IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 95-60805
FIDELITY & GUARANTY INSURANCE CO.,
Plaintiff-Appellee,
versus
CRAIG-WILKINSON, INC.,
Defendant-Appellant.
Appeal from the United States District Court
for the Southern District of Mississippi
(3:93-CV-694)
October 23, 1996
Before JONES and WIENER, Circuit Judges, and FURGESON,* District
Judge.
PER CURIAM**:
This is an appeal from an adverse judgment of the district
court following a bench trial in a diversity case that essentially
*
District Judge for the Western District of Texas,
sitting by designation.
**
Pursuant to Local Rule 47.5, the court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in Local Rule
47.5.4.
pitted one insurance company against another. The litigation was
a result of claims produced when fire destroyed a single-family
residence during the course of construction of an addition to it.
Concluding that the district court correctly ruled that mutual
waivers of subrogation by the homeowners and the general contractor
did not affect the policy of homeowner’s insurance covering the
principal residence, to which the contractor was building the
addition, we affirm.
I
Defendant-Appellant Craig-Wilkinson, Inc. (Contractor) insists
that the district court erred in holding that mutual waivers of
subrogation by the Contractor and the homeowners (the persons
insured by Plaintiff-Appellee Fidelity & Guaranty Insurance Company
(F&G) under a homeowner’s policy) were ineffective against F&G.
This ruling allowed F&G to sue the Contractor in subrogation to
recover amounts paid by F&G to its insureds under the homeowner’s
policy for fire damage to their principal residence and its
contents. The thrust of Contractor’s argument is that (1) under
article 17.6 of the construction agreement, F&G’s homeowner’s
policy constitutes “other property insurance applicable to the
Work,” and (2) despite the construction contract’s definition of
the “Project” as “[t]he addition to the residence,” and despite the
statement in that contract that the “Work might constitute the
whole or a part of the Project,” the principal residence does fall
within the contract’s definition of the “Work” as
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the construction and services required by the contract
documents, whether completed or partially completed, and
includes all other labor, materials, equipment and
services provided or to be provided by the Contractor to
fulfil the Contractor’s obligations.
Thus, insists the Contractor, inasmuch as its services in
constructing the addition necessarily included work on the existing
residence (such as connecting the addition to the residence,
including plumbing, electrical, and physical portions of the
existing dwelling), the term “Work” had to comprise the existing
house as well as the addition. Indeed, notes the Contractor, the
very electrical fixture that caused the fire was one that the
Contractor had moved from its existing location on the original
residence and placed in another part of that structure in
conjunction with constructing the addition and connecting it to the
house so as to make the addition an integral part of it.
The Contractor also perceives support in its letter of May 19,
1993, addressed to the homeowners, which varied the insurance
responsibilities of the parties from those specified in the
contract documents. In an effort to obtain the “most coverage at
the best price” during the period of construction, the homeowners
and the Contractor agreed that (1) the Contractor would obtain a
policy of Builders Risks insurance on the new addition only and
would name the homeowners as additional insureds; (2) the
homeowners would leave the F&G homeowner’s policy “as is” (covering
only the existing residence at its current, pre-addition value,
without naming the Contractor as an additional insured, and without
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increasing either the value of the insured property or the
premiums) until completion of the addition; and, (3) the Contractor
would send the owner a copy of the Builders Risks Certificate “as
well as a Certificate on our personal [general liability]
coverage,” indicating that the Contractor would continue to
maintain its comprehensive general liability insurance in effect to
cover the Contractor’s responsibility for any and all damages
arising from its negligence.
II
We have now carefully considered the essentially undisputed
facts revealed by the record, as found by the district court and as
addressed by able counsel in their respective briefs and oral
arguments to this court. With equal care we have considered the
applicable law, as explained by counsel both orally and in briefs,
as applied by the district court in reaching its decision, and as
independently researched and analyzed on our own. In the end, we
are convinced that the district court committed no reversible error
in holding that the homeowner’s insurance policy issued by F&G was
neither obtained pursuant to article 17 of the construction
contract (it clearly had been obtained by the homeowner well in
advance of the construction contract) nor “other property insurance
applicable to the Work” (the F&G policy was applicable to the
existing residence only and the contract’s definition of the Work
is not broad enough to include that residence).
Regardless of the incidental involvement of the Contractor and
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its subcontractors with the existing residence (such as sending the
plumber under the house to check on plumbing connections, removing
and relocating the fateful flood light, and the like), the concept
of the “Work” is not mystically expanded to include the entire
existing residence. This is particularly so when as here the
concept of the “Project,” which the construction agreement defines
as “an addition to the residence,” can never be less than the Work:
The Work is defined as constituting “the whole or a part of [and
thus can never be more than] the Project.” As noted, the
Contractor’s letter of May 19, 1993, advocated retaining the
existing F&G policy “as is,” i.e., applicable only to the existing
residence, throughout the entire construction period of the
addition.
Simply put, as the existing residence cannot be deemed to be
a component part of the Work, it follows that F&G’s homeowner’s
policy —— insuring as it did only the existing residence ——
provided no coverage of the Work, i.e., the new addition. That in
turn precludes the homeowners’ and the Contractor’s reciprocal
waivers of subrogation from affecting F&G’s homeowner’s policy; by
definition, the waivers applied only to policies (1) obtained
pursuant to article 17 of the contract or (2) applicable to the
Work. F&G’s homeowner’s policy was neither, so it was not affected
by the waivers.
This hiatus in the effect of the waivers of subrogation frees
F&G to pursue subrogation against the Contractor (in reality,
5
against the issuer of the Contractor’s comprehensive general
liability policy) for the costs and expenses incurred by F&G under
the homeowner’s policy as a result of the fire attributable to
Contractor’s negligence. When the homeowners and the Contractor
elected to maintain and provide insurance in the manner proposed by
Contractor in the letter of May 19, 1993, the seeds were sewn for
the creation of that hiatus in the effectiveness of the waiver of
subrogation. The facts considered by New York’s Court of Appeals
in S.S.D.W. Co. v. Brisk Waterproofing Co., Inc.3 are essentially
indistinguishable from those presented by the instant case; at
best, any distinctions are without a difference. And, like the
district court before us, we agree with the analysis of the
majority opinion in Brisk and its applicability to the instant
facts and circumstances.
III
Finding no reversible error in the district court’s conduct of
the bench trial in this case or in that court’s findings,
reasoning, and ultimate holding, we affirm the judgment of the
district court in all respects.
AFFIRMED.
3
556 N.E.2d 1097 (N.Y. 1990).
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