Case Title: Bd. of Comm’rs v. Teton Corp.

Citation: 

Docket Number: 72S04-1410-CT-642

State: indiana

Court: Indiana Supreme Court

Date: 2015-05-13T00:00:00Z

Document:
ATTORNEYS FOR APPELLANT 
Julia Blackwell Gelinas 
Maggie L. Smith 
Frost Brown Todd LLC 
Indianapolis, Indiana 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ATTORNEYS FOR APPELLEE TETON CORPORATION 
Richard T. Mullineaux 
Crystal G. Rowe 
Dustin L. Howard 
Kightlinger & Gray, LLP 
New Albany, Indiana 
 
ATTORNEYS FOR APPELLEE INNOVATIVE ROOFING 
SOLUTIONS, INC. 
Scott L. Tyler 
Eric T. Eberwine 
Waters, Tyler, Hofmann & Scott, LLC 
New Albany, Indiana 
 
ATTORNEYS FOR APPELLEES GUTAPFEL ROOFING, 
INC. AND DANIEL L. GUTAPFEL 
Grover B. Davis 
James T. Flanigan 
McClure McClure & Davis 
Indianapolis, Indiana 
__________________________________________________________________________________  
 
In the 
Indiana Supreme Court 
_________________________________ 
 
No. 72S04-1410-CT-642 
 
THE BOARD OF COMMISSIONERS  
OF THE COUNTY OF JEFFERSON, 
 
Appellant (Plaintiff),  
 
 
V. 
 
TETON CORPORATION, INNOVATIVE ROOFING  
SOLUTIONS, INC., GUTAPFEL ROOFING, INC., AND 
DANIEL L. GUTAPFEL, 
 
Appellees (Defendants).  
_________________________________ 
 
Appeal from the Scott Circuit Court, No. 72C01-1108-CT-15 
The Honorable Roger L. Duvall, Judge 
_________________________________ 
 
On Petition to Transfer from the Indiana Court of Appeals, No. 72A04-1302-CT-55 
_________________________________ 
 
May 13, 2015 
May 13 2015, 2:06 pm
 
2 
 
Rush, Chief Justice. 
 
Property owners and contractors routinely agree to waive subrogation rights for damages. 
Here, the parties did so by incorporating an American Institute of Architects (“AIA”) standard 
form into their contract for the repair of the Jefferson County courthouse. While the repairs were 
underway, a fire severely damaged the courthouse. The AIA contract waives subrogation rights 
for all “damages caused by fire or other perils to the extent covered by property insurance.” The 
parties now dispute the meaning of the subrogation waiver. Owner seeks to subrogate all damages 
unrelated to repairs, arguing that the subrogation waiver applies only to construction-related 
damages. Contractor argues that all damages covered by Owner’s property insurance policy are 
waived. Both parties cite other states’ precedent to support their position, and the decision below 
created a split of authority in our own Court of Appeals. We granted transfer in this matter of first 
impression to establish the Indiana approach.  
 
We hold the plain meaning of the contract defines the scope of the waiver based on the 
extent and source of coverage, not the nature of the property damaged. Accordingly, we agree 
with the majority of jurisdictions that have applied this plain meaning to bar recovery for all 
damages covered by the same property insurance policy used to cover construction-related 
damages—commonly referred to as the “any insurance” approach. Because Contractors have 
shown that Owner’s insurance covered all damages, the subrogation waiver applies to bar Owner’s 
claim.  Accordingly, we affirm summary judgment in favor of Contractors. 
Standard of Review 
 
On summary judgment, our appellate review is de novo. Schwartz v. Heeter, 994 N.E.2d 
1102, 1105 (Ind. 2013). The meaning of the subrogation waiver is “particularly well-suited for de 
novo appellate review” because, like all matters of contract interpretation, it presents a pure 
question of law. Holiday Hospitality Franchising, Inc. v. AMCO Ins. Co., 983 N.E.2d 574, 577 
(Ind. 2013). Here, that question is whether we should interpret the subrogation waiver according 
to either (1) the “Work versus non-Work” approach, under which the Owner waives subrogation 
only for losses related to “the Work” (i.e., the contracted-for construction and services); or (2) the 
“any insurance” approach, under which the Owner waives subrogation for all losses covered by 
Owner’s insurance policy “applicable to the Work,” regardless of whether the damage was to work 
or non-work property. 
 
