Case Title: Berger v. Teton Shadows Inc.

Citation: 

Docket Number: 90-31

State: wyoming

Court: Wyoming Supreme Court

Date: 1991-11-05T00:00:00Z

Document:
Berger v. Teton Shadows Inc.1991 WY 136820 P.2d 176Case Number: 90-31Decided: 11/05/1991Supreme Court of Wyoming
STATT 
BERGER, D/B/A STATT'S PLUMBING,

APPELLANT 
(DEFENDANT/CROSS-CLAIMANT),

v.

TETON 
SHADOWS INCORPORATED, A WYOMING CORPORATION,

APPELLEE 
(DEFENDANT/CROSS-CLAIMANT).

Appeal from the District Court, 
TetonCounty, D. Terry Rogers, 
J.

 Steven R. 
Helling of Murane & Bostwick, Casper, for appellant.

 R. Michael 
Mullikin of Mullikin, Larson & Swift, Jackson, for appellee.

Before 
URBIGKIT, C.J., and THOMAS, CARDINE, MACY and GOLDEN, 
JJ.

 OPINION

MACY, Justice.

 [¶1.]     Appellant Statt Berger 
appeals from the district court's judgment awarding damages to Appellee Teton 
Shadows Incorporated resulting from a fire at a condominium project in 
TetonCounty. Berger and Teton 
Shadows stipulated that Teton Shadows' damages totaled $120,000. At the 
conclusion of a two-day bench trial, the district court found, inter alia, that 
Berger's negligence caused the fire, and it granted judgment in favor of Teton 
Shadows for the full $120,000.1 Berger does not appeal from the 
district court's finding of negligence. Berger's appeal, instead, focuses upon 
the district court's interpretation of the parties' written 
agreement.

 [¶2.]     We reverse in part and 
affirm in part.

 [¶3.]     Berger raises the 
following issues:

1. Did 
the trial court err in awarding Appellee judgment against Appellant for damages 
caused by fire, in light of Appellee's contractual agreement to provide fire 
insurance?

2. Did 
the trial court err in allowing a subrogated claim by Appellee's insurer in 
light of Appellee's contractual agreement to provide fire insurance and further 
in light of Appellant's claim of being a co-insured under Appellee's insurance 
policy, since the policy provided coverage for the personal property of others, 
including Appellant?

3. Did 
the trial court err in not entering judgment in favor of Appellant and against 
Appellee for the damages sustained by Appellant as a result of the fire, in 
light of Appellee's contractual agreement to provide fire 
insurance?

 [¶4.]     Teton Shadows responds 
with the following issues:

1. 
Whether Teton Shadows contractually waived the right to pursue a claim for 
ordinary negligence against Berger (or agreed to indemnify Berger for his own 
negligence) as to any loss due to Berger's negligence for either the insured 
portion of the claim, the uninsured portion of the claim or 
both.

2. 
Whether Berger was a "co-insured" under or a party to the policy of Farm Bureau 
so as to preclude recovery by Farm Bureau of its subrogated interest in the 
claim of Teton Shadows for the negligence of Berger.

3. 
Whether Berger is the real party in interest with regard to any claim seeking to 
recover amounts paid to Mateosky in settlement of Mateosky's claim against 
Berger for negligence.

4. 
Whether Berger stated a claim under any judicially recognizable theory upon 
which relief could be granted for the recovery of amounts paid by CIGNA (his 
insurance company) to Mateosky based on a claim that Berger was 
negligent.

 [¶5.]     Teton Shadows, 
owner/general contractor, hired Berger as a subcontractor to do the plumbing on 
the project. The terms of their agreement were set out in a written contract.2 The dispute centered on the 
contract provision, "Owner to carry fire, tornado and other necessary 
insurance." Berger argued that this provision required the owner (Teton Shadows) 
to insure the project against fire and, thereby, shifted the risk of loss to 
Teton Shadows' insurance carrier. Teton Shadows claimed that, notwithstanding 
this provision, Berger was still responsible for the damages which resulted from 
his negligence.

 [¶6.]     In True Oil Company v. Sinclair Oil 
Corporation, 771 P.2d 781, 790 (Wyo. 1989) (citations omitted), we reviewed 
this Court's role in contract interpretation:

The 
determination of the parties' intent is our prime focus in construing or 
interpreting a contract. "If an agreement is in writing and the language is 
clear and unambiguous, the intention is to be secured from the words of the 
agreement." Nelson v. Nelson, 740 P.2d 939, 940 (Wyo. 1987). When the language is clear and 
unambiguous, the writing as a whole should be considered, taking into account 
relationships between various parts. Contract construction and interpretation 
are done by the court as a matter of law.

It is 
also true in contract interpretation that, "`Ambiguity . . . is not generated by 
subsequent disagreement of the parties concerning [the contract's] meaning.'" Ricci v. New Hampshire Insurance Company, 
721 P.2d 1081, 1085 (Wyo. 1986).

