| St. John's Univ., N.Y. v Butler Rogers Baskett Architects,P.C. |
| 2012 NY Slip Op 01238 [92 AD3d 761] |
| February 14, 2012 |
| Appellate Division, Second Department |
| St. John's University, New York, Appellant, v ButlerRogers Baskett Architects, P.C., et al., Defendants, and Skanska USA Building, Inc.,Defendant/Third-Party Plaintiff-Respondent. Phase I Group, Inc., Third-PartyDefendant-Respondent. (And Another Third-Party Action.) |
—[*1] Sesti Law Firm P.C., New York, N.Y. (Robert A. Sesti of counsel), for defendant/third-partyplaintiff-respondent. Ahmuty, Demers & McManus, Albertson, N.Y. (Brendan T. Fitzpatrick of counsel), forthird-party defendant-respondent.
In an action, inter alia, to recover damages for breach of contract, injury to property,engineering malpractice, and architectural malpractice, the plaintiff appeals, as limited by itsbrief, from so much of an order of the Supreme Court, Queens County (Grays, J.), entered June21, 2010, as granted those branches of the motion of the defendant Skanska USA Building, Inc.,and the separate motion of the third-party defendant, Phase I Group, Inc., which were forsummary judgment dismissing so much of the complaint as sought to recover for damagesustained by a building on its campus known as the Taffner Field House to the extent that itscasualty insurer reimbursed it for that damage, and denied those branches of its cross motionwhich were for summary judgment dismissing the third and fourth affirmative defenses assertedby the defendant Skanska USA Building, Inc.
Ordered that the order is modified, on the law, (1) by deleting the provision thereof grantingthose branches of the motion of the defendant Skanska USA Building, Inc., and the separatemotion of the third-party defendant, Phase I Group, Inc., which were for summary judgmentdismissing so much of the complaint as sought to recover for damages to the Taffner Field Houseto the extent that the plaintiff's casualty insurer reimbursed the plaintiff for that damage, andsubstituting therefor a provision denying those branches of the motions, and (2) by deleting theprovision thereof denying that branch of the plaintiff's cross motion which was for summaryjudgment dismissing the third affirmative defense asserted by the defendant Skanska USABuilding, Inc., and substituting therefor a provision granting that branch of the plaintiff's crossmotion; as so [*2]modified, the order is affirmed insofar asappealed from, without costs or disbursements.
On two occasions in July 2006, and again in June, July, and August 2007, severe rainstormsswept the Jamaica, Queens, campus of St. John's University (hereinafter the plaintiff), resultingin flooding of two of its buildings, the Taffner Field House and Carnesecca Hall, and millions ofdollars in property damage. The plaintiff filed a claim with its insurer, Lloyd's of London(hereinafter Lloyd's) under two institutional casualty insurance policies (hereinafter the IPIpolicies) that covered losses to the plaintiff's property worldwide occurring between July 1, 2006,and July 1, 2008. Lloyd's paid the plaintiff the sum of $2.7 million under the IPI policies.
The plaintiff commenced the instant action against Skanska USA Building, Inc. (hereinafterSkanska), which had contracted with the plaintiff to manage the construction of the Taffner FieldHouse, alleging that Skanska, inter alia, had breached the contractual duty it owed to the plaintiff,and was otherwise negligent in failing to ensure that the Taffner Field House was free fromdefects, and that these breaches of contractual and common-law duty caused the flooding at andin the vicinity of that building. The plaintiff sought to recover for the damage caused by theflooding to both the Taffner Field House and Carnesecca Hall and, thus, in effect, sought torecover, on behalf of Lloyd's, the insurance proceeds paid by Lloyd's to the plaintiff under the IPIpolicies. Skanska joined issue, asserting that, to the extent that the causes of action sought torecover for damages to the Taffner Field House that had already been paid to the plaintiff byLloyd's, those causes of action were barred by the antisubrogation rule (the third affirmativedefense), and that the plaintiff had waived the right of subrogation under its contract withSkanska (the fourth affirmative defense). Skanska commenced a third-party action against PhaseI Group, Inc. (hereinafter Phase I), seeking, inter alia, contractual indemnification, since Phase Iinstalled the drainage system pursuant to a subcontract with Skanska.
