Court Opinion

ID: 5712039
Source: CourtListenerOpinion
Date Created: 2022-01-12 15:55:23.342355+00
Date Added: 2024-06-11T08:40:32.106501
License: Public Domain

Fisher, J. (dissenting and voting to affirm the judgment insofar as appealed from with the following memorandum, in which Prudenti, RJ., concurs):
Because, in my view, the plain
meaning of the parties’ agreement, coupled with the sparsity of the record, precludes any finding that the appellant is entitled to contractual indemnification, I respectfully dissent.
In December 1999 the defendant OC Riverhead 58, LLC (hereinafter OC), as owner, and the plaintiff Watral & Sons, Inc. (hereinafter Watral), as contractor, entered into a contract for the performance of excavation, drainage, and sanitary work on property located on County Road 58, in Riverhead. The total contract price, including all change orders, was $167,401. The defendant paid the plaintiff only $85,000, leaving an outstanding balance of $82,401. On January 31, 2001 Watral filed a mechanic’s lien for that amount and subsequently commenced this action to foreclose the lien. OC asserted a counterclaim, contending that it was entitled to contractual indemnification from Watral in the amount of $69,639 and therefore should be permitted to deduct that amount from the outstanding balance on the contract. The claimed indemnification related to money *569allegedly expended by OC to compensate a neighboring landowner for disruption of electrical power caused during the course of the work.
The only facts before us are those contained in a brief agreed-upon statement of facts executed by the parties on August 14, 2003 and presented to the Supreme Court. In relevant part, the statement provides:
“5. On August 3, 2000, while [Watral] was excavating for the sewer the electric cable providing power to an adjacent landowner, ADCHEM Corporation was damaged.
“6. The original power cable, supplying electricity to [Ad-chem], had been relocated by others as it interfered with the construction of the project.
“7. Prior to [Watral’s] excavation for the installation of the sewer line, New York One Call had been notified. Flags marked the electric line servicing ADCHEM. The call for marking was performed by Charles Voy les, project superintendent employed by Síndrome Construction, Inc., construction manager for the project and the owner representative on the site.
“8. [Watral]5s excavator was digging ten to fifteen feet from the marked line, when it struck the cable. Only the outer coating of the cable was damaged. There was no spark, no noise and no signs of rupture to the cable. After closer examination, it was determined that excess cable, in the form of a loop had been buried, at the time of the original electric cable installation.
“9. It was decided among [Watral], Síndrome Construction, Inc. as the owner[’s] representative and the electrician that performed the original cable relocation, that [Watral] would pay the cost of the material, $1,000 per splice for the 8 strands in the cable and the electrician would supply the labor to effectuate the splices. The excess loop of wire was removed.
“10. On August 17, 2000, [Watral] was excavating in the same location to adjust the height of the sewer. The project superintendent Charles Voyles was present and supervising the height adjustment. The excavated material was placed two feet from the edge of the excavation. The ground adjacent to the excavation gave way dragging the cable towards the excavation site. There was a loud pop and a spark. The excavator did not come in contact with the cable and there were no burn marks on the side of the bucket. The electric cable providing power to *570[Adchem] was damaged at the site of the splice made to correct the damage of August 3, 2000.”
The $8,000 in material costs that Watral agreed to pay to OC following the first incident was subsequently reflected in a change order and is not at issue in this action. However, between December 2000 and April 2001, OC allegedly paid neighboring landowner, Adchem, a total of $69,639 for damages resulting from the interruption of power to its facility. In its counterclaim, OC sought to recover those payments from Watral under the indemnity provisions of the contract.
The contract at issue was the American Institute of Architects standard contract. Its “General Conditions” section contains the following indemnification provision:
“4.18.1 To the fullest extent permitted by law, the Contractor shall indemnify and hold harmless the Owner, the Architect, the Construction Manager, and their agents, and employees from and against all claims, damages, losses and expenses, including, but not limited to, attorneys fees arising out of or resulting from the performance of the Work, provided that any such claim, damage, loss or expense (1) is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property (other than the Work itself) including the loss of use resulting therefrom, and (2) is caused in whole or in part by any negligent act or omission of the Contractor, any Subcontractor, anyone directly or indirectly employed by any of them or anyone for whose acts any of them may be liable, regardless of whether or not it is caused in part by a party indemnified hereunder. Such obligation shall not be construed to negate, abridge or otherwise reduce any other right or obligation of indemnity which would otherwise exist as to any party or person described in this Paragraph 4.18.”
Article 10 of the General Conditions contains the following additional provisions:
“10.2.1 The Contractor shall take all reasonable precautions for the safety of, and shall provide all reasonable protection to prevent damage, injury or loss to: . . .
