New York Bd. of Fire Underwriters v. Trans Urban Const. Co., Inc.

• Decision Date: 11 January 1983
• Citation: 458 N.Y.S.2d 216,91 A.D.2d 115
• Court: New York Supreme Court — Appellate Division
• Parties: The NEW YORK BOARD OF FIRE UNDERWRITERS, as Authorized Representative of Various Insurance Companies, as Subrogee of the People of the State of New York, Plaintiff-Respondent, v. TRANS URBAN CONSTRUCTION CO., INC. & Lasker-Goldman Corporation, a Joint Venture, Defendant-Appellant, and Samson Window Corporation, Jenkins Electric Company, Inc. and Percy C. Ifill, Conrad A. Johnson and George Hanchard, Architects, d/b/a Ifill Johnson & Hanchard, Defendants. TRANS URBAN CONSTRUCTION CO., INC. & Lasker-Goldman Corporation, a Joint Venture, Third-Party Plaintiff-Appellant, v. CENTRAL LATHING CO., INC., Third-Party Defendant.

Page 216

458 N.Y.S.2d 216

91 A.D.2d 115

The NEW YORK BOARD OF FIRE UNDERWRITERS, as Authorized

Representative of Various Insurance Companies, as

Subrogee of the People of the State of

New York, Plaintiff-Respondent, v. TRANS URBAN CONSTRUCTION CO., INC. & Lasker-Goldman

Corporation, a Joint Venture, Defendant-Appellant,

and

Samson Window Corporation, Jenkins Electric Company, Inc.

and Percy C. Ifill, Conrad A. Johnson and George

Hanchard, Architects, d/b/a Ifill

Johnson & Hanchard, Defendants.

TRANS URBAN CONSTRUCTION CO., INC. & Lasker-Goldman

Corporation, a Joint Venture, Third-Party Plaintiff-Appellant, v. CENTRAL LATHING CO., INC., Third-Party Defendant.

Supreme Court, Appellate Division,

First Department.

Jan. 11, 1983.

Frederick D. Berkon, New York City, of counsel (Townley & Updike, New York City), for defendant-appellant and third-party plaintiff-appellant.

Bernard Meyerson, New York City, of counsel (Zipser, Zipser & Bernstein, P.C., New York City), for plaintiff-respondent.

Before MURPHY, P.J., and KUPFERMAN, SANDLER, SULLIVAN and KASSAL, JJ.

KASSAL, Justice.

Defendant, Trans Urban Construction Co., Inc. and Lasker-Goldman Corporation, a joint venture (Trans Urban), appeals from an order which denied its motion for summary judgment dismissing the complaint. The action is brought by the New York Board of Fire Underwriters (Underwriters), representing eight designated insurance companies as subrogee of the State of New York, to recover against the defendants to the extent of payments previously made by the eight insurers after a windstorm loss during construction of the State Office Building in Harlem, New York City. Plaintiff alleges that the substantial windstorm damage on December 2, 1974, resulted from the negligence by the named defendants in their construction of the building. The legal issue tendered on appeal is whether a right of subrogation exists against appellant to sustain the sufficiency of the complaint for a recovery of the sums previously paid to it as a named additional insured under the insurance policies issued.

This action was commenced in 1976 to recover $200,689.78 for windstorm damage sustained while the building was under construction. Each of the eight insurance carriers had issued an all risk policy which insured the State, as owner, and the general contractor and certain subcontractors, as named additional insureds. Appellant, Trans Urban, was the general contractor, responsible for the construction of the building. The remaining defendants include Samson Window Corporation, a subcontractor responsible for roofing work, Jenkins Electric Company, Inc., a prime electrical contractor, and the individual defendants, Percy Ifill, Conrad Johnson and George Hanchard, d/b/a Ifill, Johnson & Hanchard, the architects. The complaint alleges that as a result of a windstorm, a loggia ceiling in the building collapsed, resulting in substantial property damage proximately caused by the negligence of the named defendants.

