Opinion
CV106003359S
03-22-2016
Connecticut Interlocal Risk Management Agency a/s/o Borough of Naugatuck v. Silktown Roofing, Inc. et al
UNPUBLISHED OPINION
MEMORANDUM OF DECISION RE MOTION FOR SUMMARY JUDGMENT (#162)
Andrew W. Roraback, J.
I
BACKGROUND
The plaintiff, Connecticut Interlocal Risk Management Agency (CIRMA), claims that it is subrogated to the rights of its insured, the Borough of Naugatuck, to pursue claims sounding in breach of contract and negligence against the defendant, Silktown Roofing, Inc. (Silktown). The plaintiff paid a claim to Naugatuck under a general liability policy for extensive damages suffered by Naugatuck as a result of fireproofing material being dislodged from the underside of the metal decking of a roof at Naugatuck High School. The defendant was hired to remove and replace an existing roof and then install a photovoltaic panel system on that roof. The plaintiff has characterized the damaged fireproofing material as unrelated to the work that the defendant was contracted to perform.
The plaintiff paid Naugatuck for the damages and treated " the matter as a general property claim and did not pay damages based on a builder's risk policy." Plaintiff's brief at 10, December 9, 2014. The plaintiff's policy that paid the general liability claim also included a builder's risk endorsement. There is no evidence that Naugatuck procured a separate builder's risk policy, with either the plaintiff or another company, which was an option Naugatuck had to satisfy its responsibilities under the contract.
The defendant filed this motion for summary judgment on the ground that the language of the contract with Naugatuck prohibits the plaintiff from bringing this subrogation claim. The plaintiff counters that, because the loss it covered was to property that was not related to the work the defendant was contracted to perform, the contract permits this subrogation action to be maintained.
II
Discussion
" Summary judgment is a method of resolving litigation when pleadings, affidavits, and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." (Internal quotation marks omitted.) Grenier v. Commissioner of Transportation, 306 Conn. 523, 534-35, 51 A.3d 367 (2012) " [T]he genuine issue aspect of summary judgment requires the parties to bring forward before trial evidentiary facts, or substantial evidence outside the pleadings, from which the material facts alleged in the pleadings can warrantably be inferred . . . A material fact has been defined adequately and simply as a fact which will make a difference in the result of the case." (Citation omitted; internal quotation marks omitted.) Buell Industries, Inc. v. Greater New York Mutual Ins. Co., 259 Conn. 527, 556, 791 A.2d 489 (2002). " In seeking summary judgment, it is the movant who has the burden of showing the nonexistence of any issue of fact. The courts are in entire agreement that the moving party for summary judgment has the burden of showing the absence of any genuine issue as to all the material facts, which, under applicable principles of substantive law, entitle him to a judgment as a matter of law." (Internal quotation marks omitted.) Romprey v. Safeco Ins. Co. of America, 310 Conn. 304, 319-20, 77 A.3d 726 (2013).
This motion calls upon the court to harmonize several provisions of a 1997 edition of a form contract promulgated by the American Institute of Architects (AIA), which was used by the parties to memorialize their agreement. As a general proposition, these provisions address how risks occasioned by the work of a contractor, in connection with the undertaking of a specific construction project, will be allocated between the owner and the contractor. This allocation of risk extends to insurers of the respective parties through the waiver of subrogation language included in the contract. The uncertainty created by the interplay among these provisions has given rise to this litigation.
The form contract in question obligates the owner to have insurance to cover losses that are specific to the construction project itself. Such insurance may be provided by a separate builder's risk policy (Option A) or by an existing policy of the owner that includes a builder's risk endorsement (Option B). It is clear that the owner waives its right of subrogation under both Option A and Option B when an insurance claim is paid to the owner for damages that are limited exclusively to " the Work" the contractor has been retained to perform.
What is not clear is whether there are circumstances in which the contract permits a right of subrogation to be exercised to recover for covered losses suffered by an owner to property damaged by the contractor that is outside of " the Work" the contractor has been hired to perform (non-Work property).
This issue is central to this case and has also given rise to widespread litigation in many other jurisdictions. More specifically what must be determined is whether the language in this form contract precludes an owner from exercising its right of subrogation against a contractor for damages to " non-Work" property when the owner has been compensated for those losses from a single insurance policy that provided both general liability coverage and an endorsement for the contractually required builder's risk coverage.
There are two competing outcomes in the cases deciding this issue. " [O]ne approach makes a distinction between Work (as that word is defined in the contract) and non-Work property and limits the scope of the [subrogation] waiver to damages to the Work; and the second approach draws no distinction between Work and non-Work, but instead, limits the scope of the [subrogation] waiver to the proceeds of the insurance provided under the contract between the owner and the contractor." Trinity Universal Ins. Co. v. Bill Cox Construction, Inc., 75 S.W.3d 6, 11 (Tex.App. 2001).
