COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 2-08-502-CV
TRAVELERS LLOYDS INSURANCE APPELLANT
COMPANY
V.
DYNA TEN CORPORATION APPELLEE
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FROM THE 153RD DISTRICT COURT OF TARRANT COUNTY
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MEMORANDUM OPINION 1
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Travelers Lloyds Insurance Company appeals from a summary judgment
in favor of Dyna Ten Corporation. We reverse and remand.
Background
The underlying facts are not in dispute. See Tex. R. App. P.
38.2(a)(1)(B). On or about August 1, 2005, an HVAC condenser water line
1
… See Tex. R. App. P. 47.4.
ruptured on the fifth floor of “The Tower” condominium skyscraper in Fort
Worth. The ruptured water line resulted in water damage to multiple floors, the
elevator system, and the fire alarm system. Travelers contends the rupture of
this water line was caused by improper soldering of the high-pressure pipe and
joint at the time of the installation. Dyna Ten, a plumbing subcontractor on a
construction project at the Tower, installed the pipe. The general contractor for
the construction project was Turner Construction Company, and the project
was governed by a construction contract entered into between Turner as
“Contractor” and TLC Green Property Associates I, L.P. (“TLC”) as “Owner” of
the Tower.
The contract between TLC and Turner contained the following waiver of
subrogation:
13.7 Waiver of Subrogation
Owner and Contractor waive all rights against each other, if any,
for damages caused by fire or other causes of loss to the extent of
actual recovery of any insurance proceeds under any property
insurance applicable to the Project except such rights as they have
to proceeds of such insurance held by Owner in good faith. This
waiver applies regardless of whether or not the applicable insurance
policies were purchased and/or effective before this Agreement
was entered into or purchased pursuant to the terms of this
Agreement. Owner requires that Contractor and its separate
Contractors, and the subcontractors, sub-subcontractors, agents
and employees of any of them, by appropriate agreements, written
where legally required for validity, obtain similar waivers each in
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favor of the Owner. The policies shall provide such waivers of
subrogation by endorsement or otherwise. A waiver of subrogation
shall be effective as to a person or entity even though that person
or entity did not pay the Insurance premium directly or indirectly
and whether or not the person or entity had an insurable interest in
the property damaged.
Travelers provided a commercial insurance policy composed of deluxe
property coverage, commercial general liability coverage, and employee benefits
liability coverage relating to the Tower. The policy lists the Tower as an insured
location, and it identifies TLC as a named insured. Travelers paid insurance
benefits to or on behalf of TLC in the sum of $119,922.09.
Travelers then sued Dyna Ten, claiming that it was entitled as TLC’s
subrogee to recover damages against Dyna Ten. Dyna Ten filed a motion for
summary judgment on the affirmative defense of waiver, arguing that the
contract’s subrogation waiver, as well as a subrogation waiver in the policy,
precluded Travelers’s subrogation claim as a matter of law. The trial court
granted Dyna Ten’s motion; the trial court’s order does not indicate whether its
judgment is based on the contract, the policy, or both. Travelers filed this
appeal.
Standard of Review
We review summary judgments de novo. Provident Life & Accident Ins.
Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). Under the standard
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applicable to a traditional motion for summary judgment, the motion should be
granted only when the movant establishes that there is no genuine issue as to
any material fact and that it is entitled to judgment as a matter of law. See
Tex. R. Civ. P. 166a(c); Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548
(Tex. 1985).
Discussion
An insurer’s right to subrogation derives from and is limited to the rights
of the insured. Trinity Universal Ins. Co. v. Bill Cox Constr., Inc., 75 S.W.3d
6, 8 (Tex. App.—San Antonio 2001, no pet.); see also TX. C.C., Inc. v.
