Court Opinion

ID: 7077851
Source: CourtListenerOpinion
Date Created: 2022-07-24 08:35:02.532183+00
Date Added: 2024-06-11T16:12:51.376781
License: Public Domain

BROWN, Judge,
dissenting.
I respectfully dissent. This court, in Midwestern Indem. Co. v. Sys. Builders, Inc., 801 N.E.2d 661, 664 (Ind.Ct.App.2004), trans. denied, examined a contract containing identical versions of Section 11.3.5 and 11.3.7 as are present here. In Midwestern, a snowstorm caused the collapse of a building which had been completed six months previously, causing $1,391,818.90 worth of damages, $44,971.21 of which pertained to damage of the contents of the building. 801 N.E.2d at 665. Among other issues, this court examined “whether the waiver of insurance and sub-rogation provisions of the construction contract bar recovery for amounts paid for damages to the contents of the building.” Id. at 672. We noted that although the waiver provisions apply “to recovery for damages from perils insured against under the property insurance policy,” they are “limited in scope as to what property is covered.” Id. We held that “[b]ecause the contents are not part of the Work or completed building addition and because there was no requirement to waive subrogation rights as to property damage to property other than the Work,” the scope of such waiver did not include the contents of the building. Id. at 673. This court recently *572affirmed the reasoning of Midwestern in Allen Cnty. Pub. Library v. Shambaugh & Son, L.P., 997 N.E.2d 48, 53-56 (Ind.Ct.App.2013) (“Consistent with our holding in Midwestern, we conclude that the Library is not precluded by Section 11.3.7 of the standard AIA contract from seeking recovery for pollution cleanup costs for property contaminated by the Defendants’ allegedly faulty construction that is outside the scope of ‘the Work’ for which the Defendants were contracted to perform.”), reh’g pending.
Furthermore, to the extent that the majority relies upon Lexington Ins. Co. v. Entrex Comm’n Servs., Inc., 275 Neb. 702, 749 N.W.2d 124 (2008), and Westfield Ins. Grp. v. Affinia Dev’t, LLC, 982 N.E.2d 132 (OhioCt.App.2012), I believe the relevant contract provisions in those cases are distinguishable and materially impact their applicability to the instant case. As noted above, Section 11.3.5 provides:
If during the Project construction period the Owner insured properties, real or personal or both, adjoining 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 Subparagraph 11.3.7 for damages caused by fire or other perils covered by this separate property insurance.
Appellants’ Appendix at 586 (emphasis added). As noted by the majority, the versions of this provision used in Lexington Ins. Co. and Westfield Ins. Grp. substitute the word “at” for the word “adjoining” in the emphasized portion above. See Draft at 18 n.5.
The majority declares the versions used in Lexington Ins. Co. and Westfield Ins. Grp. to be “equivalent” or “analogous” to the version at issue here, deeming any differences to be “minor.” Id. at 14, 14 n. 4, 18 n. 5.1 disagree. The American Heritage Dictionary defines the word “at” as follows: “la. In or near the area occupied by; in or near the location of: at the market; at our destination, b. In or near the position of: always at my side; at the center of the page. ...” American Heritage Dictionary 112 (4th ed.2006). Conversely, the dictionary defines the term “adjoining” as “[njeighboring; contiguous,” and “adjoin” as: “1. To be next to; be contiguous to: property that adjoins ours. 2. To attach: 7 do adjoin a copy of the letter that I have received’ ... To be contiguous....” Id. at 21. The dictionary also defines “adjacent,” which is present in both versions of Section 11.3.5., as “1. Close to; lying near: adjacent cities. 2. Next to; adjoining: adjacent garden plots. ... ” Id.
Thus, the plain meaning of the terms “adjoining” and “adjacent” are synonymous, while the term “at,” which is not present in the instant version of Section 11.3.5, carries a different meaning. Because the damaged personal property at issue was contained within the work property, the courthouse, the fact that the term “at” is not used in Section 11.3.5 is material. Simply put, the waiver provision in the instant version of Section 11.3.5 is applicable only to damage occurring to sites adjoining or adjacent to the courthouse, not personal property contained within the courthouse. Accordingly, I find that reliance upon Lexington Ins. Co. and Westfield Ins. Grp. is misplaced. As discussed by the majority and in Lexington Ins. Co., the Nebraska Supreme Court adopted the “Majority Approach,” concluding that “the 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 clause.” 749 N.W.2d at 134. After reciting subparagraph 11.4.5, which, as noted above, is akin to Section 11.3.5 except that it applies *573to policies insuring property “at or adjacent to the site,” the court stated: “We understand this provision 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.” 749 N.W.2d at 134-135 (emphasis added). The court observed that “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.” Id. at 135. However, because Section 11.3.5 in the contract at issue here does not apply to property at the project site, the reasoning contained in Lexington Ins. Co. does not apply.
Thus, only the waiver language contained in Section 11.3.7 is applicable to the circumstances, and in my view the Work/ non-Work or Minority Approach applies with equal force. Section 11.3.7, titled “Waivers of Subrogation,” provides that “[t]he owner and Contractor waive all rights against [] each other and any of their subcontractors, sub-subcontractors, agents and employees, each of the other ... 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 .... ” Appellant’s Appendix at 586 (emphasis added). This “either/or” language in the provision lets an owner choose between purchasing a builder’s risk policy or relying upon another all-risk policy, and here Jefferson County chose to rely upon its general all-risk policy in accordance with the emphasized language. This reading gives effect to both clauses in Section 11.3.7. The “Work” involves refurbishing the courthouse building, and the general policy protects against damage to the building. Indeed, the record appears to indicate that the policy did pay Jefferson County based upon such Work-related damages, and, in light of the fact that at the time of the contract Midwestern was valid Indiana law, I believe it was precisely what the parties agreed upon in allocating risk when they chose to use the term “adjoining” in place of the word “at.”
Additionally I am not convinced by the majority’s conclusion that Jefferson County was in material breach of the contract when it did not notify Teton of its intent to rely upon its existing all-risk policy rather than purchase a “builder’s risk” policy. Again, Section 11.3.1 provides that “[u]n-less otherwise provided, the Owner [Jefferson County] 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.... ” Appellant’s Appendix at 585. Section 11.3.1.1 denotes the specifics of the type of property insurance policy and states that such insurance:
shall be on an ‘all-risk’ policy form and shall insure against the perils of fire and extended coverage and physical loss or damage including, without duplication of coverage, theft, vandalism, malicious mischief, collapse, falsework, temporary buildings and debris removal including demolition occasioned by enforcement of any applicable legal requirements, and shall cover reasonable compensation for Architect’s services and expenses required as a result of such insured loss.