“3. Other property at the site or adjacent thereto, including trees, shrubs, lawns, walks, pavements, roadways, structures and utilities not designated for removal, relocation or replacement in the course of construction . . .
“10.2.5 The Contractor shall promptly remedy all damage *571or loss ... to any property referred to in Clause [ ] . . . 10.2.1.3 caused in whole or in part by the Contractor, any Subcontractor, any Sub-subcontractor, anyone directly or indirectly employed by any of them, or by anyone for whose acts any of them may be liable, and for which the Contractor is responsible under Clause [ ] . . . 10.2.1.3, except damage or loss attributable to the acts or omissions of the Owner, the Architect, the Construction Manager or anyone directly or indirectly employed by any of them, or by anyone for whose acts any of them may be liable, and not attributable to the fault or negligence of the Contractor. The foregoing obligations of the Contractor are in addition to the Contractor’s obligations under Paragraph 4.18.”
Moreover, article 6 of the General Conditions contains the following provision:
“6.2.4 Should the Contractor wrongfully cause damage to the work or property of the Owner, or to other work or property on the site, the Contractor shall promptly remedy such damage as provided in Subparagraph 10.2.5.”
Based upon the agreed-upon statement of facts and the relevant language of the contract, the Supreme Court determined that OC had not established its right to contractual indemnification under either subparagraphs 4.18.1 or 10.2.5 of the contract. I agree.
“[T]he right to contractual indemnification depends upon the specific language of the contract” (Gillmore v Duke/Fluor Daniel, 221 AD2d 938, 939 [1995]; accord Kader v City of N.Y., Hous. Preserv. & Dev., 16 AD3d 461, 463 [2005]). Moreover, “[w]hen a party is under no legal duty to indemnify, a contract assuming that obligation must be strictly construed to avoid reading into it a duty which the parties did not intend to be assumed” (Hooper Assoc. v AGS Computers, 74 NY2d 487, 491 [1989]; see also Tonking v Port Auth. of N.Y. & N.J., 3 NY3d 486, 490 [2004]). Guided by these principles, the court correctly determined that OC’s right to indemnification pursuant to subparagraph 4.18.1 of the contract was contingent, inter aha, on proof that the damage or loss was caused in whole or in part by Watral’s negligence, or by the negligence of someone for whose acts Watral may be liable.
There is no proof that the first accident was caused by Watral’s negligence. To the contrary, the parties stipulated that *572the electrical cable servicing the Adchem property was not where it was supposed to be, but “had been relocated by others” prior to the commencement of Watral’s work. Under these circumstances, there is no proof of negligence on Watral’s part and, because the record does not disclose the identity of the electrician responsible for the relocation of the cable, it cannot be determined whether that person was someone for whose acts Watral may be liable, so as to trigger indemnity pursuant to subparagraph 4.18.1 of the agreement.
With respect to the second accident, which occurred two weeks later, the agreed-upon facts reveal only that the same electrical cable was damaged when the ground adjacent to Watral’s excavation gave way, dragging the cable towards the excavation site. An employee of the construction manager was present and supervising Watral’s work at the time. There was no contact between the excavation equipment and the cable, and the only damage to the cable was at the site of the previous repair, made only two weeks earlier. Based on nothing more than this, I cannot conclude that the damage to the cable was caused by Watral’s negligence.
The majority reasons that Watral, as an excavator, had a statutory duty to provide support and prevent damage to the underground cable and its protective coating pursuant to section 764 (4) of the General Business Law, and that evidence of a ground collapse adjacent to the excavation site conclusively establishes Watral’s statutory liability and, therefore, its negligence. I respectfully disagree. Even assuming that Watral violated a duty owed to the operator of the cable (as that term is defined in General Business Law § 760 [6]; see New York Tel. Co. v Harrison & Burrowes Bridge Contrs., 3 AD3d 606 [2004]), the consequences of such a violation are spelled out in section 765 of the General Business Law, and include, inter alia, an obligation to indemnify the operator of the cable for the “reasonable costs” incurred in repairing or providing new support for it (see General Business Law § 765 [4]). Notably, such consequences do not include a private right of action in favor of property owners such as OC (cf. N. A. Orlando Contr. Corp. v Consolidated Edison Co., 131 AD2d 827 [1987]; Lizza Indus. v Long Is. Light Co., 44 AD2d 681, 682-683 [1974]; see also Public Service Law § 119-b [7]), much less an open-ended obligation to compensate third parties for economic losses resulting from the interruption of electrical power. While excavators remain liable for the consequences of their own negligent acts or omissions (see General Business Law § 765 [2]; see also, Buckeye Pipeline *573Co. v Congel-Hazard, Inc., 41 AD2d 590 [1973]), section 764 of the General Business Law does not expand the scope of their common-law duty of care. Thus, in my view, evidence of a statutory violation, without more, does not establish Watral’s negligence for purposes of determining OC’s right to contractual indemnification under the circumstances presented.
