IN THE SUPREME COURT OF MISSISSIPPI NO. 2019-FC-01285-SCT
LIBERTY

MUTUAL FIRE INSURANCE COMPANY

, AS SUBROGEE OF CHICKASAW COUNTY SCHOOL DISTRICT PLAINTIFF – APPELLEE

v. FOWLKES PLUMBING, L.L.C., SULLIV AN ENTERPRISES, INCORPORATED, AND QUALITY

HEAT AND AIR, INCORPORATED DEFENDANTS – APPELLANTS

ATTORNEYS FOR DEFENDANTS – APPELLANTS: RICHARD T. LAW RENCE MICHAEL O. GW IN BRIAN A. HINTON THOMAS M. W RIGHT SAMUEL C. KELLY R. LANE BOBO MARC A. BIGGERS STEVEN C. COOKSTON ATTORNEYS FOR PLAINTIFF – APPELLEE: JAY M. GOLDSTEIN ALBERT S. NALIBOTSKY LANA E. GILLON NATURE OF THE CASE: CIVIL - FEDERALLY CERTIFIED QUESTION DISPOSITION: CERTIFIED QUESTION ANSW ERED - 02/20/2020 MOTION FOR REHEARING FILED: MANDATE ISSUED:
EN BANC. COLEMAN, JUSTICE, FOR THE COURT: ¶1. In July 2015, f

ire destroy ed the H oulka At t e n d a n c e C e n t er i n Chickasaw C ounty while the school was undergoing renovations. Litigation e nsued. The United States District Court f or the Northern District of Mississippi f ound that the waiver of subrogation in the case subjudice applied o nly t o dam ag e s t o the “ work” property

. Liberty Mut. Fire Ins. Co. v.

F owlkes Plum bing, LLC

, No. 1:17-cv-010-GHD-DAS, 2018 W L 842169, at *7 (N.D. Miss. Feb. 12, 2018). T he court allowed Liberty Mutual to proceed in litigation f or dam a ges to the “non-work” property

. Id. The United States Court of Appeals f o r the Fif th Circuit allowed

an interlocutory appeal, certif y ing the f ollowing question to Suprem e Court of Mississippi: “[ i]s the waiver of subrogation between t he school district a n d Sullivan lim i ted t o dam ages
to the W ork or does it also apply to dam ages t o non-W ork property ? ” Liberty Mut. Fire Ins. Co. v. Fowlkes Plum bing, LLC , 934 F.3d 424, 428 (5th Cir. 2019).
FACTS AND PROCEDURAL HISTORY ¶2. In May 2 015, the C h i c k a s a w C o u n t y S chool D i strict e ntered i nto a contract with Sullivan Enterprises, Inc., f or window restoration work on t he H oulka Attenda n c e Center.
In July 2015, d

u ring constru ction, a f

ire began that com

pletely consum ed the a ttendance
center. Liberty Mutual, t he school district’s insurer, paid the s chool district $4.3 m illion f or the dam age to the b uilding. Liberty Mu t u a l then f iled a subrogation s uit a gainst Sullivan Enterprises, Fowlkes P lum bing, LLC, and Quality Heat & A ir, I nc. The U n i ted States District Court f

o r the Northern District of Mississippi f o und that the waiver of subrogation did not a pply to dam ages to the “ non-W ork” p roperty , t hus Liberty M utual could p roceed in litigation as to “non-W ork” p roperty dam ages. Fowlkes P lum bing, LLC

, 2 018 W L 842169,
at *7. The United S tates Court of A p p e a l s f o r the Fif th Circuit allowed an interlocutory appeal and certif

ied the question of whether the s ubrogation waiver applies to “non-W ork” property to t he Suprem e Court of Mississippi. Fowlkes Plum bing, LLC , 934 F.3d at 428.

2STANDARD OF REVIEW

¶3. “This C ourt reviews questions of l aw de novo.” Equifax, I n c . v . Miss. Dep’t of
Revenue , 125 So. 3d 36, 41 (¶ 7) (Miss. 2013) (citing Hankins v. Md. Cas. Co./Zurich Am . Ins. Co. , 1 01 So. 3d 645, 652 (¶ 15) (Miss. 2 0 1 2)). Additionally , “A de novo standard of review is applied to questions of c ontract construction.” Epperson v. SOUTHBank , 93 So. 3d 10, 16 (¶ 16) (Miss. 2012) (citing A & F Props., LLC v. Madison Cty. Bd. of Supervisors , 933 So. 2d 296, 301 (¶ 11) (Miss. 2006)).
DISCUSSION ¶4. T h e q u e s t i o n c e r t i f i e d b y the Fif