The lines of reasoning underlying these contrary interpretations are well illustrated in the divergent opinions of the Supreme Courts of Nebraska and Colorado. See Lexington Ins. Co. v. Entrex Communication Services, Inc., 275 Neb. 702, 749 N.W.2d 124 (Neb. 2008); Copper Mountain, Inc. v. Industrial Systems, Inc., 208 P.3d 692 (Colo. 2009). A discussion of the respective holdings of these cases will follow later in this opinion.
The contract provision obligating the owner to procure insurance coverage is Section 11.4.1, which provides in pertinent part as follows: " Unless otherwise provided, the Owner shall purchase and maintain . . . property insurance written on a builder's risk " all-risk" or equivalent policy form . . . until final payment has been made . . . or until no person or entity other than the Owner has an insurable interest in the property required under this section 11.4 to be covered, whichever is later. This insurance shall include interests of the Owner, the Contractor, Subcontractors and Sub-subcontractors in the Project."
The provision of the contract speaking to subrogation rights is Section 11.4.7, which provides in pertinent part as follows: " Waivers of Subrogation. The Owner and Contractor waive all rights against (1) each other and any of their subcontractors . . . for damages caused by fire or other causes of loss to the extent covered by property insurance obtained pursuant to this Section 11.4 or other property insurance applicable to the Work . . ."
Also relevant is section 11.4.5, which provides in pertinent part as follows: " If during the Project construction period the owner insures properties, real or personal or both, at or adjacent to the site by property insurance under policies separate from those insuring the Project . . . the Owner shall waive all rights in accordance with the terms of Section 11.4.7 for damages caused by fire or other causes of loss covered by this separate property insurance."
" [W]here there is definitive contract language, the determination of what the parties intended by their contractual commitments is a question of law . . . [T]he interpretation and construction of a written contract present only questions of law, within the province of the court . . . so long as the contract is unambiguous and the intent of the parties can be determined from the agreement's face . . . Contract language is unambiguous when it has a definite and precise meaning about which there is no reasonable basis for a difference of opinion." (Internal quotation marks omitted.) Nash v. Stevens, 144 Conn.App. 1, 18, 71 A.3d 635, cert. denied, 310 Conn. 915, 76 A.3d 628 (2013). " If the language of the contract is susceptible to more than one reasonable interpretation, the contract is ambiguous." United Illuminating Co. v. Wisvest-Connecticut, LLC, 259 Conn. 665, 671, 791 A.2d 546 (2002). " Furthermore, a presumption that the language used is definitive arises when the contract at issue is between sophisticated parties and is commercial in nature." Id., 670.
" The intent of the parties as expressed in a contract is determined from the language used interpreted in the light of the situation of the parties and the circumstances connected with the transaction . . . [T]he intent of the parties is to be ascertained by a fair and reasonable construction of the written words . . ." Prymas v. New Britain, 122 Conn App. 511, 517, 3 A.3d 86, cert. denied, 298 Conn. 915, 4 A.3d 833 (2010).
The two competing interpretations of the interplay among the sections at issue in this case are illustrated by the decisions in Copper Mountain and Entrex, respectively.
In Copper Mountain, Inc. v. Industrial Systems, Inc., supra, 208 P.3d 692, the Colorado Supreme Court concluded that a right of subrogation existed to bring a claim for damages to non-Work property in a situation analogous to the case now being decided. The court observed as follows: " The trial court found that it is clear that all fire damage to the Lodge was covered by the same pre-existing [insurance policy], albeit possibly by different provisions within that one policy . . . Paragraph 11.4.5 does not apply here, because Copper's insurance covering non-Work was not 'separate' and was not procured during the project construction period.
" Furthermore, paragraph 11.4.5 is limited by the terms of paragraph 11.4.7, because it states that 'the Owner shall waive all rights in accordance with the terms of Subparagraph 11.4.7 . . .' Instead of expanding the scope of paragraph 11.4.7, paragraph 11.4.5 clarifies what type of insurance will be subject to the waiver in paragraph 11.4.7. Specifically, the purpose of paragraph 11.4.5 is to clarify that if, subsequent to the execution of the contract and during the construction period, the owner acquires additional insurance under separate policies for properties at or adjacent to the site that have been added to the Project, the owner waives rights to the extent of that insurance.
