St. Paul Fire & Marine Insurance Co. v. Freeman-White Associates, Inc., 358 S.E.2d 99

St. Paul Fire & Marine Insurance Co. v. Freeman-White Associates, Inc.

358 S.E.2d 99

N.C. Ct. App.

1987

Check Treatment

Lead Opinion

WELLS, Judge.

It seems apparent from the briefs of the parties that there is little question that plaintiffs’ complaint, on its face, sets forth a vаlid claim for relief against defendants for negligence in the performance of their professional duties owed to plaintiffs. The complications in the case arise out of the provisions of contract documents attached to and incorporated in the complaint. The order of the trial court allowing defendants’ N.C. Gen. Stat. 1A-1, Rule 12(b)(6) motion to dismiss indicates that the trial сourt was convinced that in these contract documents, plaintiff waived any claim it may have had against defendants for their nеgligence to the extent plaintiffs had obtained hazard insurance coverage for *433damage to the property during construction. This is the central point addressed by the parties in their briefs. Thus, our task is to examine the contract documents to determine whether these documents were so clear in their provisions as to allow the trial court to find such a waiver, as a matter оf law.

The contract documents are lengthy and detailed, but a few provisions pertinent to the question before us convince us that the trial court erred in allowing defendants’ motion to dismiss.

Paragraph 11.4 of the agreement between the owner (plaintiff) and ‍‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‍thе architect (defendants) (AIA Document B141/CM) provides:

The Owner and the Architect waive all rights against each other and against the сontractors, consultants, agents and employees of the other for damages covered by any property insurancе during construction as set forth in the 1980 Edition of AIA Documents A201/CM, General Conditions of the Contract for Construction, Construction Management Edition. The Owner and the Architect shall each require similar waivers from their contractors, consultants and agents.

Paragraph 11.3.1 of thе General Conditions of the Contract for Construction (AIA Document A201/CM) provides in pertinent part as follows:

Unless otherwise provided, the Owner shall purchase and maintain property insurance upon the entire Work at the site to the full insurable value thereоf. This insurance shall include the interests of the Owner, the Construction Manager, the Contractor, Subcontractors and Sub-subcontractors in the Work, and shall insure against the perils of fire and extended coverage and shall include “all risk” insurance for physical loss or damage including, without duplication of coverage, theft, vandalism and malicious mischief. . . .

By separate document, the parties added a paragraph numbered 11.5 to the agreement between ‍‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‍the owner and the architect (AIA Document B141/CM). That paragraph provides:

The Architect shall maintain in force an Architects and Engineers Professional Liability Insurance Policy providing coverage for errors and omissions of professional services in *434architecture, building design, HVAC, electrical, mechanical, structural engineering, that might be made pursuant to this Agreement and protecting the Owner from the direct and consequential results оf such errors and omissions. Such insurance shall provide coverage on an occurrence and aggregate basis in amоunts not less than $1,000,000 respectively. This insurance shall be maintained in force during the life of the Project and for that period of time fоllowing the date of final completion during which an action for professional liabil ity on the part of the Architect for this Projеct may be brought by the Owner under North Carolina Law. The Architect may provide such insurance protection to the Owner through cоmmercial insurance or other financial mechanisms acceptable to the Owner, and the Owner’s acceptance shall not be unreasonably withheld.

The contract thus contains provisions which appear to be inconsistent with each оther, or are at least susceptible to more than one interpretation: (1) that the true intent of the parties was that the owner would waive all claims against the architect for damage against which the owner had insured itself; and (2) that the architect would provide its own insurance coverage for damages caused for its own errors and omissions, thereby negating waiver as to suсh losses. Under such circumstances, plaintiff would be allowed to introduce extrinsic evidence to show the true intent of the pаrties. See Root v. Insurance Co., 272 N.C. 580, 158 S.E. 2d 829 (1968); see also Silver v. Board of Transportation, 47 N.C. App. 261, 267 S.E. 2d 49 (1980).

Under Sutton v. Duke, 277 N.C. 94, 176 S.E. 2d 161 (1970), and its progeny, a motion to dismiss a complaint for failure to state a claim upon which relief can be granted, pursuant to G.S. 1A-1, Rule 12(b)(6) of the Rules of Civil Procedure, ‍‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‍should not be granted unless it appears to a certainty that plaintiff is not entitled to reliеf under any statement of facts which could be proved in support of the claim.

The contract between plaintiffs and defеndants being ambiguous and unclear as to plaintiffs’ intent to waive its negligence claim against defendants, the trial court erred in dismissing plaintiffs’ action.

*435Reversed and remanded.

Judge ORR concurs. Judge Arnold dissents.

Dissenting Opinion

Judge Arnold

dissenting.

I dissent. While the majority correctly states that our task is to examine the contract documents and determine whether or not the provisions within are ambiguous, the majority fails to recognize one of the basic rules of contract interpretаtion. A contract must be construed as a whole, considering each clause and word with reference to all other provisions and giving effect to each whenever possible. Marcoin, Inc. v. McDaniel, 70 N.C. App. 498, 320 S.E. 2d 892 (1984). With this duty in mind, the provisions ‍‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‍of the contract in the case sub judice are unambiguous and the waiver contained in 11.4 prevents plaintiffs from bringing this action.

The owner was required by the contract to рurchase “all risk” and property insurance. Knowing this and realizing that the waiver in 11.4 applies only to damages to the work occurring during construction, section 11.5 requires defendants to purchase professional liability insurance covering the following: During construction, defendants were to insure against damages other than to the work itself resulting from defendants’ negligence, including claims for bodily injury, dаmage to other property and claims made by third parties. After construction was completed, however, defendants were additionally required to obtain insurance covering damage to the work itself.

Reading each clause with reference to the other provisions and giving each effect, it is clear that the owner waived its rights to recover from other parties for damages covered by insurance. See Trump-Equitable Fifth Ave. ‍‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‍v. H.R.H. Construction Corp., 66 N.Y. 2d 779, 488 N.E. 2d 115, 497 N.Y.S. 2d 369 (1985); South Tippecanoe School Bldg. Corp. v. Shambaugh & Son, Inc., 182 Ind. App. 350, 395 N.E. 2d 320 (1979); Village of Rosemont v. Lentin Lumber Co., 144 Ill. App. 3d 651, 494 N.E. 2d 592 (1986). Thus, I find no error in the trial court’s granting of defendants’ motion to dismiss.