South Tippecanoe School Bldg. Corp. v. Shambaugh & Son, Inc.

Decision Date10 October 1979
Docket NumberNo. 1-1278A361,1-1278A361
Citation182 Ind.App. 350,395 N.E.2d 320
PartiesSOUTH TIPPECANOE SCHOOL BUILDING CORPORATION, Appellant (Plaintiff Below), v. SHAMBAUGH & SON, INC., Monitor Products, A Division of Comerco, Inc., Lee J. Brockway, John A. Shaver, John F. Swindell, Robert I. McKay, and Robert S. Osmond, d/b/a Shaver and Company, Paul Akers, Incorporated, Worrall Propane Corporation and T & S Construction, Inc., Appellees (Defendants Below).
CourtIndiana Appellate Court

Brent E. Dickson, Dickson, Reiling & Teder, Lafayette, for appellant.

Arthur P. Kalleres, David L. Gray, Ice, Miller, Donadio & Ryan, Indianapolis, and David A. Ault, Wernle, Ristine & Ayres, Crawfordsville, for appellee, Shambaugh & Son, Inc.

Randolph A. Leerkamp, John R. Hiner, Osborn & Hiner, Indianapolis, for appellee, Paul Akers, Inc.

John T. Lorenz, Kightlinger, Young, Gray & De Trude, Indianapolis, for appellee, Monitor Products, A Division of Comerco, Inc.

Nicholas C. Nizamoff, White, Raub, Reis, Wick & Riegner, Indianapolis, for appellees, Lee J. Brockway, John A. Shaver, John F. Swindell, Robert I. McKay, and Robert S. Osmond, d/b/a Shaver and Co.



Generally stated, this appeal involves the right of builder's risk insurance subrogation against allegedly negligent contractors, subcontractors, and architects.

Plaintiff-appellant South Tippecanoe School Building Corporation's (South Tippecanoe) complaint against defendant-appellees Shambaugh, etc. (Defendants) alleging negligence, strict liability, breach of implied warranty, and breach of contractual warranty, sought damages for losses sustained in a gas explosion and fire at a Tippecanoe County high school which was in the process of construction. Of the $75,628.63 damages claimed, 1 South Tippecanoe was paid $74,628.63 by the Hartford Insurance Company pursuant to builder's risk insurance with the remaining $1000 representing South Tippecanoe's deductible. This action is thus a subrogation action prosecuted by the Hartford.

The Defendants herein are Shambaugh & Son, Inc. (Shambaugh), subcontractor for mechanical work, including plumbing and heating, to the general contractor, K. H. Kettlehut & Co., Inc.; Monitor Products, A Division of Comerco, Inc. (Monitor), "Contractor" for general case work and booth-bench seating under contract with Tippecanoe School Corporation; 2 Shaver and Company (Shaver), architects; and, Paul Akers, Incorporated (Akers), variously described as subcontractor and materialman, and sub-subcontractor. 3


Upon motions for summary judgment by the Defendants and South Tippecanoe's motion for partial summary judgment on the issues raised by Defendants' motions, the trial court granted the former motions and denied the latter. Its judgment, omitting formal parts, is as follows:

The Court, having had under advisement the motions for summary judgment of defendants, Shambaugh & Son, Inc., Paul Akers, Inc., Monitor Products, a division of Comerco, Inc. and Shaver and Company, also, of motion of plaintiff for partial summary judgment. Having heard argument and having considered such motions, now finds that there is no genuine issue as to any material fact with regard to the provisions of the contracts entered into as set forth in the pleadings, the relationships of the various parties, the manner in which the loss was incurred and the right of plaintiff's insurance carrier to subrogation to any recovery plaintiff may obtain.

The Court further finds that, as a matter of law, the provisions of the contracts prevent plaintiff from recovering against any of said defendants and that said defendants are entitled to judgments in their favor and against plaintiff; that the motion of each said defendant for summary judgment should be granted and the motion for partial summary judgment, filed by plaintiff, should be denied.

The Court further finds that there is no reason for delay in entering final judgment for and on behalf of said defendants and against plaintiff; that the issues between such parties are fully adjudicated by this entry and that final judgment as to such parties should be granted.

South Tippecanoe's appeal from this summary judgment raises essentially this issue: whether the trial court correctly found that certain provisions of the contracts involved herein bar recovery of amounts paid out under a builder's risk insurance policy from allegedly negligent Defendants.


