JCM Const. Co., Inc. v. Orleans Parish School Bd., No. 2002-CA-0824

• Court: Court of Appeal of Louisiana (US)
• Writing for the Court: JOAN BERNARD ARMSTRONG, Chief.
• Citation: 860 So.2d 610
• Parties: JCM CONSTRUCTION COMPANY, INC. v. ORLEANS PARISH SCHOOL BOARD. Orleans Parish School Board v. Michael J. Gegg d/b/a JCM Construction Co., Integon Indemnity Corporation, Aetna Casualty & Surety Company, Guy Michael Leppich, in His Capacity as The Natural Tutor of Daniel Leppich, His Minor Son, Barbara Phillips, et al. Integon Indemnity Corporation v. Orleans Parish School Board and Michael J. Gegg.
• Docket Number: No. 2002-CA-0824, No. 2001-C-1930, No. 2002-CA-0825, No. 2002-CA-0826., No. 2003-CA-1077, No. 2003-C-0299
• Decision Date: 17 November 2003

860 So.2d 610

JCM CONSTRUCTION COMPANY, INC.
v.
ORLEANS PARISH SCHOOL BOARD.
Orleans Parish School Board
v.
Michael J. Gegg d/b/a JCM Construction Co., Integon Indemnity Corporation, Aetna Casualty & Surety Company, Guy Michael Leppich, in His Capacity as The Natural Tutor of Daniel Leppich, His Minor Son, Barbara Phillips, et al.
Integon Indemnity Corporation
v.
Orleans Parish School Board and Michael J. Gegg

Nos. 2002-CA-0824, 2003-C-0299, 2001-C-1930, 2003-CA-1077, 2002-CA-0825, 2002-CA-0826.

Court of Appeal of Louisiana, Fourth Circuit.

November 17, 2003.

Rehearing Denied December 9, 2003.

860 So.2d 613

J. Warren Gardner, Jr., Janet L. White, Christovich & Kearney, L.L.P., New Orleans, LA, for Michael J. Gegg, d/b/a JCM Construction Company

George F. Riess, Robert M. Rosenberg, Larry C. Becnel, Polack, Rosenberg & Endom, L.L.P., New Orleans, LA, for Orleans Parish School Board.

(Court composed of Chief Judge JOAN BERNARD ARMSTRONG, Judge CHARLES R. JONES and Judge DAVID S. GORBATY).

860 So.2d 614

JOAN BERNARD ARMSTRONG, Chief Judge

PROCEDURAL HISTORY

In 1989, the Orleans Parish School Board advertised for bid proposals, pursuant to the Louisiana Public Contracts Law, LSA-R.S. 38:2181 et seq., for the relocation of two portable classroom buildings from Karr Junior High School to Harte Elementary School. Michael J. Gegg, d/b/a JCM Construction Company, Inc. (JCM) was the successful bidder on the project. JCM was advised by letter dated November 3, 1989, that he was to contact the School Board's attorney, Mr. Rosenberg, to execute the contract documents.

Article 20 of the "General Conditions" attached to the contract sets forth the contractor's obligation to provide insurance coverage. It states that the contractor "shall effect and maintain, until the date of filing of the Owner's acceptance of the work" six different types of insurance, including "Builders' Risk Insurance for Fire, Extended Coverage, Vandalism, and Malicious Mischief." Article 21, entitled "Submission of Insurance Policies," states that the contractor must furnish to the School Board's notary and the School Board's insurance consultant, at least five days prior to the signing of the contract, the required certificates of insurance. The article further provides:

The Contractor will not be permitted to sign the contract before the School Board Notary until the Certificates of Insurance or insurance policies have been approved by the School Board insurance consultant. In the event the successful contractor fails to provide the Certificates of Insurance or insurance policy for review, the amount of guaranty deposited by him will be forfeited to the Orleans Parish School Board, not as a penalty but as acknowledged liquidated damage.

On November 3, 1989, Gegg submitted to the Laurance Eustis Insurance Agency, Inc., the School Board's insurance consultant, a certificate of insurance showing various types of coverage (general liability, automobile liability, etc.) but not including builder's risk coverage. The certificate of insurance was initially returned by Joseph A. O'Connor, Jr., Vice-President of Laurance Eustis, with a written notation that the School Board should be listed as the certificate holder rather than Laurance Eustis. Gegg submitted a new certificate of insurance correcting this error, and on November 16, 1989, Mr. O'Connor sent Gegg a letter stating: "We have reviewed the Certificate of Insurance for the above captioned [Karr relocation project] and find it meets the necessary requirements for School Board purposes." The contract was executed on November 17, 1989, and recorded on December 1, 1989.

Gegg began work on the project in February of 1990. On August 9, 1990, after the project was substantially complete, but before the School Board had filed its formal acceptance of the work, three juveniles broke into the classrooms and started a fire, which completely destroyed the two portable buildings. The School Board refused to pay Gegg the remainder of the money due under the contract. On June 4, 1991, Gegg filed suit against the School Board seeking the balance due him as well as damages for the Board's alleged breach of contract. On July 14, 1991, the School Board filed suit against Gegg, the three arsonists, Gegg's insurer, and Gegg's surety, Integon Indemnity Corporation (Integon), seeking the value of the portable classrooms. The two suits were consolidated.