Skanska and Phase I moved for summary judgment dismissing the causes of action thatsought to recover for damage to the Teffner Field House and Carnesecca Hall, to the extent thatLloyd's had already paid the plaintiff for that damage, and the plaintiff cross-moved for summaryjudgment, inter alia, dismissing Skanska's third and fourth affirmative defenses. The SupremeCourt granted those branches of the motions of Skanska and Phase I which were for summaryjudgment dismissing the causes of action that sought to recover for damage to the Taffner FieldHouse, to the extent that Lloyd's had already paid for that damage. The Supreme Court held that,pursuant to a waiver of subrogation provision in the contract between the plaintiff and Skanska,the plaintiff had waived its right to seek recovery on behalf of Lloyd's for the damage to theTaffner Field House. However, the Supreme Court concluded that an issue of fact existed as towhether the scope of the waiver included the damage to Carnesecca Hall. The Supreme Court,inter alia, denied those branches of the plaintiff's cross motion which were for summaryjudgment dismissing Skanska's third and fourth affirmative defenses.
Subrogation, an equitable doctrine, entitles an insurer to stand in the shoes of its insured toseek indemnification from third parties whose wrongdoing has caused a loss for which theinsurer is bound to reimburse (see North Star Reins. Corp. v Continental Ins. Co., 82NY2d 281, 294 [1993]). The subrogation doctrine allocates responsibility for the loss to theperson who in equity and good conscience ought to pay it, in the interest of avoiding absolutionof a wrongdoer from liability simply because the insured had the foresight to procure insurancecoverage (id.). However, an insurer has no right of subrogation against its own insuredfor a claim arising from the very risk for which the insured was covered (see PennsylvaniaGen. Ins. Co. v Austin Powder Co., 68 NY2d 465, 468 [1986]).
Here, the plaintiff satisfied its prima facie burden of establishing its entitlement to judgmentas a matter of law dismissing Skanska's third affirmative defense, which alleged that theantisubrogation rule barred certain of the plaintiff's claims, by demonstrating that Skanska wasnot an additional insured under the IPI policies (see Glens Falls Ins. Co. v City of NewYork, 293 AD2d 568, 570 [2002]) and that consequently, the plaintiff, by prosecuting theaction, in effect, on behalf of Lloyd's, was not making a claim against one of Lloyd's insureds. Inopposition, Skanska failed to raise a triable issue of fact. Skanska contends that under its contractwith the plaintiff, the plaintiff [*3]was required to name it as anadditional insured. However, those provisions of the contract refer to a builder's riskendorsement. By August 26, 2005, Skanska had provided the plaintiff with a certificate ofsubstantial completion, and the New York City Department of Buildings had issued a temporarycertificate of occupancy for the Taffner Field House, at which point the plaintiff canceled thebuilder's risk endorsement. Thus, the builder's risk endorsement was no longer in effect when theflooding occurred, and the plaintiff's claim was paid pursuant to the IPI policies, not the builder'srisk endorsement, which insures against different risks. Therefore, the plaintiff, in effect, onbehalf of Lloyd's, is not seeking subrogation against its own insured for a claim arising from thevery risk for which the insured was covered (see Pennsylvania Gen. Ins. Co. v Austin PowderCo., 68 NY2d at 468; Utica Mut.Ins. Co. v Brooklyn Navy Yard Dev. Corp., 52 AD3d 821, 822-823 [2008]; Insurance Corp. of N.Y. v Cohoes RealtyAssoc., L.P., 50 AD3d 1228, 1230 [2008]; Glens Falls Ins. Co. v City of NewYork, 293 AD2d at 570). Accordingly, the plaintiff is entitled to summary judgmentdismissing Skanska's third affirmative defense.
The interpretation of a contract should give fair meaning to all of the language employed bythe parties, and reach a practical interpretation of the parties' expressions so that their reasonableexpectations will be realized (see W.W.W. Assoc. v Giancontieri, 77 NY2d 157, 162[1990]; McCabe v Witteveen, 34AD3d 652, 654 [2006]). Contract language which is clear and unambiguous must beenforced according to its terms (see McCabe v Witteveen, 34 AD3d at 654). Thus, whileparties to an agreement may waive their insurer's right of subrogation, a waiver-of-subrogationclause cannot be enforced beyond the scope of the specific context in which it appears (seeKaf-Kaf, Inc. v Rodless Decorations, 90 NY2d 654, 660 [1997]).
