ILNews

Ruling prevents county from subrogating damages after courthouse fire

Back to TopCommentsE-mailPrintBookmark and Share

The Indiana Court of Appeals Tuesday adopted the “majority approach” in a waiver of subrogation issue and concluded a southern Indiana county waived its right to subrogate any and all claims covered by its property insurance. Jefferson County sued contractors after its courthouse caught fire during renovations in 2009.

Jefferson County entered into a contract with Teton Corp. to renovate the building and subcontract work to several companies. The contract prepared by the American Institute of Architects stated that Jefferson County, as owner of the project, should obtain separate insurance. Instead of obtaining separate property or builder’s risk insurance for the project, the county relied on its existing property and casualty insurance. The county also did not tell Teton that it wasn’t getting the separate insurance. The contract also required Teton to obtain contractors liability insurance.

During renovations, a fire broke out in May 2009 causing more than $6 million in damages. The county relied on its general insurance policy, but that did not cover all of the damages.

The county sued Teton and other defendants involved in renovations, claiming negligence, breach of implied warranties and breach of contract. The defendants argued Jefferson County agreed to provide insurance for the project and waived its subrogation rights against them, so the county can’t recover damages that were caused by the fire.

In granting the defendants’ motion for summary judgment, the trial court ruled that the county as owner of the project was to obtain insurance and that insurance would be the source of compensation in the event of a loss. The contract also says every party would waive the right to seek recovery of the loss covered by the insurance policy.

Jefferson County conceded that pursuant to the terms of the AIA contract, subrogation is barred when a property owner seeks to recover damages to its insured “Work” property, but maintains that “this case involves damage to non-Work property.” And therefore, Jefferson County argues that under the AIA contract, Teton was responsible for procuring insurance to cover damages for claims “other than to the Work.”

In support of its argument, Jefferson County relied on Midwestern Indemnity Company v. Systems Builders, Inc., 801 N.E.2d 661 (Ind. Ct. App. 2004), which concluded that under the AIA contract there is a distinction between work and non-work property, and the scope of the waiver is limited to damages to the work property.

The interpretation of the waiver provision has been litigated in other jurisdictions and the Court of Appeals, but not made it to the Indiana Supreme Court. After examining caselaw, in The Board of Commissioners of the County of Jefferson v. Teton Corporation, Innovative Roofing Solutions, Inc., Gutapfel Roofing, Inc. and Daniel L. Gutapfel, 72A04-1302-CT-55, Judges Paul Mathias and Edward Najam affirmed, ruling the “majority view” is the better approach to risk allocation in construction projects in general, which rejects the “work” v. “non-work” approach.

They believed adopting the “minority, non-Work distinction” used previously by the Indiana Court of Appeals would “throw many projects into protracted litigation, possibly even years after project completion and acceptance.”

“Each and every major construction project adds both value and risk to the owner’s property. Section 11.3.1 of the AIA contract therefore requires owners to insure their interests in the construction project at least to the value of the underlying contract.

The AIA contract expressly requires property owners to separately insure these interests and, in order to facilitate the completion of the project without delaying and debilitating litigation, to obtain an ‘all-risk’ insurance policy that waives the carrier’s rights to be subrogated to any loss arising within the extremely broad coverage described in the contract. If the owner does not secure such insurance, then it still waives its subrogation rights for any loss described within the AIA contract that it sustains,” Mathias wrote.

Judge Elaine Brown dissented, believing the court should uphold the minority approach as outlined in Midwestern. By adopting the majority approach, the majority in this case has prevented the county from being able to attempt to recoup damages to non-work property from Teton’s liability insurer based upon alleged negligence.

 

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Indiana State Bar Association

Indianapolis Bar Association

Evansville Bar Association

Allen County Bar Association

Indiana Lawyer on Facebook

facebook
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. It appears the police and prosecutors are allowed to change the rules halfway through the game to suit themselves. I am surprised that the congress has not yet eliminated the right to a trial in cases involving any type of forensic evidence. That would suit their foolish law and order police state views. I say we eliminate the statute of limitations for crimes committed by members of congress and other government employees. Of course they would never do that. They are all corrupt cowards!!!

  2. Poor Judge Brown probably thought that by slavishly serving the godz of the age her violations of 18th century concepts like due process and the rule of law would be overlooked. Mayhaps she was merely a Judge ahead of her time?

  3. in a lawyer discipline case Judge Brown, now removed, was presiding over a hearing about a lawyer accused of the supposedly heinous ethical violation of saying the words "Illegal immigrant." (IN re Barker) http://www.in.gov/judiciary/files/order-discipline-2013-55S00-1008-DI-429.pdf .... I wonder if when we compare the egregious violations of due process by Judge Brown, to her chiding of another lawyer for politically incorrectness, if there are any conclusions to be drawn about what kind of person, what kind of judge, what kind of apparatchik, is busy implementing the agenda of political correctness and making off-limits legit advocacy about an adverse party in a suit whose illegal alien status is relevant? I am just asking the question, the reader can make own conclsuion. Oh wait-- did I use the wrong adjective-- let me rephrase that, um undocumented alien?

  4. of course the bigger questions of whether or not the people want to pay for ANY bussing is off limits, due to the Supreme Court protecting the people from DEMOCRACY. Several decades hence from desegregation and bussing plans and we STILL need to be taking all this taxpayer money to combat mostly-imagined "discrimination" in the most obviously failed social program of the postwar period.

  5. You can put your photos anywhere you like... When someone steals it they know it doesn't belong to them. And, a man getting a divorce is automatically not a nice guy...? That's ridiculous. Since when is need of money a conflict of interest? That would mean that no one should have a job unless they are already financially solvent without a job... A photographer is also under no obligation to use a watermark (again, people know when a photo doesn't belong to them) or provide contact information. Hey, he didn't make it easy for me to pay him so I'll just take it! Well heck, might as well walk out of the grocery store with a cart full of food because the lines are too long and you don't find that convenient. "Only in Indiana." Oh, now you're passing judgement on an entire state... What state do you live in? I need to characterize everyone in your state as ignorant and opinionated. And the final bit of ignorance; assuming a photo anyone would want is lucky and then how much does your camera have to cost to make it a good photo, in your obviously relevant opinion?

ADVERTISEMENT