 [¶7.]     In a Florida case with facts 
nearly identical to those in this case, the plumber's alleged negligence caused 
a fire which damaged the owner's insured property. Housing Investment Corporation v. 
Carris, 389 So. 2d 689 (Fla.App. 1980). The owner's insurance carrier paid 
the loss and sought subrogation. The Florida court denied subrogation because the 
parties' contract provided, "`Owner to carry fire, tornado, and other necessary 
insurance.'"3 Id. at 689. The court 
reasoned:

[T]he 
parties foresaw the possibility of loss by fire arising from construction work 
and . . . the contract provision was for the purpose of providing protection 
from that risk by use of insurance.

Id. at 689-90. The 
Florida court 
discussed the rationale for parties shifting the risk of loss to the insurance 
carrier:

The 
owner had, as all owners always have, the right to insure his own property for 
his own exclusive benefit without the consent or agreement of the contractor or 
anyone else. Therefore, the only reasonably conceivable purpose of a 
construction contract provision placing an obligation on the owner to carry 
insurance is to benefit the contractor by providing him protection and 
exculpation from risk of liability for the insured loss. Although the contractor 
was not named as an insured, nor does the contract require this to be done, the 
contract insurance provision is valuable to the contractor for the very purpose 
this case exemplifies and serves to limit the owner to insurance proceeds even 
though the loss was caused by the negligence of the 
contractor.

Id. at 690.

 [¶8.]     In this case, the 
parties' contract was unambiguous. The contract provision, owner to carry fire 
insurance, clearly expressed the parties' intent to shift the risk to Teton 
Shadows' insurance carrier. We agree with the Florida court's reasoning and hold that Teton 
Shadows is limited to the proceeds of its insurance policy for its recovery. The 
district court's $120,000 judgment for Teton Shadows is 
reversed.

 [¶9.]     Because the parties' 
contract was unambiguous, we do not need to decide whether Berger was a 
co-insured under Teton Shadows' builder's risk policy. As to Berger's third 
issue, the district court did not err in denying Berger's cross-claim against 
Teton Shadows for damages. Berger does not cite any authority or present a 
cogent argument to support his claim that Teton Shadows agreed to insure against 
the losses which Berger suffered due to the fire. Bland v. State, 803 P.2d 856 (Wyo. 
1990).

 [¶10.]  Reversed in part and affirmed in 
part.

THOMAS, 
J., dissenting, with GOLDEN, J., joining.

GOLDEN, 
J., dissenting.

THOMAS, 
Justice, dissenting, with whom GOLDEN, Justice, joins.

 [¶11.]  I dissent from the disposition of this 
case according to the majority opinion. I agree with the views expressed in the 
dissenting opinion of Justice Golden, in which I join. I am further persuaded 
that Carris v. Housing Investment 
Corporation, 389 So. 2d 689 (Fla.App. 1980), the cases upon which it relies, 
and other cases of similar tenor suffer from a fundamental fault in analysis 
that, for me, dictates a different result.

 [¶12.]  The articulated rationale found in such 
cases is that since an owner always has a right to insure his property, a 
provision in a construction contract assigning the responsibility for obtaining 
coverage to the owner would have no efficacy other than to include the 
contractor as an insured. It follows according to the reasoning of those courts 
that no action will lie against the contractor, even for a loss caused by his 
own negligence, because an insurance carrier cannot seek recoupment from its 
insured. The cases do not seem to consider the proposition that the contractor 
might have no insurable interest in the property other than the work that the 
contractor had performed. If the cases were limited to including the contractor 
as an insured to the extent of the contractor's insurable interest, they would 
be far more sound.

 [¶13.]  The majority asserts that a provision of 
a construction contract that provides, "Owner to carry fire, tornado and other 
necessary insurance," is a clear expression of the intent of the parties that 
the risk is to be shifted to the insurance carrier selected by the owner, 
including the risk of the contractor's negligence. I can find a clear expression 
of an intent that as between the owner and contractor, the owner is going to 
accept the expense and the necessary investment of time and effort to obtain the 
insurance alluded to in their agreement. Anything beyond that is conjecture that 
leads to a legal fiction.

 [¶14.]  The fallacy of the approach adopted by 
the majority, as I see the situation, is that an insurance policy obtained by 
the owner of property, covering certain limited risks to his property, becomes 
in an almost mystical way a liability policy for the contractor, covering the 
risk of the contractor's negligence. I submit that is an entirely different risk 
from the risks for which the insurance carrier received its premium, and that 
the insurance carrier clearly would be entitled to an additional premium for 
covering the negligence of the contractor. In fact the policy provisions would 
be markedly different. In a larger context of public policy, this rule provides 
very little incentive to the contractor to use due care.

 [¶15.]  The possibility that the contractor did, 
in fact, have liability insurance for which an appropriate premium had been paid 
is ignored. I have some tolerance for legal fictions but, in the field of 
insurance, I have accepted the proposition that risk coverage should be tied to 
the insurance contract and the risks for which a premium is paid. If the 
contractor had liability insurance, then that insurance company should pay for 
this loss and, if the contractor for some reason had no coverage, the rule 
should be the same. The negligent party, whether protected by insurance for 
negligence or not, should be responsible for the consequences of his 
negligence.