th Circuit i s an issue of f i rst im pres s i o n i n Mississippi. The certif

ied question has sp l it courts across t he nation, a nd two opposite approaches have developed. The question calls f or an interpretation of several contractual provisions in the Am erican Institute of Architects (AIA) f orm A201-2007. The provisions that are the subject of t he dispute include the f ol l o w i n g , s u b paragraphs 1 1.3.7 and 11.3.5 respectively . Subparagraph 11.3.7 states, The Owner and Contractor waive all rights against

. . . each other and any of their subcontractors

. . . f

or dam ages caused by

f ire or other causes of

loss to the extent covered by property insurance obtained pursuant to this Paragraph 11.3 or other property insurance a pplicable to the W ork, except such rights as they have to proceeds of

such insurance held by

the Owner as f

iduciary

. Subparagraph 11.3.5 states,
If during the Project construction p eriod t he Owner insures p roperties, real or personal or both, at or adjacent to t he site by property insurance under p olicies separate f rom those insuring the Project,

. . . t he Owner s hall waive all rights in accordance with the term s of Subparagraph 11.3.7 f or dam a ges caused by f ire or other causes of

loss covered by

this separate property

insurance.

3¶5. W h en interpreting a contract, the court mu s t f i r s t d e t e r mi n e i f t h e contract is

am biguous. Epperson v. SOUTHBank , 93 S o. 3d 10, 1 6 (¶ 17) (Miss. 2012) (citing Royer
Hom es of

Miss., Inc. v. C

handeleur Hom es, Inc. , 857 So. 2d 7 48, 752 (¶ 10) (Miss. 2003)).
“If the contract is unam

biguous, ‘ the intention of the c o ntracting p arties should be gleaned solely f rom the wording of the c ontract[ .]’” Epperson , 93 So. 3d a t 16 ( ¶ 1 7) (quoting
Turner v. Terry , 799 So. 2d 25, 32 (¶ 16) (Miss. 2001)). “This Court m ust ‘accept the plain

m eaning of a contract as the intent of the parties where no am biguity exists.’” Epperson , 93
So. 3d at 16 (¶ 17) (quoting A & F Props., LLC v. Madison Cty. Bd. of Supervisors , 933 So. 2d 296, 301 (¶ 12) (Miss. 2006)). ¶6. Wh i le the issue in t he case sub judice is an issue o f f irst i m pression in Mississ i p p i , the Court does have som e g uidance. The issue h as s plit courts, and two opposite a pproaches have developed. The m ajority approach s e e k s t o d eterm ine the source of t he insurance proceeds. “[ I]f the proceeds were paid f rom a policy provided

. . . pursuant to” the contract, then all dam ages, i ncluding “W ork” and “non-W ork” property , “ are covered b y the waiver.”
Fowlkes Plum bing, LLC , 2018 W L 842169, at *6. The m inority a pproach considers the ty

pe of property t hat w as dam aged. Under the m inority approach, “dam ages to ‘W ork’ property are covered by

the waiver and dam ages to ‘non-W ork’ property are not.” Id. ¶7. However, the Court does not nee d t o l o o k f o r g u i d a n c e elsewhere, because the language o f the contract in the case sub judice is unam biguous. Subparagraph 11.3.7, titled
“W aiver of Subrogation,” operates as a blanket waiver of property dam age t o the e xtent the property is covered by insurance. The provision m akes clear that the owner, contractor, and

4subcontractors waive all righ t s a g ainst each other f or dam ages c aused by f

ire to the extent the p roperty i s covered by insurance “obtained pursuant to this Paragraph 1 1.3 o r o t h e r property insurance applicable to the W ork.” The phrase “to the extent the property is covered by i nsu r a n c e ” me a n s that any dam age that is p aid f or by insurance proceeds is covered. Additionally , the phrase “applicable to t he w ork” m eans any insurance that insures the work, which i s not a lim it o n recovery f or only dam ages t o w ork prope rty , as t he m inority courts
argue. In ASIC II Ltd. v. Stonhard, Inc. , the United States D istrict C ourt f or the District of Maine held,
If the property insurance actually procured covers m ore t han just the l ocation of a particular contractor’s own work, t he waiver of subrogation m ust still be ef f ective as to all f

i re dam a ges covered by insurance, not just f ire dam age to the “W ork” i tself