3 
 
Facts and Procedural History 
 
On May 20, 2009, a fire destroyed much of the Jefferson County courthouse, located in 
Madison, Indiana. Jefferson County alleged that the fire began while Daniel Gutapfel—a roofing 
subcontractor—was soldering copper downspouts near the wood frame of the courthouse as part 
of a four-phase plan to remodel and renovate the entire building. The damages far exceeded the 
remodeling costs, but were fully covered by Jefferson County’s property insurer, which paid 
Jefferson County under its policy after the fire. The parties now contest whose insurance company 
should cover the loss.  
 
Seven months earlier, Jefferson County awarded the first phase of its courthouse remodeling 
plan to Teton Corporation, and both parties signed the contract on October 29, 2008. The contract 
was for repairs to the courthouse roof, flashing, gutters, and downspouts at a price of $87,280.00. 
Teton subcontracted to Innovative Roofing Solutions, Inc., which sub-subcontracted to Gutapfel 
Roofing, Inc.—owned and operated by Daniel Gutapfel. Jefferson County’s contract with Teton 
incorporated a 1987 version of the AIA “Standard Form of Agreement Between the Owner and 
Contractor” (A101-1987) and “General Conditions of the Contract for Construction” (A201-1987) 
(collectively the “AIA contract”).  
 
The AIA contract contains a broad waiver of subrogation provision for all damages covered 
by property insurance:   
11.3.7 Waivers of Subrogation. The Owner and Contractor waive 
all rights . . . 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, except such 
rights as they have to proceeds of such insurance held by the Owner 
as fiduciary. . . . A waiver of subrogation shall be effective as to a 
person or entity even though that person or entity would otherwise 
have a duty of indemnification, contractual or otherwise, did not pay 
the insurance premium directly or indirectly, and whether or not the 
person or entity had an insurable interest in the property damaged. 
 
4 
 
(Emphasis added.) Jefferson County as Owner is required to obtain the property insurance that 
triggers the waiver—there is no comparable requirement for Teton as Contractor.1 The AIA contract 
also requires each party to obtain its own liability insurance,2 but such insurance has no impact on 
the subrogation waiver because (as we discuss below) waiver depends on the extent of coverage of 
property insurance, not liability insurance. The waiver and the insurance requirements work in 
tandem to ensure that the parties resolve damages disputes through insurance claims, not lawsuits. 
Am. Zurich Ins. Co. v. Barker Roofing L.P., 387 S.W.3d 54, 61 (Tex. Ct. App. 2012). 
 
Jefferson County could satisfy its property insurance requirements in one of two ways: either 
(1) procure a separate policy to cover only the renovations—commonly referred to as “builders-risk 
insurance”—or (2) rely on its existing “all-risk” property insurance policy to cover the entire 
courthouse, including the renovations. See ¶¶ 11.3.1, 11.3.1.1; 2 Philip L. Bruner & Patrick J. 
O’Connor, Jr., Bruner & O’Connor on Construction Law § 5:220 (2002). Jefferson County chose to 
rely on its existing “all-risk” policy that it maintained with St. Paul Fire and Marine Insurance 
Company (“St. Paul policy”).  
                                                 
1  
11.3.1 Unless otherwise provided, the Owner shall purchase and maintain . 
. . property insurance in the amount of the initial Contract Sum as well as 
subsequent modifications thereto for the entire Work at the site . . . . 
 
11.3.1.1 Property insurance shall be on an all-risk policy form . . . . 
 
2  
11.1.1 The Contractor shall purchase . . . and maintain . . . such insurance as 
will protect the Contractor from claims set forth below which may arise out 
of or result from the Contractor’s operations under the Contract and for 
which the Contractor may be legally liable, whether such operations be by 
the Contractor or by a Subcontractor or by anyone directly or indirectly 
employed by any of them, or by anyone for whose acts any of them may be 
liable. . . . 
 
. . .  
 
