934 F.3d 424
5th Cir.2019Background
- Chickasaw County School District contracted with Sullivan Enterprises using AIA Document A201-2007 for a window restoration project; while work was ongoing a fire destroyed the entire school.
- The District had an existing Liberty Mutual property-insurance policy that covered the Project; Liberty Mutual paid $4.3 million for the loss.
- Liberty Mutual sued Sullivan and subcontractors in subrogation alleging negligent causation of the fire.
- The district court bifurcated proceedings to decide whether the contract’s subrogation waiver precluded Liberty Mutual’s claims; it adopted the view that the waiver covers only damage to the contractual “Work.”
- On appeal, the Fifth Circuit asked (and now certifies) whether Mississippi law would limit the A201 §11.3.7 waiver to damage to the Work or extend it to non-Work property; the court also addressed, but forfeited, a challenge that the board’s minutes failed to form a valid contract.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of contract under Mississippi minutes rule | Liberty Mutual suggested board unaware of A201 terms; implied challenge to formation | Sullivan relied on signed agreement and board action reflected in minutes | Court treats contract as valid because Liberty Mutual forfeited the minutes-based challenge in district court |
| Which AIA provision controls waiver analysis (§11.3.5 vs §11.3.7) | Liberty Mutual argued §11.3.5 triggered broader waiver | Sullivan argued §11.3.5 creates waiver when separate insurance exists, but §11.3.7 governs generally | Court held §11.3.7 is the operative provision; §11.3.5 applies only if separate, adjacent-property insurance exists and thus did not apply here |
| Proper interpretive approach to §11.3.7 (scope of waiver) | Liberty Mutual: waiver limited to damage to the contractual "Work" (minority approach) | Sullivan: waiver applies to all damage covered by property insurance purchased under §11.3.1 (majority approach) | District court adopted minority rule; Fifth Circuit certified the question to Mississippi Supreme Court because state law is unclear |
| Procedural disposition—whether question should be certified to state court | Liberty Mutual wanted federal court decision on scope under Mississippi law | Sullivan opposed certification | Fifth Circuit certified the controlling question to the Mississippi Supreme Court and retained jurisdiction pending the state court's response |
Key Cases Cited
- Commercial Union Ins. Co. v. Bituminous Cas. Corp., 851 F.2d 98 (3d Cir.) (interpreting A201 waiver based on source of insurance proceeds)
- Tokio Marine & Fire Ins. Co. v. Employers Ins. of Wausau, 786 F.2d 101 (2d Cir.) (adopting waiver scope tied to insurance procured under AIA provisions)
- Lexington Ins. Co. v. Entrex Communication Servs., Inc., 749 N.W.2d 124 (Neb.) (majority approach: waiver covers damage paid by owner-obtained insurance)
- Copper Mountain, Inc. v. Indus. Sys., Inc., 208 P.3d 692 (Colo.) (en banc) (minority approach: waiver limited to damage to the Work)
- Facilities, Inc. v. Rogers-Usry Chevrolet, Inc., 908 So.2d 107 (Miss.) (contract construed as a whole; give effect to all clauses)