The construction at issue here was governed by a contract between South Tippecanoe ("Owner" under the contract) and the general contractor Kettlehut ("Contractor" under the contract). The following clauses of the General Conditions of the Contract for Construction are most relevant for our discussion and decision here:


11.3.1 Unless otherwise provided, the Owner shall purchase and maintain property insurance upon the entire Work 4 at the site to the full insurable value thereof. This insurance shall include the interests of the Owner, the Contractor, Subcontractors and Sub-subcontractors in the Work and shall insure against the peril of Fire, Extended Coverage, Vandalism and Malicious Mischief. (Subparagraph)

11.3.3 Any insured loss is to be adjusted with the Owner and made payable to the Owner as trustee for the insureds, as their interests may appear, . . . (Subparagraph)

11.3.6 The Owner and Contractor waive all rights against each other for damages caused by fire or other perils to the extent covered by insurance provided under this Paragraph 11.3, except such rights as they may have to the proceeds of such insurance held by the Owner as trustee. The Contractor shall require similar waivers by Subcontractors and Sub-subcontractors in accordance with Clause In waiving rights of recovery under terms of this paragraph, the term "Owner" shall be deemed to include his employees and the Architect and his employees as the Owner's representative as provided for in the Contract Document. (Subparagraph)


5.3.1 All work performed for the Contractor by a Subcontractor shall be pursuant to an appropriate agreement between the Contractor and the Subcontractor (and where appropriate between Subcontractors and Sub-subcontractors) which shall contain provisions that: (Subparagraph)

.5 waive all rights the contracting parties may have against one another for damages caused by fire or other perils covered by the property insurance described in Paragraph 11.3, except such rights as they may have to the proceeds of such insurance held by the Owner as trustee under Paragraph 11.3; . . . (Clause)

In fulfilling the 11.3.1 requirements, South Tippecanoe obtained builder's risk insurance. The Hartford builder's risk policy, whose named insured is South Tippecanoe, includes these relevant provisions:


A. This policy covers on the building(s) or structure(s) described herein while in the course of construction, erection, fabrication, repair or completion, including foundations, additions, attachments and all permanent fixtures belonging to and forming a part of said building(s) or structure(s).

B. This policy also covers temporary structures at the job site; and in addition, materials, equipment and supplies of all kinds pertaining to the construction of said building(s) or structure(s) or temporary structure(s), while temporarily held at any location within the United States or Canada prior to delivery to the job site, while in transit to and after delivery at the job site, and while there awaiting installation and during installation.

C. This policy also covers, WHEN NOT OTHERWISE COVERED BY INSURANCE, builders' machinery, tools and equipment owned by the insured or similar property of others for which the insured is legally liable, all while contained in said building(s) or structure(s) or temporary structure(s) or on vehicles, or in the open; only while on the described premises or within 100 feet thereof.


In the event of any payment under this policy, the Company shall be subrogated to all of the Insured's rights of recovery therefor against any person or organization and the insured shall execute and deliver instruments and papers and do whatever else is necessary to secure such rights. The Insured shall do nothing after loss to prejudice such rights.

This insurance, however, shall not be invalidated should the Insured waive in writing prior to a loss to the described property any or all right of recovery against any entity for whom work is being performed, or against any subcontractor working on the job insured hereunder.


The respective positions of the Defendants in this cause merit individual attention; however, in that their arguments embrace repeated themes, we will set forth and respond to those common contentions before treating the individual concerns.

The Defendants submit that subparagraph 11.3.1 of the General Conditions obligated South Tippecanoe to purchase and maintain property insurance covering the full insurable value of the project including the interests of the owner, contractor, subcontractors, and sub-subcontractors. In suing the co-defendants, contend the Defendants, South Tippecanoe is suing its own insureds an action South Tippecanoe cannot take according to the weight of authority from other jurisdictions and our Third District's recent Morsches Lumber v. Probst, (1979) Ind.App., 388 N.E.2d 284 (transfer pending), decision. Defendants further submit that by reason of subparagraph 11.3.6 of the General Conditions, South Tippecanoe waived all rights against the Defendants. Defendants maintain that the contract provisions evince an intent to place the risk of loss which might arise in the course of construction upon insurance, and respecting damage to the Work, an intent to waive...

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