Allen County Public Library v. Shambaugh & Son, L.P., Hamilton Hunter Builders, Inc., W.A. Sheets & Sons, Inc., and MSKTD & Associates, Inc.
997 N.E.2d 48
Ind. Ct. App.2013Background
- In 2004 the Allen County Public Library contracted (using the AIA form) with Shambaugh (mechanical/electrical), Hamilton Hunter (concrete), Sheets (construction manager), and MSKTD (architect) to renovate and expand its main branch.
- The AIA-based contracts required the Owner to buy property/builders-risk insurance covering "the Work" and included a waiver of subrogation (§11.3.7) as to damage covered by that insurance; contractors were separately required to carry liability insurance for damage "other than to the Work itself."
- The Library purchased a Builders Risk Plus policy; pollutant cleanup coverage was limited to $5,000 under a separate extension.
- During construction a diesel fuel line in the basement was punctured (allegedly by Hamilton Hunter driving a stake), releasing ~3,000 gallons of diesel that contaminated soil under and around the library; Great American paid the Library $5,000 under the pollutant cleanup limit.
- The Library sued the contractors for remediation costs (~$490,000 to date); defendants moved for summary judgment arguing the AIA waiver of subrogation and the Library’s insurance recovery barred the claim.
- Trial court granted summary judgment for defendants; the Court of Appeals reversed and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the AIA contract’s waiver of subrogation (§11.3.7) and the Library’s insurance receipt bar the Library from recovering pollution‑cleanup costs for contamination of land outside the defined "Work." | Library: waiver covers only damage to the defined "Work" (the building/site work); contamination of surrounding land is "non‑Work" property and not barred — so Library may recover from contractors. | Defendants: any loss caused by construction is consequential to the Work and barred by the waiver once the Owner obtained insurance and was paid; waiver/preclusion applies to cleanup even off the immediate Work. | The waiver is limited to property covered as "the Work." Damage to land outside the Work (contaminated soil) is not within §11.3.7’s waiver, so the Library is not precluded from pursuing recovery for those cleanup costs. |
Key Cases Cited
- South Tippecanoe School Bldg. Corp. v. Shambaugh & Son, Inc., 395 N.E.2d 320 (Ind. Ct. App. 1979) (AIA insurance/subrogation clauses allocate risk to owner’s insurance and limit recourse to policy proceeds)
- Midwestern Indem. Co. v. Systems Builders, Inc., 801 N.E.2d 661 (Ind. Ct. App. 2004) (waiver of subrogation limited to the value of the Work; contents/non‑Work property not barred)
- Town of Silverton v. Phoenix Heat Source Sys., Inc., 948 P.2d 9 (Colo. Ct. App. 1997) (waiver limited to the work performed; inapplicable to other parts damaged)
- S.S.D.W. Co. v. Brisk Waterproofing Co., Inc., 556 N.E.2d 1097 (N.Y. 1990) (contractor liable for damage beyond the scope of the Work; contract allocates owner vs. contractor insurance responsibilities)
- Lloyd’s Underwriters v. Craig & Rush, Inc., 32 Cal. Rptr. 2d 144 (Cal. Ct. App. 1994) (contrary authority holding AIA waiver bars recovery whenever owner’s insurer pays; discussed but not followed)