.5 claims for damages, other than to the Work itself, because of 
injury to or destruction of tangible property, including loss of use 
resulting therefrom;  
 
. . .  
11.2.1 The Owner shall be responsible for purchasing and maintaining the 
Owner’s usual liability insurance. . . .  
 
 
5 
 
 
After the fire, Jefferson County filed a subrogation claim (presumably on behalf of St. Paul) 
against Teton, Innovative Roofing, Gutapfel Roofing, and Daniel Gutapfel to recover damages 
caused to its property outside the scope of the work—that is, property unrelated to repairs to the 
roofing, flashing, gutters, and downspouts. Jefferson County claimed breach of implied warranty 
and negligence and/or gross negligence against all defendants, breach of contract against Teton 
and all subcontractors; and it sought to compel arbitration. All Defendants moved for summary 
judgment, arguing Jefferson County had waived its claim under the AIA waiver because its St. 
Paul policy covered all the damages. Jefferson County responded that it had waived subrogation 
rights only for damages to the work—not non-work property.  
 
 The trial court granted final summary judgment for Defendants on all claims and denied 
Jefferson County’s motion for partial summary judgment as moot. It found that Jefferson County 
had waived subrogation rights for all claims because it had insurance that covered all the damages 
caused by the fire. Since the trial court found the waiver dispositive, it did not address any of the 
issues related to Gutapfel’s gross negligence or Teton’s or Innovative Roofing’s vicarious liability. 
The trial court noted that the scope of its judgment was only “[t]he parties[’] [sic] rights and 
responsibilities under their contract” and not “[t]he nature and cause of th[e] fire . . . .” The trial 
court also denied Jefferson County’s subsequent motion to correct error.  
 
The Court of Appeals affirmed in a split decision. Bd. of Comm’rs. v. Teton Corp., 3 
N.E.3d 556 (Ind. Ct. App. 2014). The majority adopted the “any insurance” approach to 
interpreting the subrogation waiver and held that the waiver barred Jefferson County’s claims. Id. 
at 570–71. Judge Brown dissented, however, reasoning that Indiana should continue its recent 
trend of applying the “Work versus non-Work” approach and hold that Jefferson County waived 
claims for only work damages. Id. at 574–75; see Midwestern Indem. Co. v. Sys. Builders, Inc., 
801 N.E.2d 661 (Ind. Ct. App. 2004), trans. denied; Allen Cty. Pub. Library v. Shambaugh & Son, 
L.P., 997 N.E.2d 48 (Ind. Ct. App. 2013). See also Bhd. Mut. Ins. Co. v. Michiana Contracting, 
Inc., 971 N.E.2d 127 (Ind. Ct. App. 2012). On the gross negligence issue, the majority simply 
noted in a footnote that “Jefferson County has not designated any evidence that would establish 
that Gutapfel or the other Appellee contractors were grossly negligent (or acted willfully or 
wantonly).” Teton Corp., 3 N.E.3d at 571 n.10.  
 
6 
 
 
We granted transfer. Ind. Appellate R. 58(A). We summarily affirm the Court of Appeals 
on the gross negligence issue, id., and now affirm summary judgment in favor of Contractors and 
against Jefferson County. 
Discussion and Decision 
 
We must decide whether, under the plain meaning of the AIA contract, property owners 
waive subrogation rights for construction damages by maintaining “all-risk” property insurance 
policies that cover both their construction-related damages and their entire property. Our Court of 
Appeals has offered two competing approaches to resolve this question, mirroring a national split of 
authority. In a matter of first impression for this Court, we adopt the “any insurance” approach, 
which applies the plain meaning of the waiver, and therefore hold Jefferson County’s subrogation 
claim is barred.  
I. 
The Plain Meaning of the AIA Subrogation Waiver Defines the Scope of the Waiver By 
the Source and Extent of the Insurance Coverage, Not By the Property Damaged. 
 