 [¶16.]  I note the application of a similar rule 
in several jurisdictions in the context of landlord and tenant. Indeed, some 
cases lead to the conclusion that the rule for owners and contractors was 
adapted from the rule for landlords and tenants. In the rental context, the 
Illinois 
courts have properly assigned the risk of the tenant's negligence and retreated 
from the rule that the tenant will be considered a coinsured against whom the 
insurer for the landlord cannot seek subrogation for the consequences of the 
tenant's negligence. Fire Ins. Exchange 
v. Geekie, 179 Ill. App.3d 679, 128 Ill.Dec. 616, 534 N.E.2d 1061 (1989).

This 
analysis demonstrates the wisdom of the long-standing rule in Wyoming that an agreement 
to indemnify a party from the consequences of his own negligence must articulate 
that provision in clear and unequivocal language. Northwinds of Wyo., Inc. v. Phillips Petroleum Co., 779 P.2d 753 
(Wyo. 1989); Wyoming Johnson, Inc. v. Stag Industries, 
Inc., 662 P.2d 96 (Wyo. 1983). I would adopt the result in a 
contrary line of cases to the effect that when the landlord insures, whether by 
contract requirement or not, that does not absolve the tenant of the 
consequences of his negligence. E.g., 
Sears, Roebuck & Co. v. Poling, 248 Iowa 582, 81 N.W.2d 462 (1957); Winkler v. Appalachian Amusement Co., 
238 N.C. 589, 79 S.E.2d 185 (1953); Wichita City Lines, Inc. v. Puckett, 156 
Tex. 456, 295 S.W.2d 894 (1956). This line of authority is in harmony with our general rule. 
In U.S. Fidelity & Guaranty Co. v. 
Farrar's Plumbing & Heating Co., 158 Ariz. 354, 762 P.2d 641 (App. 
1988), and Steamboat Development Corp. v. 
Bacjac Industries, Inc., 701 P.2d 127 (Colo. App. 1985), are found examples 
of contractual language that probably would satisfy our general rule in Wyoming. 
That language should not be implied as a matter of law.

 [¶17.]  I would affirm all aspects of the 
judgment of the trial court in this case.

GOLDEN, 
Justice, dissenting.

 [¶18.]  I respectfully dissent. Relying on a 
Florida case, 
the majority holds that the unambiguous contract provision, "Owner to carry 
fire, tornado and other necessary insurance," clearly and unequivocally 
expresses, beyond any peradventure of doubt, the intention of Teton Shadows, as 
owner, and Berger, as its plumbing subcontractor, that Berger is absolved from 
liability for Berger's own negligence. I disagree.

 [¶19.]  For me, the facts of significance which 
frame this legal issue of the meaning of this unambiguous contract provision are 
that Berger is deemed the drafter of the contract provision and Berger's 
negligence caused the fire. In Wyoming 
Johnson, Inc. v. Stag Industries, Inc., 662 P.2d 96, 99 (Wyo. 1983), this court 
listed several principles of contract interpretation which I would apply here to 
resolve the legal issue presented. Courts look with disfavor on contracts 
exculpating a party from the consequences of his own acts. Id. Thus, we 
look with disfavor on Berger's contract provision. We construe an agreement for 
indemnity strictly against the indemnitee, particularly if the indemnitee 
drafted the agreement. Id. Berger's 
contract provision strikes me as being in the nature of an indemnity provision; 
therefore, I construe it strictly against Berger. Since Berger intended to throw 
the loss upon Teton Shadows for the consequences of Berger's own fault, it was 
incumbent upon Berger to express that purpose beyond any peradventure of doubt. 
Id. In my 
judgment, Berger's contract provision fails to express that purpose since it is 
silent about the matter. Berger's contract provision fails the test identified 
in Wyoming Johnson: that provision does not 
specifically focus attention on the fact that by the provision Teton Shadows was 
assuming liability for Berger's own negligence. Id. See also, Northwinds of Wyoming, Inc. v. 
Phillips Petroleum Company, 779 P.2d 753 (Wyo. 1989); and Cities Service Co. v. Northern Production 
Co., Inc., 705 P.2d 321 (Wyo. 1985).

 [¶20.]  I would affirm the trial court's judgment 
in favor of Teton Shadows. 

1 Teton Shadows' insurance company, 
Mountain West Farm Bureau Mutual Insurance Company, paid $103,000 of the loss 
under its builder's risk policy, leaving $17,000 unpaid as an uninsured loss. 
Teton Shadows' risk policy included fire insurance. This appeal involves both 
Farm Bureau's subrogated claim of $103,000 and Teton Shadows' uninsured loss 
(nonsubrogated claim) of $17,000.

2 The parties' contract consisted of 
Berger's proposal to furnish materials and labor and Teton Shadows' acceptance 
of the proposal.

 3 This provision is identical to the 
one at issue in this case.