Section 11.4.5 of the contract between the plaintiff and Skanska provides, "If during theProject construction period the Owner [the plaintiff] insures properties, real or personal or both,at or adjacent to the site by property insurance under policies separate from those insuring theProject, or if after final payment property insurance is to be provided on the completed Projectthrough a policy or policies other than those insuring the Project during the construction period,the Owner shall waive all rights in accordance with the terms of Subparagraph 11.4.7 fordamages caused by fire or other causes of loss to the extent that said damage or loss is covered bythis separate property insurance. All separate policies shall to the extent obtainable, withoutadditional premium, provide this waiver of subrogation by endorsement or otherwise." Section11.4.7 of the contract provides, "The Owner [the plaintiff] and Contractor [Skanska] waive allrights against (1) each other . . . for damages caused by fire or other causes of lossto the extent of actual recovery of any insurance proceeds under any property insurance obtainedpursuant to this Paragraph 11.4 or other property insurance applicable to the Work."
Contrary to the plaintiff's contention, although the IPI polices were obtained afterconstruction on the Taffner Field House was completed, they constitute "property insuranceapplicable to the [w]ork." The "[w]ork" is defined in the contract as, inter alia, the "completed[p]roject," which is the Taffner Field House (see Acuity v Interstate Constr., Inc., 2008Ohio 1022, ¶ 63 [2008]; TX C.C., Inc. v Wilson/Barnes Gen. Contrs., Inc., 233SW3d 562, 570 [Tex 2007]). However, as the plaintiff correctly contends, the first clause ofsection 11.4.5, pertaining to the "[p]roject construction period," does not apply to the instantdispute because construction had been completed by the time of the flooding in 2006 and 2007.The IPI policies, which were in effect from July 1, 2006, until July 1, 2008, were not insuring theproperty during the "[p]roject construction period." Thus, that portion of section 11.4.5 does notbar the plaintiff, in effect, on behalf of Lloyd's, from seeking damages from Skanska.
As for the portion of section 11.4.5 pertaining to the period "after final payment," contrary tothe plaintiff's contention, a plain reading of it, supported by the Commentary of the AmericanInstitute of Architects, demonstrates that the waiver applies to post-construction losses (seeArgonaut Great Cent. Ins. Co. v DiTocco Konstruction, Inc., 2007 WL 4554219, *7-9, 2007US Dist LEXIS 93846, *26-27 [D NJ 2007]; Royal Surplus Lines Ins. Co. v Weis Bldrs.,Inc., 2006 WL 897078, *4, 2006 US Dist LEXIS 16316, *13 [WD Ky 2006]; MiddleoakIns. Co. v Tri-State Sprinkler Corp., 77 Mass App Ct 336, 338, 931 NE2d 470, 471-472[2010]). Further, there is no merit to the plaintiff's contention that the inclusion of the phrase "isto be provided" limited the waiver of subrogation to situations in which the plaintiff wascontractually obligated to purchase casualty insurance after construction was completed (seeArgonaut Great Cent. Ins. Co. v DiTocco Konstruction, Inc., 2007 WL 4554219, 2007 USDist LEXIS 93846 [2007]; Middleoak Ins. Co. v Tri-State Sprinkler Corp., 77 Mass AppCt at 339, 931 NE2d 470 at 472 [2010]; Acuity v Interstate Constr., Inc., 2008 Ohio1022, ¶ 61-62 [2008]).
As the plaintiff correctly contends, the waiver of subrogation was conditioned on such awaiver being "obtainable, without additional premium." Nevertheless, the plaintiff's submissionsfailed to demonstrate, as a matter of law, that the waiver of subrogation was not obtainablewithout additional premium. Accordingly, the existence of factual issues precludes the award ofsummary judgment to any party on the issue of whether the waiver of subrogation in sections11.4.5 and 11.4.7 are applicable and, as such, the Supreme Court properly denied that branch ofthe plaintiff's motion which was for summary judgment dismissing the fourth affirmative defenseasserted by Skanska.
The plaintiff's contention that Skanska agreed to forego enforcement of the waiver ofsubrogation is without merit, as that alleged agreement applied to the builder's risk endorsementand not the IPI policies. Mastro, A.P.J., Balkin, Chambers and Lott, JJ., concur.