The AIA subrogation waiver is well-known in the construction industry and it plays a 
critical role in the AIA contract’s scheme of remedying construction losses through insurance 
claims, not lawsuits. See Am. Zurich, 387 S.W.3d at 61. The parties incorporated the 1987 version 
of the waiver:  
11.3.7 Waivers of Subrogation. The Owner and Contractor waive 
all rights . . . 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, except such 
rights as they have to proceeds of such insurance held by the Owner 
as fiduciary. . . . A waiver of subrogation shall be effective as to a 
person or entity even though that person or entity would otherwise 
have a duty of indemnification, contractual or otherwise, did not pay 
the insurance premium directly or indirectly, and whether or not the 
person or entity had an insurable interest in the property damaged.  
(Emphasis added.) We presume the waiver represents “the freely bargained agreement of the 
parties.” Haegert v. Univ. of Evansville, 977 N.E.2d 924, 937 (Ind. 2012). Therefore, when the terms 
are “clear and unambiguous,” we “apply the plain and ordinary meaning of that language and enforce 
the contract according to those terms.” Id. 
 
7 
 
 
The waiver applies to all “damages caused by fire,” but only “to the extent covered by 
property insurance obtained pursuant to this Paragraph 11.3 or other property insurance applicable 
to the Work.” Thus, to determine which fire damages are covered by the subrogation waiver, we 
must look at everything that follows the phrase “to the extent.” The positioning and plain meaning 
of the word “covered” restricts the scope of the subrogation waiver based on the source and extent 
of the property insurance coverage, not the nature of the damages or of the damaged property.  
One of two kinds of property insurance coverage will trigger the waiver: (1) “property 
insurance obtained pursuant to this Paragraph 11.3” or (2) “other property insurance applicable to 
the Work.” And as discussed earlier, paragraph 11.3 coverage can be either “property insurance in 
the amount of the initial Contract Sum” (i.e., builder’s risk insurance) or an existing “all-risk” 
property insurance policy that covers both the entire existing property and the work. See Bruner & 
O’Connor, Jr., supra, § 5:220. Obtaining either form of insurance triggers paragraph 11.3 
coverage,3 and consequently triggers the subrogation waiver. The second kind of coverage that 
triggers the waiver is any other property insurance policy “applicable to the Work.” This 
alternative is broader than paragraph 11.3 coverage, and serves as a catch-all provision describing 
any other property insurance that may cover construction-related damages. In sum, if property 
damages (of any sort) are “covered” by an insurance policy that fits within one of these two 
descriptions, the waiver applies. And here, Jefferson County was covered under a property 
insurance policy that fit within the first description—an “all-risk” policy that covered both existing 
property and the work. 
Jefferson County argues that we should begin our analysis instead with the language of the 
AIA insurance requirement—paragraph 11.3—not the plain meaning of the subrogation waiver 
itself. Because the AIA contract requires Jefferson County to procure insurance only for the work, 
not the entire courthouse, Jefferson County believes the scope of the waiver should be just as 
narrow. But even though the scope of the insurance requirement is indeed narrow, the plain 
                                                 
3 Courts that have considered the AIA subrogation waiver have disagreed on whether a pre-existing “all-risk” 
property insurance policy that covers all of an owner’s property—including the work—fits under the 
paragraph 11.3 coverage or under the general category of “other property insurance applicable to the Work.” 
Lexington Ins. Co. v. Entrex Commc’n Servs., Inc., 749 N.W.2d 124, 134 (Neb. 2008). But courts generally 
agree that such a policy is clearly one of the two. Id. at 133–34. 
 
