Turner Const. Co. v. John B. Kelly Co., Civ. A. No. 73-1988.

CourtUnited States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
Citation442 F. Supp. 551
Docket NumberCiv. A. No. 73-1988.
Decision Date10 May 1976

Richard C. Glazer, Cozen, Begier & O'Connor, Philadelphia, Pa., for plaintiff.

Richard W. Hopkins, White & Williams, Philadelphia, Pa., for defendant.


VanARTSDALEN, District Judge.

During the construction of Three Girard Plaza, Philadelphia, Pennsylvania, a fire occurred that was allegedly caused by the negligence of a subcontractor, John B. Kelly Company (Kelly). The general contractor, Turner Construction Company (Turner) was paid the full amount of the loss, $107,777 less $5,000 deductible, on its fire insurance policy. The insurance carriers, as subrogees of Turner, filed action in the name of Turner against Kelly. The basis of jurisdiction is diversity of citizenship.1

Turner's fire insurance policy under Section 3 "Property Covered" insures:

all property, materials, equipment, machinery and supplies, contractors tools chargeable to the job, owned by the Assured or others and for which the Assured may be liable or assumes liability, to be used in or incidental to the construction.

Section 4, "Extension of Interests Covered" states:

It is specifically understood and agreed that this policy covers both the interest of the Assured and contractor(s) and subcontractor(s) as additional Assureds hereunder, as their interests may appear. (emphasis added).

Section 20, "Company's Rights of Recovery" contains the following clause:

the company specifically waives its rights of subrogation against any person, firm or corporation insured hereunder.

Kelly contends that, as a subcontractor it became an additional assured under Section 4 of the policy and as such is a "person, firm or corporation insured hereunder" against whom the insurer has expressly waived a right of subrogation under Section 20 of the policy. Kelly has moved for summary judgment. The motion will be denied.

Normally, subrogation is allowed in favor of an insurer who pays a loss suffered by its insured which was occasioned by the negligence of a third party. Subrogation thus arises by operation of law and there is no need for the contract of insurance to contain an express stipulation as to subrogation. Roberts v. Fireman's Ins. Co., 376 Pa. 99, 101 A.2d 747 (1953); Fidelity Title and Trust Co. v. People's Natural Gas Co., 150 Pa. 8, 24 A. 339 (1892).

Subrogation, however, has been held not to lie against an insured. "No rights of subrogation can arise in favor of the insurer against its own insured, since by definition subrogation arises only with respect to the rights of the insured against third persons to whom the insurer owes no duty." 16 Couch on Insurance § 61:133 (2d ed. 1966). See, e.g., Graham v. Rockman, 504 P.2d 1351, 1356 (Alaska 1972); Home Ins. Co. v. Pinski Bros., Inc., 160 Mont. 219, 500 P.2d 945, 949 (1972). Although research has failed to locate any appellate court of Pennsylvania squarely deciding this question, lower court cases are in accord. See Allegheny College v. Crump, Inc., 21 D. & C.2d 207 (1959); Hartford Mutual Ins. Co. v. McNally, 82 York Legal Record 110 (1968).

Defendant Kelly is not specifically named as an insured or as a co-insured. Kelly claims coverage under Section 4 of the policy insuring subcontractors as additional assureds "as their interests may appear." Turner disputes this interpretation on two grounds: (1) Kelly suffered no insurable loss as a result of the fire, therefore, it had no insurable interest and could not be an insured; (2) the insurance contract between the insurers and Turner covered actual damage to the property of the subcontractors and did not purport to insure their legal liability to others.

Kelly cites a line of cases, all stemming from two Louisiana decisions, which view the partial insuring of a party as immunizing it from a later subrogation action brought by the insurer. In Glens Falls Ins. Co. v. Globe Indemnity Co., 214 La. 467, 38 So.2d 139 (1948), the insurer issued a policy to Brewster Co., and/or Treadwell. Treadwell was the general contractor on a building owned by Brewster. A fire destroyed the building before it was completed and the insurer paid Brewster's claim. The court refused to allow the insurer to sue Treadwell for negligence as Treadwell was a named co-insured. The court pointed out that Treadwell (unlike Kelly's position in the present case) had a property interest in the entire building. Treadwell was specifically a named insured.

This case was followed a few months later by Louisiana Fire Ins. Co. v. Royal Indemnity Co., 38 So.2d 807 (La.App.1949). Plaintiff was an insurer which had paid a claim of $1,963.52 to a general contractor on a Builder's Risk policy. The policy provided coverage for items of labor, materials, equipment, supplies and forms to be used in the construction of the building. The general contractor then paid defendant Beckett, a subcontractor, on his claim of $175 for damaged property. When the insurer attempted to sue Beckett for its negligence in causing the fire, the court found Glens Falls to be controlling. The court reasoned that by paying Beckett the $175.00, the insurer recognized that Beckett was a co-insured and thus all subrogation was precluded. Turner attempts to distinguish this case on the basis that Beckett had suffered a property loss for which he had been paid, while Kelly suffered no loss whatsoever. This distinction I do not consider to be controlling. Such a decision should not turn on whether Kelly suffered any particular dollar amount of property damage in the fire, but rather, on the extent of the policy coverage.