" The purpose of paragraph 11.4.5 cannot be to waive the owner's rights to sue for damages to non-Work, because that interpretation would render paragraph 11.4.5 inconsistent with paragraph 11.4.7, which only waives the owner's rights to sue for damages to Work. Under such an interpretation, the more limited waiver in paragraph 11.4.7 would be superseded by the broader waiver of paragraph 11.4.5, and paragraph 11.4.7 would be superfluous. We choose a construction of the contract that harmonizes provisions instead of rendering them superfluous. If the intent of the contract were to waive all claims to the non-Work to the extent covered by Copper's insurance, the contract could have stated this explicitly. It is significant that the contract did not do so." (Citations omitted; emphasis in original; internal quotation marks omitted.) Copper Mountain, Inc. v. Industrial Systems, Inc., supra, 208 P.3d 700.
In Lexington Ins. Co. v. Entrex Communication Services, Inc., supra, 749 N.W.2d 124, another case analogous to and interpreting the same provisions being considered in this decision, the Nebraska Supreme Court concluded that " the waiver of subrogation is subject to only one reasonable interpretation . . . that the contract is not ambiguous and that here, the waiver applies to damages to both the Work and the non-Work property." Id., 132.
The rationale underlying this conclusion was cogently articulated as follows: " We understand [Section 11.4.5] to mean that if the owner acquires a separate property insurance policy to cover non-Project property--a policy that did not cover the Project or Work property--and the non-Project property is damaged, the owner waives subrogation rights for the insurer as to those damages. So even though the damage occurred to non-Work property, the owner waived subrogation rights because the damages were insured. This provision shows that the contracting parties were not opposed to waiving damages to non-Work property.
" Subparagraph 11.4.5 reinforces our conclusion that the waiver in subparagraph 11.4.7. applies to all damages--including Work and non-Work damages--covered by the owner's property insurance policy. An example is helpful. Suppose the owner purchased two separate property insurance policies: 'Policy A' that covered only the Project (Work) and 'Policy B' that covered only the non-Work property. Under subparagraph 11.4.7, the owner waives subrogation rights as to any damages covered by Policy A (damages to Work property). Under subparagraph 11.4.5, the owner waives subrogation rights as to any damages covered by the separate Policy B (damages to the non-Work property). So, applying subparagraphs 11.4.5 and 11.4.7, the owner waives damages to both the Work and the non-Work property when the owner obtains two separate policies. We see no reason why the parties would intend a different result when, instead of purchasing two separate policies, the owner relied on one policy covering both the Work and the non-Work property . . .
" [This] approach furthers the policy underlying the use of waiver of subrogation clauses in construction contracts . . . because it avoids disrupting the project and eliminates the need for lawsuits." (Footnote omitted.) Id., 718-19.
This approach also eliminates another risk inherent in the conclusion reached by the Colorado Supreme Court. In cases where a single policy covers both " Work" and " non-Work" property of the owner, the Colorado approach would encourage insurers to make payments under the general liability provisions of the policy to secure a right to subrogation, even in cases where the damages in question might reasonably be characterized as being related to " the Work."
This court adopts the reasoning of Entrex and finds that the paragraphs in question are subject to only one reasonable interpretation, namely that no right of subrogation exists for damages to non-Work property when payment for those damages has been made through a single insurance policy which covers damages to both Work and non-Work property.
The plaintiff has also argued that summary judgment should be denied because enforcement of the anti-subrogation provisions of this contract would be in violation of General Statutes § 52-572k. This court can find no reason why the holding of the well-reasoned decision of the Appellate Court in Best Friends Pet Care, Inc. v. Design Learned, Inc., 77 Conn.App. 167, 823 A.2d 329 (2003), does not apply with equal validity the instant case. In Best Friends, the Court determined that the anti-subrogation language in an AIA contract did not violate § 52-572k, because it was in the nature of a permissible allocation of risk provision rather than exculpatory provision which was intended to be prohibited through the operation of § 52-572k. Best Friends Pet Care, Inc. v. Design Learned, Inc., supra, 77 Conn.App. 175. These same considerations appertain in this case, and § 52-572k is, therefore, no bar to the entry of summary judgment.
General Statutes § 52-572k renders void indemnification and hold harmless clauses in certain construction contracts.
The plaintiff's final claim is that the language of the anti-subrogation provisions of the contract would only operate to bar its contract claim and should not be interpreted to prohibit it from maintaining a cause of action in negligence. This argument must fail because it ignores the plain language of the contract. Specifically, section 11.4.7 states that " [t]he Owner and Contractor waive all rights against (1) each other . . . for damages caused by fire or other causes of loss to the extent covered by property insurance . . ." " All rights" can only be reasonably interpreted to include rights sounding in both contract and tort. As such, the plaintiff's argument on this point is unavailing.
III
Conclusion
For the reasons set forth above, there is no genuine issue of material fact that the defendant Silktown Roofing, Inc. is entitled to judgment as a matter of law. The defendant's motion for summary judgment is, therefore, granted.