The contract entered into between the State, as owner, and Trans Urban, as general contractor, imposed the risk of loss upon the contractor and required it to repair and replace any damage occasioned during the construction of the project, without regard to fault. Article 25A, section 126A, amending the general conditions of the contract, provides:

"126A. RISK OF LOSS. The Contractor shall faithfully perform and complete all of the work required by the Contract, assuming full responsibility for the following risks:

(a) Loss or damage, direct or indirect, to the contract work including the buildings, structures, or any other construction in progress, or to any plant, equipment, tools, materials or property furnished, used, installed, or received by the State. The Contractor shall bear all such risk of loss or damage until all of the work covered by the Contract has been finally accepted by the State. In the event of such loss or damage, the Contractor shall forthwith repair, replace, and/or make good any such loss or damage without cost to the State."

(b) Damage or injury of any kind or nature (including death resulting therefrom) to persons and/or property caused, directly or indirectly, by an occurrence arising out of, resulting from or in connection with (1) the performance by the Contractor of the work covered by the Contract or (2) the Contractor's operations, actions, omissions, or presence at or near the vicinity of the construction site."

The agreement obligated the owner to obtain all risk insurance against physical damage to the property during construction, naming as an additional insured, inter alia, Trans Urban, as follows:

"124A. BUILDERS RISK FIRE INSURANCE. From commencement of the work until final acceptance, the State shall procure and maintain, at its own expense, an All Risk Direct Physical Damage Property policy with coverages including, but not limited to, buildings in the course of construction and materials to be made a part of the work. The State, and the Contractor, as their interests may appear, will be named as the parties insured. The policy shall contain a provision that any loss shall be payable to the State on behalf of the insureds. The State shall, on behalf of the insureds, have power to adjust and settle with the insurer any loss or claim under such policy."

In accordance with its contractual obligation, the State secured eight all risk policies, each of which named appellant and other designated contractors as additional assureds, in addition to the owner. Each policy afforded builders' risk coverage to the extent of the actual cash value of the property, but not in excess of the cost to repair or replace the property, with extended coverage to include, inter alia, windstorm loss.

Subsequent to the windstorm damage sustained during the construction of the building, Trans Urban, fulfilling its contractual obligation, made the necessary repairs in conjunction with the other prime contractors and, thereafter, submitted claims to the eight insurers in the total sum of $214,601.87, representing appellant's cost for such repairs. Following negotiations with the insurance carriers, a settlement was arrived at in the amount of $154,431.50, with each of the insurance carriers paying its pro rata share of the total claim by checks payable to both the State of New York and appellant. The payments constituted an acknowledgement by each carrier that the policies afforded coverage for the windstorm loss at the construction site. The State, apparently recognizing that it suffered no loss since the repairs had been wholly borne by appellant and the other contractors, endorsed each of the checks, thereby transmitting full payment of the settlement to the prime contractors.

After the settlement, this action was instituted by Underwriters, allegedly representing the eight insurers as subrogee of the State to recover as against appellant the sums previously paid to it as an additional insured under the builders' risk insurance policies issued. The complaint, in three causes of action, asserts a right by the State to recover for the loss. Insofar as concerns appellant, the first, third and fourth causes of action, respectively, purport to assert claims premised upon breach of contract, negligence and breach of warranty. Defendants, it is alleged, were negligent and careless in the construction of the building and failed to follow specifications, as a result of which the project was so improperly constructed that it did not withstand anticipated environmental conditions. This, in turn, caused a collapse of the roof, resulting in substantial property damage.

In moving for summary judgment dismissing the complaint, Trans Urban claimed that no right of subrogation existed, since the State, as subrogor, had suffered no loss, the cost of repairs having been fully assumed by the contractors, who had repaired the physical damage to the building. At Special Term appellant argued that since Underwriters, as subrogee of the State, stood in the same position as the subrogor, with no greater rights, it could not maintain this action in the shoes of the State to recover as against the contractor for the very payments which it had received as an assured.

Underwriters placed principal reliance upon Paul Tishman Company, Inc. v. Carney & Del Guidice, Inc., 34 N.Y.2d 941, 359 N.Y.S.2d 561, 316 N.E.2d 875, as authorizing subrogation against the contractors, albeit they were named as additional insureds in the policies. In claiming entitlement to subrogation, plaintiff here contended that the State did suffer a loss, evidenced by the fact that the insurers had issued their drafts payable to the State, in addition to the named contractors. Plaintiff also claimed that...