Louisiana does not distinguish between property and liability coverage in its determination of the existence of a co-insured status. In the recent case of State Farm Fire and Casualty Co. v. Sentry Indemnity Co., 316 So.2d 185 (La.App.1975), the fire insurance policy insured a church building and provided for church employees to recover up to $500 for personal property damage caused by fire. A fire was allegedly caused by the negligence of the minister's wife and the minister was named as vicariously liable. The court dismissed the claim against the minister because the $500 personal effects coverage was deemed to have elevated him to the status of a co-insured. He, therefore, was not amenable to suit on the insurer's $25,000 subrogation claim.

The reasoning of these Louisiana decisions has been adopted in Transamerica Ins. Co. v. Gage Plumbing & Heating Co., 433 F.2d 1051 (10th Cir. 1970) and New Amsterdam Casualty Co. v. Homans-Kohler, Inc., 305 F.Supp. 1017, 1020 (D.R.I.1969). Other courts, however, have rejected the rationale upon which the Louisiana cases were based. Public Service Co. of Oklahoma v. Black and Veatch, Consulting Engineers, 328 F.Supp. 14 (N.D.Okl.1971); Baltimore Contractors, Inc. v. Circle Floor Co. of Wash., Inc., 318 F.Supp. 106 (D.Md.1970); Employers' Fire Ins. Co. v. Behunin, 275 F.Supp. 399 (D.Colo.1967); Paul Tishman Co. v. Carney & Del Guidice, Inc., 36 A.D.2d 273, 320 N.Y.S.2d 396 (1971), aff'd, 34 N.Y.2d 941, 359 N.Y.S.2d 561, 316 N.E.2d 875 (1974); McBroome-Bennett Plumbing, Inc. v. Villa-France, Inc., 515 S.W.2d 32 (Tex.Civ.App. 1974).2 I find the cases rejecting the "Louisiana Rule" more accurately reflect the intent of the parties to the insurance contract entered into between the insurers and Turner Construction Company.

The cases rejecting the "Louisiana Rule" draw a clear distinction between a subcontractor who is insured against property damage alone as opposed to a subcontractor who is additionally protected for his legal liability. In Tishman, supra, the court found the policies "included as assured the defendant as well as other subcontractors." The policies, however, insured only the structure for loss by fire or other included risk. "These policies did not insure the assureds against liability to others." 320 N.Y.S.2d at 397.

A Texas court, in a lengthy opinion, undertook to analyze carefully a factual situation similar to the instant case. In McBroome-Bennett Plumbing, Inc. v. Villa-France, Inc., supra, the insurer instituted suit in the name of Villa-France, a...

To continue reading

Request your trial
19 cases
  • THE CHURCH v. Ferrellgas, Inc., No. 23334-7-II
    • United States
    • Court of Appeals of Washington
    • September 8, 2000
    ...a similar argument, but we need not address it given our resolution of the first issue. 7. See Turner Constr. Co. v. John B. Kelly Co., 442 F.Supp. 551 (E.D.Pa.1976); Public Service Co. of Oklahoma v. Black & Veatch Consul. Eng'rs, 328 F.Supp. 14 (N.D.Okla.1971); Paul Tishman Co. v. Carney ......
  • Frank Briscoe Co., Inc. v. Georgia Sprinkler Co., Inc., 82-8479
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • September 6, 1983
    ...Mutual Insurance Company v. Alsco Construction Company, Inc., 144 Ga.App. 307, 240 S.E.2d 899 (1977); Turner Construction Company v. John B. Kelly Company, 442 F.Supp. 551 (E.D.Pa.1976); 6A Appleman, Insurance Law and Practice § 4054 (1972). The principle of subrogation has been described a......
  • Remy v. Michael D's Carpet Outlets
    • United States
    • Superior Court of Pennsylvania
    • March 12, 1990
    ...Inc. v. Neemar, Inc., supra; Employers of Wausau v. Purex Corp., 476 F.Supp. 140 (E.D.Pa.1979); Turner Const. Co. v. John B. Kelly Co., 442 F.Supp. 551 (E.D.Pa.1976). Michael D's contends, therefore, that Kimco's action against it, which in reality is a claim by Kimco's insurer to enforce s......
  • Erie Ins. Exch. v. Scottsdale Ins. Co., 2:11-cv-429
    • United States
    • United States District Courts. 3th Circuit. United States District Courts. 3th Circuit. Western District of Pennsylvania
    • September 7, 2012
    ...the limited partnership in the insurance policy to its insurable interest in the property. See Turner Constr. Co. v. John B. Kelly Co., 442 F.Supp. 551, 554...
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT