Town of Silverton v. Phoenix Heat Source System, Inc.

• Decision Date: 09 January 1997
• Docket Number: J-M,No. 95CA1576,95CA1576
• Citation: 948 P.2d 9
• Parties: 21 Colorado Journal 14 TOWN OF SILVERTON, a Statutory Town, Plaintiff-Appellant, v. The PHOENIX HEAT SOURCE SYSTEM, INC., a Colorado corporation; Ronald W. Van Kleeck;Constructors, Inc., a Colorado corporation; Nichols Electric, Inc., a Colorado corporation; Reynolds/Larson Associates, Inc., a Colorado corporation, Defendants-Appellees. . II
• Court: Colorado Court of Appeals

Page 9

948 P.2d 9

21 Colorado Journal 14

TOWN OF SILVERTON, a Statutory Town, Plaintiff-Appellant, v. The PHOENIX HEAT SOURCE SYSTEM, INC., a Colorado

corporation; Ronald W. Van Kleeck; J-M Constructors, Inc.,

a Colorado corporation; Nichols Electric, Inc., a Colorado

corporation; Reynolds/Larson Associates, Inc., a Colorado

corporation, Defendants-Appellees.

No. 95CA1576.

Colorado Court of Appeals,

Div. II.

Jan. 9, 1997.

As Modified on Denial of Rehearing May 1, 1997.

Certiorari Granted Dec. 2, 1997.

Senter, Goldfarb & Rice, L.L.C., Steven J. Dawes, Peter H. Doherty, Denver, for Plaintiff-Appellant.

White and Steele, P.C., John P. Craver, George A. Codding, III, Denver, for Defendants-Appellees The Phoenix Heat Source System, Inc. and Ronald W. Van Kleeck.

Weller Friedrich, L.L.C., Dennis J. Bartlett, Denver, for Defendant-Appellee J-M Constructors, Inc.

Susemihl, Lohman & McDermott, P.C., Gary Cowan, Colorado Springs, for Defendant-Appellee Nichols Electric, Inc.

James A. Shaner, Durango, for Defendant-Appellee Reynolds/Larson Associates, Inc.

Opinion by Judge ROTHENBERG.

In this action for damages based on negligence, breach of warranty, and products liability, plaintiff, the Town of Silverton (town), appeals the summary judgment entered in favor of defendants, Phoenix Heat Source, Inc. (Phoenix Heat); Ronald W. Van Kleeck; J-M Constructors, Inc. (J-M); Nichols Electric, Inc.; and Reynolds/Larson Associates, Inc. We affirm in part, reverse in part, and remand with directions.

In October 1990, the town contracted with J-M, as general contractor, for installation of a new roof on the town hall. Phoenix Heat was a subcontractor that designed, manufactured, and supplied an electric snow melting system installed on the roof of the town hall. Van Kleeck is a principal of Phoenix Heat and, for the purposes of this appeal, also was a subcontractor as were Reynolds/Larson Associates, Inc., and Nichols Electric, Inc.

The construction contract included a form agreement drafted in 1987 by the American Institute of Architects (AIA) called the "General Conditions of the Contract for Construction." It contained two waiver of subrogation provisions.

Paragraph 11.3.5 states in pertinent part that:

[I]f after final payment property insurance is to be provided on the completed Project through a policy or policies other than those insuring the Project during the construction period, the Owner shall waive all rights in accordance with the terms of Subparagraph 11.3.7 for damages caused by fire or other perils covered by this separate property insurance....

Paragraph 11.3.7 also states that:

The Owner and Contractor waive all rights against (1) each other and any of their subcontractors, sub-subcontractors, agents and employees, each of the other, and (2) the Architect, Architect's consultants ... for damages caused by fire or other perils to the extent covered by property insurance obtained pursuant to this Paragraph 11.3 or other property insurance applicable to the Work.... A waiver of subrogation shall be effective ... whether or not the person or entity had an insurable interest in the property damaged.

Upon completion of the roofing project in May 1991, the town made its final payment to defendants.

In November 1992, the town hall was damaged in a fire. The town was insured against the loss by the Colorado Intergovernmental Risk Sharing Agency (CIRSA). After CIRSA compensated the town for the fire damage, it assigned the town all of its interests, including rights of subrogation, for benefits it had paid due to the fire.