The majority’s reliance on subparagraph 10.2.5 as an alternate basis for indemnification is similarly misplaced. The majority reads subparagraph 10.2.5 as imposing strict liability on Watral for any and all direct and indirect losses resulting from any damage to underground cables caused by Watral’s work, except to the extent such losses are shown to be attributable to OC’s acts or omissions and not at all attributable to Watral’s own negligence. That is not, however, what the contract provides.
Insofar as relevant here, subparagraph 10.2.5 requires Watral to remedy any and all damage it causes to any property referred to in clause 10.2.1.3 and for which it is responsible under clause 10.2.1.3. But Watral’s responsibility under clause 10.2.1.3 is not absolute. It is obligated only to take all reasonable precautions for the safety of, and provide all reasonable protection to prevent damage to, underground utilities. Thus, it is only in the event that Watral’s responsibility under clause 10.2.1.3 is engaged that Watral’s duty to indemnify OC for any resulting property damage is triggered. This interpretation of subparagraph 10.2.5 finds support in subparagraph 6.2.4, which makes clear that Watral’s obligation under subparagraph 10.2.5 is limited to damage “wrongfully cause[d] to . . . work or property on the site.”
Contrary to the views expressed by the majority, I cannot read subparagraph 10.2.5—particularly in light of subparagraph 6.2.4—as imposing strict liability on Watral. Indeed, the majority’s interpretation of subparagraph 10.2.5 renders Watral liable for any damage to underground utilities caused by Watral’s operations, regardless of whether Watral’s actions were in any way “wrongful” as contemplated by subparagraph 6.2.4, and irrespective of whether Watral took “all reasonable precautions” to avoid such damage, as contemplated by clause 10.2.1.3. Such a result is “unsupportable under standard principles of contract interpretation” (Lawyers’ Fund for Client Protection of State of N.Y. v Bank Leumi Trust Co. of N.Y., 94 NY2d 398, 404 [2000]; see Matter of Columbus Park Corp. v Department of Hous. Preserv. & Dev. of City of N.Y., 80 NY2d 19, 31 [1992]) and, in effect, turns Watral into an insurer.
In fact, under the majority’s view, Watral’s duty under subparagraphs 10.2.5 and 6.2.4 is arguably greater than that of *574an insurer. It includes not only the obligation to repair the damaged cable but also to indemnify OC for sums paid to an adjacent landowner allegedly to compensate it for losses resulting from the interruption of electrical service to its facility even though the circumstances surrounding such alleged losses remain unknown and undisclosed. The scope of Watral’s obligation under subparagraphs 10.2.5 and 6.2.4 is to indemnify OC against “damage or loss ... to any property referred to in Clause [ ] . . . 10.2.1.3” (emphasis added). The “property” in this case is the subject cable. Yet the majority holds, in effect, that “property” damage also potentially includes purely economic injury suffered by any third party whose electrical supply happens to travel through the damaged cable. I cannot agree.
Indeed, irrespective of whether Watral’s contractual liability is predicated on subparagraphs 10.2.5 and 6.2.4 or on subparagraph 4.18.1, it is impossible, on this record, to determine whether OC’s request for indemnification with respect to Adchem’s third-party claim is viable, as the threadbare record raises more questions than it answers. There is no evidence before us, for example, as to who owned and operated the subject cable, or as to what duty of care, if any, OC owed to Adchem. There is no evidence in the record as to whether Adchem actually suffered any damage to its own property as a result of the damage to the cable, or, instead, sustained purely economic injury. And there is no evidence as to whether OC’s payment to Adchem was voluntary or legally compelled. These are basic questions (cf. 532 Madison Ave. Gourmet Foods v Finlandia Ctr., 96 NY2d 280 [2001]; see generally Annotation, Liability of One Other than Electric Power or Light Company or its Employee for Interruption, Failure, or Inadequacy of Electric Power, 15 ALR4th 1148) that must be answered before a determination can be made as to whether OC is entitled to contractual indemnification in this case.
In sum, the agreed-upon statement of facts is too sparse, in my view, to support the majority’s conclusion that OC is entitled to indemnification from Watral, particularly for the type of damages it seeks. And, because it was incumbent upon OC to show that it was entitled to that indemnification, and because it has failed to do so, the judgment should be affirmed insofar as appealed from.