8 
 
meaning of the waiver is not. Nothing in the AIA contract links the scope of the waiver to the 
minimum coverage property owners must procure under paragraph 11.3. Property owners are 
certainly free to use limited builder’s risk insurance, which covers only the construction project 
and nothing else. But property owners are also free to use existing—and broader—“all-risk” 
insurance policies to cover both existing property and the work. Contrary to Jefferson County’s 
argument, damages are waived “to the extent” the damages are “covered,” not “to the extent” they 
are “applicable to the Work.”   
Jefferson County also argues that the “any insurance” approach would disrupt the allocation 
of construction risk agreed to by the parties—which it sees as Jefferson County covering damages 
to the work through property insurance and Teton covering damages to non-work property through 
liability insurance. But no such allocation between property and liability insurance is expressed 
anywhere in the contract. Rather, the waiver of subrogation plainly applies to “damages caused by 
fire or other perils”—without exception or distinction—“to the extent covered by property 
insurance.” This necessarily implies that Teton’s duty to procure liability insurance had no bearing 
on damages that are already covered by the Owner’s property insurance. Finally, in a separate 
provision, the AIA contract provides that even when the Owner has both builders-risk coverage for 
the work and separate property insurance for “adjoining or adjacent” property, its subrogation waiver 
under paragraph 11.3.7 extends to “fire or other perils covered by this separate property insurance 
policy.” This separate provision would be an anomaly within the AIA contractual scheme if the 
parties already expected Teton’s liability insurance to cover non-work damages. In sum, we reject 
Jefferson County’s understanding of the AIA contract’s allocation of construction risk.  
 
Thus, we adopt the “any insurance” approach to the AIA waiver because it reflects the plain 
and unambiguous meaning of the contract—that as long as a property owner’s damages are 
covered by any property insurance policy used to insure construction-related damages (i.e., the 
work), the waiver applies to all damages. Under this approach, Jefferson County has waived its 
subrogation claim because it relied on its pre-existing “all-risk” property insurance policy to insure 
both the work and all other damages to the courthouse. Future parties that incorporate the AIA 
contract into their construction agreements are certainly free to restrict the scope of the subrogation 
waiver to work-related damages alone. But the parties did not adopt such a restriction here, so the 
waiver’s plain meaning applies to bar Jefferson County’s claim.  
 
9 
 
II. The Plain Meaning of the AIA Waiver Is Consistent with the Majority of Courts 
Interpreting Similar AIA Waivers. 
 
Our holding is supported by the majority of other jurisdictions that have adopted the “any 
insurance” approach when interpreting similar AIA waivers. The Nebraska Supreme Court’s 
decision in Entrex, supra note 3, is a prime example. In Entrex, the owner of a television station 
contracted with Entrex to replace an analog television antenna with a digital antenna. 749 N.W.2d at 
126. Their contract incorporated the same 1997 version of the AIA contract Teton and Jefferson 
County used. Id. at 127. It required the owner to obtain property insurance to cover the work, which 
the owner did by relying on its existing “all-risk” property insurance policies, instead of 
“purchas[ing] a separate builder’s risk policy covering the Work.” See id. at 127, 131. The contract 
also waived all subrogation rights for damages “to the extent covered by property insurance obtained 
pursuant to this [agreement] or other property insurance applicable to the Work.” Id. at 128. After the 
antenna collapsed during construction, the owner’s insurance company, Lexington Insurance, covered 
all losses except the deductible, id. at 126, then brought a subrogation claim against Entrex for non-
work damages, id. at 131.    
 
The Nebraska Supreme Court held that the AIA subrogation waiver unambiguously applied 
“to both the Work and the non-Work property.” Id. at 132. It relied on several decisions from other 
jurisdictions that had reached the same conclusion. Id. at 134 (discussing Haemonetics Corp. v. 
Brophy & Phillips Co., Inc., 501 N.E.2d 524 (Mass. App. Ct. 1986) and Lloyd’s Underwriters v. 
Craig & Rush, Inc., 32 Cal. Rptr. 2d 144 (Cal. Ct. App. 1994)). “[T]he scope of the waiver clause 
was not defined by the property damaged, but, rather, by the extent the damages were covered by 
those policies described in the [waiver] clause.” Id. at 134 (emphasis added). As long as the non-
work damages were covered under the same policy that covered the work, the subrogation waiver 
applied. Id. The Nebraska Supreme Court also found that this approach was “more consistent with 
other provisions in the parties’ agreement” and “furthers the purpose of the waiver clause,” namely 
avoiding disruptive litigation and eliminating disputes over whether damages were caused to work 
or non-work property. Id. at 134–35.  
 
10 
 
 
Entrex represents just one of twelve other jurisdictions that have already adopted the “any 
insurance” approach.4 And each of these cases relies primarily upon the plain meaning of the AIA 
waiver, just as we do today.  
 