. NSC chose not to o btain separate insurance ( i.e. , “ property insur ance o btained pursuant to this Subparagraph”) but instead, relied on its existing policy ( i.e. , “ other property i nsurance applicable to the W ork”). The preexisting I RI insurance w a s the insurance t hat NSC c hose to provide to com ply with [ 11.3] even t hough that policy m ay have been m ore extensive tha n w h a t was required. The waiver clause does not restrict the waiver of dam ages to “W ork” but to the proceeds of a n y i n s u r a nce provided under [ 11.3]. ASIC II Ltd. v. Stonhard, Inc. , 63 F. Supp. 2d 85, 92 (D. Me. 1999). ¶8. If subparagraph 11.3.5 i s i n t e r p r e t e d u s i n g t he m i nority a pproach, the waiver is ef f ective when two separate polices were purchased, one covering the work and one covering the non-work property

. However, if there is a pr e e xisting insurance t hat covers both work and non-work property , according to the m inority t here would not be an ef f ective waiver of dam ages a s to t he non-work p roperty

. The logical f allacy in the m i nority ’s a r g u me n t is pointed out by

the Nebraska Suprem e Court:

5Subparagraph [ 11.3.5] reinf orces our conclusion t hat t he w aiver in subparagraph [ 11.3.7] applies to all dam ages—including W ork and non-W o rk dam ages—covered by the owner’s property insurance policy

. An exam ple is helpf ul. Suppos e t he owner purchased two separate property insurance policies: “ Policy A” t hat covered only the Project ( W ork) and “Policy B” t hat covered only the non-W ork property

. Under subparagraph [ 11.3.7], the o wner waives subrogation rights as to any dam a g es c overed by P olicy A (dam ages to the W ork p roperty )

. Under sub p a r a graph [ 11.3.5], the owner waives subro gation rights as to any dam ages covered by the separate Policy B (dam ages to t he n on-W ork property ). So, apply ing subparagraphs [ 11.3.5] and [ 11.3.7], the owner waives d a ma ges to both the W ork and the non-W o rk property when the owner obtains two separate policies. W e s ee no reason why the parties would intend a dif f erent result when, instead of pur c h a s i n g t wo separate policies, the owner relied on one p olicy covering both the W ork and the non-W o rk property

. Lexington Ins. Co. v. E

ntrex C om m c’n Servs., Inc. , 275 Neb. 702, 7 18, 7 49 N.W .2d 124, 135 (2008). ¶9. Subparagr a p h 1 1

. 3 .5 is i ncluded in the contract f or the lim ited purpose of waiving subrogation rights w hen the owner did n ot have a preexisting policy that covered work and non-work property

. In the event that an owner did not have a preexisting policy and elected
to purchase one af

ter the start of the work, t hey could c h o o s e t o purchase a policy that covered only the work, in which case there w ould be no waiver o f subrogation rights as to the non-work p roperty

. Additionally , if the owner had a preexisting insurance policy that only c o vered the work property , they could choose to purchase another insurance policy to

cover non-work property

. Subparagraph 11.3.5 provides t hat if an owner chose t o do so, the

owner w aives all rights f

or dam ages caused by f

ire “in accordance with the term s of Section
11.3.7.” Essentially , subparagraph 11.3.5 is a catch-all provision that allows a contractor the

6benef

it of subrogation, even if the owner did not have a p reexisting policy that covered the non-work property

. ¶10. The i nterpretation of a m ajority of courts tracks the plain m eaning of t h e c o n t r a c t language a nd f

urthers the goal of the contract, to prevent litigation. G iven the general waiver of subrogation in s ubparagraph 1 1.3.7 and subparagraph 11.3.5, which provides subrogation when the owner purchases a separate policy to cover n on-work property , the o nly instance when dam age to non-work property would not be covered by a subrogation waiver is if the

owner did not have any policy insuring the non-work property . The waiver of subrogation
in the Am e rican Institute of Architects (AIA) f orm A201-2007 applies to both w ork and nonwork property

. CONCLUSION ¶11. Based on the plain m eaning of the contract language, the waiv e r o f s u b r o g a t i on applies to work and non-work property

. ¶12. CERTIFIED QUESTION ANSWERED. RANDOLPH, C.J., KITCHENS AND KING, P.JJ., M AX WEL L , BEAM, CHAMBERLIN, ISHEE AND GRIFFIS, JJ., CONCUR.

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