2 N.E.3d 132
Ind. Ct. App.2014Background
- Allen County Public Library (Library) contracted for renovation/expansion and purchased a Builders Risk policy with $5,000 pollution cleanup coverage for the Work.
- Diesel leaked from underground pipes installed by defendants during the project; Library alleges remediation costs exceed $490,000 and spread beyond the building into surrounding land.
- Contract included AIA Section 11.3.7 waiver of subrogation, which waives rights against contractors for perils covered by the required property insurance.
- Library sued defendants to recover remediation costs in excess of insurance proceeds; defendants moved for summary judgment asserting the waiver bars recovery.
- Trial and appellate proceedings focused on whether the waiver precludes the Library’s claims when contamination affected property outside the contracted “Work” and whether Midwestern interpretation controls.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether AIA §11.3.7 bars suit for contamination outside the contracted Work | Library: waiver limited to damage to the Work; recovery allowed for contamination to non-Work property | Defendants: waiver applies to bar recovery regardless of Work/non-Work distinction | Court: waiver does not bar claims for damage to non-Work property; genuine factual dispute exists on contamination scope |
| Whether summary judgment was proper given record on contamination scope | Library: factual dispute that contamination spread beyond Work precludes summary judgment | Defendants: contamination confined to Work so waiver applies | Court: defendants as movants failed to show no genuine issue; remand possible to determine scope |
| Whether court should abandon Midwestern (minority view) in favor of majority view cases | Library: relies on Midwestern holding waiver limited to Work | Defendants: Midwestern is wrong; majority view controls and would bar recovery when owner’s policy covered loss | Court: defendants waived new argument; even under majority view, Library’s builder’s risk policy limited to Work, so recovery for uninsured non-Work damage remains viable |
| Whether Library’s procurement of a builders’ risk policy affects waiver scope | Library: purchased builders’ risk covering only Work, so waiver should be limited | Defendants: waiver should apply if any insurance covered the loss | Held: builders’ risk covering only the Work supports limiting waiver; absence of broader property insurance means waiver does not bar claims for uninsured non-Work damage |
Key Cases Cited
- Midwestern Indem. Co. v. Systems Builders, Inc., 801 N.E.2d 661 (Ind. Ct. App. 2004) (AIA waiver of subrogation interpreted as limited to the contracted Work)
- S.S.D.W. Co. v. Brisk Waterproofing Co., Inc., 556 N.E.2d 1097 (N.Y. 1990) (New York Court of Appeals decision adopting the minority/Work-limited interpretation of AIA waiver)
- Employers Mut. Cas. Co. v. A.C.C.T., Inc., 580 N.W.2d 490 (Minn. 1998) (distinguishes builder’s risk versus broader property insurance and explains waiver effect when owner relies on existing all-risk coverage)
- Lloyd’s Underwriters v. Craig & Rush, Inc., 32 Cal. Rptr.2d 144 (Cal. Ct. App. 1994) (application of waiver where owner relied on broad pre-existing property insurance rather than builder’s risk)
- Mu Chapter of Sigma Pi Fraternity v. Northeast Constr. Servs., 273 A.D.2d 579 (N.Y. App. Div. 2000) (allowed owner’s separate claim for uninsured losses not covered by insurance despite waiver/subrogation issues)