Yet, two recent decisions by our Indiana Court of Appeals applied the “Work versus non-
Work” approach to the very same AIA subrogation waiver we consider today. Midwestern, 801 
N.E.2d at 672–73; Allen County, 997 N.E.2d at 54–55. Unlike the Court of Appeals opinion below 
and the majority of jurisdictions applying the “any insurance” approach, both Midwestern and 
Allen County held that the AIA waiver applies to cover damages only to the work and never damages 
to existing property unrelated to the construction—even if such non-work damages are covered by 
the same “all-risk” property insurance policy used to insure the work. And another Court of Appeals 
decision has assumed—without discussing—the central holding of those two decisions. Bhd. Mut., 
971 N.E.2d 127 (holding that floor installed by property owner was not part of the work and thus 
not subject to the AIA subrogation waiver). The “Work versus non-Work” approach does have 
support in several other jurisdictions,5 but we believe that the “any insurance” approach more 
faithfully tracks the plain meaning of the contract. We therefore resolve the split in authority 
created by the Court of Appeals (now-vacated) decision in this case and apply the “any insurance” 
approach to bar Jefferson County’s claim.  
                                                 
4 ASIC II Ltd. v. Stonhard, Inc., 63 F. Supp. 2d 85 (D. Me. 1999); Lloyd’s Underwriters, 32 Cal. Rptr. 2d 
144; Hous. Inv. Corp. v. Carris, 389 So. 2d. 689 (Fla. Ct. App. 1980); E.C. Long, Inc. v. Brennan’s of 
Atlanta, Inc., 252 S.E.2d 642 (Ga. Ct. App. 1979); Willis Realty Assocs. v. Cimino Constr. Co., 623 A.2d 
1287 (Me. 1993); Haemonetics, 501 N.E.2d 524 (interpreting AIA form A201-1976); Emp’rs Mut. Cas. 
Co. v. A.C.C.T., Inc., 580 N.W.2d 490 (Minn. 1998) (interpreting AIA form A201-1987); Entrex, 749 
N.W.2d 124 (interpreting AIA form A201-1997); Chadwick v. CSI, Ltd., 629 A.2d 820 (N.H. 1993); Mu 
Ch. of Sigma Pi Fraternity of U.S., Inc. v. Ne. Constr. Servs., Inc., 709 N.Y.S.2d 677, 680 n.2 (N.Y. App. 
Div. 2000), leave to appeal denied; Westfield Ins. Grp. v. Affinia Dev., LLC, 982 N.E.2d 132 (Ohio Ct. 
App. 2012) (interpreting AIA form A201-2007); Trinity Universal Ins. Co. v. Bill Cox Const., Inc., 75 
S.W.3d 6 (Tex. App. 2001). 
5 Fid. & Guar. Ins. Co. v. Craig-Wilkinson, Inc., 948 F. Supp. 608 (S.D. Miss. 1996), aff’d, 101 F.3d 699 
(5th Cir. 1996) (interpreting AIA form A201-1987); Copper Mountain, Inc. v. Indus. Sys., Inc., 208 P.3d 692 
(Colo. 2009) (en banc); Butler v. Mitchell-Hugeback, Inc., 895 S.W.2d 15 (Mo. 1995) (en banc); S.S.D.W. 
Co. v. Brisk Waterproofing Co., Inc., 556 N.E.2d 1097 (N.Y. 1990); Travelers Ins. Cos. v. Dickey, 799 P.2d 
625 (Okla. 1990); Pub. Emp. Mut. Ins. Co. v. Sellen Const. Co., Inc., 740 P.2d 913 (Wash. Ct. App. 1987) 
(interpreting A201-1976). 
 
 
11 
 
Conclusion 
 
Jefferson County agreed to waive its rights to bring this subrogation claim by relying on its 
existing “all-risk” property insurance policy that covered the work and all other losses suffered in 
the courthouse fire. We reach this decision because the plain language of the AIA contract restricts 
the scope of the waiver based on the source and extent of property insurance coverage, not the 
nature of the damages. Accordingly, we affirm summary judgment in favor of Contractors and 
against Jefferson County in all respects.  
Dickson, Rucker, David, and Massa, JJ., concur.