Id.

“All-risk policies cover all losses, except those specifically excluded.” Copper Mountain, Inc. v. Industrial Sys., Inc., 208 P.3d 692, 694 n. 7 (Colo.2009) (citing Heller v. Fire Ins. Exch, 800 P.2d 1006, 1007 n. 1 (Colo.1990)). The property in*574surance policy owned by Jefferson County was titled as “BLANKET BUILDING AND BUSINESS PERSONAL PROPERTY AT LOCATIONS SCHEDULED BELOW” which included the courthouse located at 300 West Main Street in Madison, Indiana. Appellee’s Designation of Evidence at Tab 4, pages 358, 360. The limit of coverage to the building is listed at $25,859,000, and the policy notes that for “Business Personal Property” that the limit of coverage is “Incl W Bldg.” Id. at 358. The policy also states, under the heading “Covered Causes Of Loss,” that “[w]e’ll protect covered property against risks of direct physical loss or damage except as indicated in the Exclusions—Losses We Won’t Cover section.” Id. at 369. Thus, the policy meets the definition of an “all-risk” policy.
The majority concludes that the County breached the agreement because it did not notify Teton of its decision to rely on existing coverage rather than procure separate all-risk insurance, relying on Section 11.3.1.2 which states: “If the Owner does not intend to purchase such property insurance required by the Contract and with all of the coverages in the amount described above, the Owner shall so inform the Contractor in writing prior to commencement of the Work.” Supra at 559; see also Appellants’ Appendix at 585. Section 11.3.1.2 specifically provides that the purpose of the notification would be that the contractor could “then effect insurance which will protect the interest of the Contractor, Subcontractors and Sub-subcontractors in the Work.” Appellants’ Appendix at 585 (emphasis added). However, there is no dispute that Jefferson County’s property insurance policy covered the courthouse for work-related damages. It would have been superfluous for Teton to have purchased additional property insurance for the courthouse. Thus, any breach of the agreement by Jefferson County was not a material breach and should not dictate the outcome.
By adopting the Majority Approach, the majority extinguishes Jefferson County’s ability to attempt to recoup damages from Teton’s liability insurer based upon alleged negligence on the part of Teton and its subcontractors.11 For the reasons dis*575cussed above, I believe this to be error, and I would uphold Midwestern and the so-called “Minority Approach” as valid Indiana law, and allow Jefferson County to bring suit under these circumstances to recoup liability damages to non-Work property. I respectfully dissent.

. At oral argument, Teton’s counsel suggested that Section 11.1.1, which obligated Teton to purchase liability insurance, applied only to claims by third parties. Section 11.1.1 provides:
11.1.1 The Contractor shall purchase from and maintain in a company or companies lawfully authorized to do business in the jurisdiction in which the Project is located 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:
.1 claims under workers’ or workmen’s compensation, disability benefit and other similar employee benefit acts which are applicable to the Work to be performed;
.2 claims for damages because of bodily injury, occupational sickness or disease, or death of the Contractor’s employees;
.3 claims for damages because of bodily injury, sickness or disease, or death of any person other than the Contractor’s employees;
.4 claims for damages insured by usual personal injury liability coverage which are sustained by (1) by a person as a result of an offense directly or indirectly related to employment of such person by the Contractor, or (2) by another person;
.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;
.6 claims for damages because of bodily injury, death of a person or property damage arising out of ownership, maintenance or use of a motor vehicle; and
*575.7 claims involving contractual liability insurance applicable to the Contractor’s obligations under Paragraph 3.18.
Appellants’ Appendix at 584-585. Although certain subsections of Section 11.1.1 are intended to apply to third parties, including Subsection .3 and the second part of Subsection .4, other portions, notably Subsection .5, do not appear to be so constrained.