On June 14, 1994, the School Board moved for partial summary judgment against Gegg and Integon, alleging that

860 So.2d 615

they were solidarily liable for all damages sustained by the Board as a result of Gegg's failure to procure builder's risk insurance as required by the contract. Integon also filed a motion for summary judgment. The motions were heard on September 30, 1994

On October 5, 1994, the district court granted the School Boards motion for partial summary judgment against Gegg and Integon. In written reasons for judgment, the court stated that Gegg was obligated to provide the insurance under the terms of the contract and "was not in any way relieved of this obligation." The court apparently relied upon the fact that the contract required any modification of its terms to be in writing, signed by both parties. The court further stated that Integon was solidarily liable, up to the amount of its performance of all obligations assumed by Gegg under the contract.

Following the judgment, Gegg moved for a new trial based upon alleged "newly discovered evidence." This evidence was a statement by Gegg's insurance agent that a standard builder's risk insurance policy would not have covered the fire in question. The trial court denied Gegg's motion.

Gegg and Integon appealed the district court's granting of summary judgment in favor of the School Board. Additionally, Integon had applied for writs from this court (94-C-2376) from the trial court's denial of its motion for summary judgment. A panel of this Court converted the writ application and consolidated it with Gegg and Integon's appeal.

On appeal, Gegg argued that the trial court erred in granting summary judgment because: (1) the correspondence exchanged between the parties prior to the execution of the contract effectively modified the contract as to the requirement concerning builder's risk insurance; and (2) the School Board waived its right to claim breach of contract by approving the certificate of insurance submitted by Gegg. Gegg also argued that the trial court should have granted the motion for new trial on the grounds that the impossibility of obtaining builder's risk coverage on the project renders the contractual provision void. Additionally, Integon argued that the trial court erred in holding it liable for Gegg's failure to obtain insurance because the obligation to procure insurance was to be completed prior to the execution of the contract and was not related to the performance of the work.

On appeal the summary judgment granted in favor of the School Board against Integon was reversed and summary judgment was rendered dismissing Integon from the lawsuit. Accordingly, the issue concerning Gegg and Integon's motion for a new trial on the basis of newly discovered evidence was found to be moot.

The matter was remanded to the trial court for further proceedings. On remand, Gegg submitted a Second Supplemental and Amending Petition adding: Laurance Eustis Insurance Agency, Inc., Employers Reinsurance Corporation, and Joseph A. O'Connor, Vice President of Laurance Eustis Insurance Agency, Inc., as Defendants. Gegg alleged that Eustis is liable for negligent misrepresentation and detrimental reliance. On October 3, 1996, Eustis filed a Motion for Summary Judgment arguing that as a disclosed agent for the School Board they cannot be held liable. The district court granted summary judgment in favor of Eustis.¹

860 So.2d 616

This Court affirmed the summary judgment granted in favor of Laurance Eustis Insurance Agency, Inc., Employers Reinsurance Corporation and Joseph A. O'Conner, in Orleans Parish School Board v. Gegg, 97-0947 (La.App. 4 Cir. 1/14/98), 708 So.2d 425, following long standing precedent holding that an agent, acting in that capacity, avoids personal liability to a contracting third party when the third party has notice of the agency relationship and the principal has been identified.

Procedural History of No. 91-12952 on the docket of the Civil District Court for the Parish of Orleans: Orleans Parish School Board v. Michael J. Gegg d/b/a/JCM Construction CO., et al.

Following this Court's affirmance of the summary judgment dismissing the insurance agents, defendant Aetna Casualty and Surety Company submitted its trial witness list on May 21, 1998. Barbara Phillips did likewise on May 28, 1998. On March 4, 1999, the trial court granted Potomac Insurance Company of Illinois's motion to dismiss Barbara Bush Phillips, individually and in her capacity as the natural tutor of her minor sons, Jason and Brian, two of the three juveniles who allegedly set fire to the mobile classrooms, on the grounds that the debt on which the instant suit was based had been discharged by a final decree in Ms. Phillips' bankruptcy action, No. 96-15543(B) on the docket of the United States Bankruptcy Court for the Eastern District of Louisiana.

Aetna filed its answer to the School Board's Amended and Supplemental Petition on January 25, 1999. On February 9, 1999, Aetna filed an amended crossclaim against Brian and Jason Phillips, both of whom reached the age of majority during the pendency of the action. Aetna claimed it is entitled to indemnity from Brian and Jason Phillips because the fire that is the basis of the litigation was solely and proximately caused through the conduct of the Phillips boys in trespassing and/or breaking into the grounds and building of Harte School and in either intentionally or negligently starting the fire that ultimately caused the property damage that is the basis...