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
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. On a related note, I offered the ICLU my cases against the BLE repeatedly, and sought their amici aid repeatedly as well. Crickets. Usually not even a response. I am guessing they do not do allegations of anti-Christian bias? No matter how glaring? I have posted on other links the amicus brief that did get filed (search this ezine, e.g., Kansas attorney), read the Thomas More Society brief to note what the ACLU ran from like vampires from garlic. An Examiner pledged to advance diversity and inclusion came right out on the record and demanded that I choose Man's law or God's law. I wonder, had I been asked to swear off Allah ... what result then, ICLU? Had I been found of bad character and fitness for advocating sexual deviance, what result then ICLU? Had I been lifetime banned for posting left of center statements denigrating the US Constitution, what result ICLU? Hey, we all know don't we? Rather Biased.

  2. It was mentioned in the article that there have been numerous CLE events to train attorneys on e-filing. I would like someone to provide a list of those events, because I have not seen any such events in east central Indiana, and since Hamilton County is one of the counties where e-filing is mandatory, one would expect some instruction in this area. Come on, people, give some instruction, not just applause!

  3. This law is troubling in two respects: First, why wasn't the law reviewed "with the intention of getting all the facts surrounding the legislation and its actual impact on the marketplace" BEFORE it was passed and signed? Seems a bit backwards to me (even acknowledging that this is the Indiana state legislature we're talking about. Second, what is it with the laws in this state that seem to create artificial monopolies in various industries? Besides this one, the other law that comes to mind is the legislation that governed the granting of licenses to firms that wanted to set up craft distilleries. The licensing was limited to only those entities that were already in the craft beer brewing business. Republicans in this state talk a big game when it comes to being "business friendly". They're friendly alright . . . to certain businesses.

  4. Gretchen, Asia, Roberto, Tonia, Shannon, Cheri, Nicholas, Sondra, Carey, Laura ... my heart breaks for you, reaching out in a forum in which you are ignored by a professional suffering through both compassion fatigue and the love of filthy lucre. Most if not all of you seek a warm blooded Hoosier attorney unafraid to take on the government and plead that government officials have acted unconstitutionally to try to save a family and/or rescue children in need and/or press individual rights against the Leviathan state. I know an attorney from Kansas who has taken such cases across the country, arguing before half of the federal courts of appeal and presenting cases to the US S.Ct. numerous times seeking cert. Unfortunately, due to his zeal for the constitutional rights of peasants and willingness to confront powerful government bureaucrats seemingly violating the same ... he was denied character and fitness certification to join the Indiana bar, even after he was cleared to sit for, and passed, both the bar exam and ethics exam. And was even admitted to the Indiana federal bar! NOW KNOW THIS .... you will face headwinds and difficulties in locating a zealously motivated Hoosier attorney to face off against powerful government agents who violate the constitution, for those who do so tend to end up as marginalized as Paul Odgen, who was driven from the profession. So beware, many are mere expensive lapdogs, the kind of breed who will gladly take a large retainer, but then fail to press against the status quo and powers that be when told to heel to. It is a common belief among some in Indiana that those attorneys who truly fight the power and rigorously confront corruption often end up, actually or metaphorically, in real life or at least as to their careers, as dead as the late, great Gary Welch. All of that said, I wish you the very best in finding a Hoosier attorney with a fighting spirit to press your rights as far as you can, for you do have rights against government actors, no matter what said actors may tell you otherwise. Attorneys outside the elitist camp are often better fighters that those owing the powers that be for their salaries, corner offices and end of year bonuses. So do not be afraid to retain a green horn or unconnected lawyer, many of them are fine men and woman who are yet untainted by the "unique" Hoosier system.

  5. I am not the John below. He is a journalist and talk show host who knows me through my years working in Kansas government. I did no ask John to post the note below ...

ADVERTISEMENT