The town then filed this action alleging that the fire had been caused by problems in the snow melting system installed by defendants. Defendants moved for summary judgment, arguing that the town had waived its right to subrogate its claim to CIRSA and, therefore, that assignment of the claim had conveyed no legal rights to the town. The town argued that the waiver provisions were inapplicable because they were limited to: (1) damages incurred during the period of construction and the fire damage in this case occurred after the project was completed; (2) damages to the work performed under the contract; and (3) damages occurring as a result of the conduct of a subcontractor and not a provider of materials.

The trial court granted summary judgment for defendants and dismissed the town's complaint.

I.

The town contends that the trial court erred in interpreting the waiver of subrogation provision. The town argues that the waiver was limited: (1) spatially, to damages to the new roof and not to other parts of the town hall damaged by the fire, and (2) temporally, to damages occurring during the construction period. The town also asserts that the waiver of subrogation clause does not apply to its products liability and breach of warranty claims against Phoenix Heat. We agree the waiver of subrogation provision was limited spatially but reject the town's other contentions.

Summary judgment is proper under C.R.C.P. 56(c) when the pleadings, affidavits, depositions, or admissions reveal no genuine issue of material fact and establish that the moving party is entitled to judgment as a matter of law. Continental Air Lines, Inc. v. Keenan, 731 P.2d 708 (Colo.1987).

The meaning of a contract is found by examining the entire instrument, not by viewing clauses or phrases in isolation. Each word should be given meaning if possible. U.S. Fidelity & Guaranty Co. v. Budget Rent-A-Car Systems, Inc., 842 P.2d 208 (Colo.1992).

The interpretation of a written contract is a question of law and a reviewing court need not defer to a trial court's interpretation. Fibreglas Fabricators, Inc. v. Kylberg, 799 P.2d 371 (Colo.1990).

In determining the intent of contracting parties, we must give the terms of the contract their plain and ordinary meaning. Cache National Bank v. Lusher, 882 P.2d 952 (Colo.1994).

A trial court may not look beyond the plain words of a contract to interpret the parties' underlying intent unless the contract terms are ambiguous or are used in a special or technical sense not defined in the contract. KN Energy, Inc. v. Great Western Sugar Co., 698 P.2d 769 (Colo.1985).

A. Spatial Scope of Waiver

The town first contends that the scope of the subrogation waiver in paragraph 11.3.7 is limited to the value of "the Work," i.e., the new roof, and is inapplicable to other parts of the town hall that were damaged in the fire. We agree.

Paragraph 11.3.7 waives the subrogation rights of both the property owner and the contractor for damages caused by fire to the extent covered by the owner's property insurance obtained pursuant to paragraph 11.3 or other property insurance applicable to the work.

The agreement defines "Work" as "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." In another provision, it specifies the "Work of the Contract" as the reroofing of the town hall.

The waiver of subrogation provisions placed defendants essentially in the position of co-insureds on the town's property insurance policy only with respect to damages to the work. See Public Employees Mutual Insurance Co. v. Sellen Construction Co., 48 Wash.App. 792, 740 P.2d 913 (1987);c.f. 1700 Lincoln Limited v. Denver Marble & Tile Co., 741 P.2d 1270 (Colo.App. 1987)(insurer may not subrogate against its insured). In the event of fire loss to the work, the parties agreed to exculpate each other from liability due to such fire loss, but to look solely to the town's property insurance for recovery. See Steamboat Development Corp. v. Bacjac Industries, Inc., 701 P.2d 127 (Colo.App.1985). However, nothing in the agreement shows an intent to extend this mutual exculpation to parts of the building other than the work.

Other courts have construed the AIA General Conditions agreement form in a similar manner. For example, in Butler v. Mitchell-Hugeback, Inc., 895 S.W.2d 15 (Mo.1995), the designer of a remodelled portion of a warehouse was sued after the warehouse collapsed. The designer argued that the claim was barred by a waiver of subrogation clause in a contract identical to the one at issue here. The Missouri court disagreed, and construed the waiver provision as effective only to the extent of the value of the work. Butler v. Mitchell-Hugeback, Inc., supra. See also S.S.D.W. Co. v. Brisk Waterproofing Co., Inc., 76 N.Y.2d 228, 557 N.Y.S.2d 290, 556 N.E.2d 1097 (N.Y.1990) (construing 1976 version of the General Conditions form agreement); Public Employees Mutual Insurance Co. v. Sellen Construction Co., supra (same).

Reading the provisions of the agreement together, we agree with the conclusion reached in Butler and other similar cases. But see Lloyd's Underwriters v. Craig & Rush, Inc., 26 Cal.App.4th...