fire resulting from any party's negligence. The court thus concluded to dismiss plaintiff's action on the merits without prejudice to defendants' counterclaims. 2 The pertinent provisions of the contract are as follows:
'The term 'Owner' as used in this specification refers to Independent School District No. 23, Buffalo, Minnesota.
'2.21 TERMS OF PAYMENT
'On or after the first day of each month during the progress of the work, each Prime Contractor shall submit to the Architect an Application for Payment (AIA Form 702) and a Certificate for Payment (AIA Form 703). Both forms are available from the Architect and will be submitted in quadruplicate. The Application for Payment will be based on the Contractor's Cost Break-down and will include all labor accomplished and materials incorporated in the work or delivered to the site since the previous Application for Payment was made.
'Upon approval by the Architect, the Application and Certificate for Payment will be forearded to the Owner, who will pay 90% Of the amount of the Application and will retain 10%. The 10% Retained will be paid within 30 days after the substantial completion of the work, provided the work be then completed and accepted by Owner and the contract fully performed.
'For a period of one year after acceptance of the work, each Prime Contractor shall guarantee all workmanship and materials included in his contract and if, during guarantee period, any defects or faulty materials are found, he shall immediately upon notification from Architect, proceed to replace and repair same without cost to Owner, together with any damage to finish, fixtures, equipment or furnishings that may be damaged due to defective work or materials. Considerations will be allowed for natural use of building during this time.
'2.31 CONTRACTORS LIABILITY INSURANCE
'Each Prime Contractor shall maintain such insurance as will protect him from claims under the Workmen's Compensation Acts and from claims for damages because of bodily injury, including death, which may arise both out of and during operations under this contract, whether such operations be by himself or by any subcontractor or anyone directly or indirectly employed by either of them. This insurance shall be written for not less than the limits of liability as specified as follows:
'1. Contractors Public Liability Insurance $100--300 thousand.
'2. Contractors Contingent Liability Insurance $100--300 thousand.
'3. Property Damage Insurance $50--100 thousand.
'4. Automotive Insurance.
'A. Public Liability thousand. $100--300
'B. Property Damage thousand. $50--50
'This insurance need not cover any liability imposed by Article 31 of Section 1. Certificates of such insurance shall be filed with Owner and Architect. The contractor also shall maintain insurance required under any other Employee Benefits Acts in force at the place of building. Property Damage, Liability, including claims due to automobiles, shall be issued with Bodily Injury Claims under General Liability policy.
'All Liability insurance required herein shall be under Comprehensive General and Automobile Bodily Injury, and Property Damage form policy. Certificates of such aforementioned insurance shall be filed with the Owner and the Architect.
'2.32 OWNERS LIABILITY INSURANCE
'The Owner shall be responsible for and at his option may maintain such insurance as will protect him from his contingent liability to others for damages because of bodily injury, including death, which may arise from operations under this contract, and any other liability for damages which the Contractor is required to insure under any provision of this contract.
'2.33 BUILDERS RISK INSURANCE (FIRE INSURANCE)
'The Owner shall effect and maintain fire insurance, including as minimum coverage fire, extended coverage, and vandalism and malicious mischief insurance on a completed value form, upon the entire structure on which the work of this contract is to be done to one hundred percent of the insurable value thereof, including items of labor and materials connected therewith whether in or adjacent to the structure insured, materials in place, or to be used as part of the permanent construction including surplus materials, shanties, protective...
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