Wilson/Barnes Gen. Contractors, Inc., 233 S.W.3d 562, 571 (Tex. App.—Dallas
2007, pet. denied) (holding insurer’s subrogation claim barred as a matter of
law when property owner waived subrogation “because [the insurer’s] rights
are limited to [the property owner’s] rights”); Nat’l Union Fire Ins. Co. v. John
Zink Co., 972 S.W.2d 839, 844 (Tex. App.—Corpus Christi 1998, pet. denied)
(“The subrogees stand in the shoes of the one whose rights they claim, and the
extent of the subrogees’ remedy and the measure of their rights are controlled
by those possessed by the subrogor.”). A release between the insured and the
offending party prior to the loss destroys the insurer’s rights by way of
subrogation. Trinity Universal, 75 S.W.3d at 10. The purpose of a
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waiver-of-subrogation provision in a construction contract “is to eliminate the
need for lawsuits by protecting all contracting parties from property loss under
the owner’s property insurance.” Walker Eng'g, Inc. v. Bracebridge Corp., 102
S.W.3d 837, 841 (Tex. App.—Dallas 2003, pet. denied).
When reviewing a trial court’s interpretation of a contract, we give words
in the contract their plain meaning and examine the entire contract in an effort
to harmonize and give effect to all the provisions so that none will be rendered
meaningless. Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 157–59
(Tex. 2003); Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983). We
determine the parties’ intent from the instrument as a whole, considering each
provision not in isolation but with reference to the entire contract. Stine v.
Stewart, 80 S.W.3d 586, 589 (Tex. 2002); Coker, 650 S.W.2d at 393. We
will find the contract to be unambiguous and will construe it as a matter of law
if we can give it a certain or definite legal meaning or interpretation. Coker,
650 S.W.2d at 393; Ludwig v. Encore Med., L.P., 191 S.W.3d 285, 290 (Tex.
App.—Austin 2006, pet. denied).
1. The construction contract’s waiver provision
Dyna Ten first argues that the subrogation waiver in the contract between
TLC and Turner bars Travelers’s subrogation claim against Dyna Ten. We
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disagree. The waiver provides that “Owner and Contractor waive all rights
against each other . . . for damages caused by fire or other causes of loss to
the extent of actual recovery of any insurance proceeds . . . .” [Emphasis
added.] Thus, TLC and Turner waived subrogation rights against each other;
but nothing in the quoted sentence suggests that TLC also waived subrogation
rights in favor of Turner’s subcontractors, including Dyna Ten.
The only provision in the contract’s subrogation waiver that addresses
Turner’s subcontractors is this sentence: “Owner requires that Contractor and
its separate Contractors . . . , by appropriate agreements, written where legally
required for validity, obtain similar waivers each in favor of the Owner.” But
this provision requires Turner to obtain waivers in favor of TLC; it says nothing
about TLC waiving subrogation in favor of Turner’s subcontractors, including
Dyna Ten.
For a contrasting example of a construction contract in which the owner
clearly waived subrogation against the contractor’s subcontractors, we look to
TX. C.C. The subrogation waiver in that case provided that “[t]he Owner and
Contractor waive all rights against (1) each other and any of their
subcontractors, sub-subcontractors, agents and employees, each of the other
. . . for damages caused by fire or other perils to the extent covered by property
insurance.” TX. C.C., 233 S.W.3d at 565 (emphasis added). The Dallas court
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of appeals held that the owner had waived its subrogation rights against both
the contractor and its subcontractors as a matter of law. Id. at 574.2
Unlike the waiver provision in TX. C.C., TLC’s subrogation waiver in this
case does not explicitly extend to Turner’s subcontractors, and nothing in the
construction contract suggests that the parties intended such a waiver. We
therefore hold that the contract’s subrogation waiver does not bar Travelers’s
claims against Dyna Ten. If and to the extent the trial court relied on the
contract’s subrogation waiver as the basis of summary judgment in Dyna Ten’s
favor, it erred.
2. Subrogation waiver in the Travelers insurance policy
Dyna Ten alternatively argues that a subrogation waiver in the insurance
policy Travelers issued to TLC bars Travelers’s claims against Dyna Ten.
Travelers argues that the waiver is an endorsement to an inapplicable
coverage—commercial general liability—and thus plays no role in this case.
The Travelers policy provided for three separate insurance coverages:
Deluxe Property Coverage, Commercial General Liability Coverage, and
Employee Benefits Liability Coverage. Each coverage is independent, defines
2
… The crucial issue in TX. C.C. was whether the waiver extended to
losses occurring after construction was complete as well as during
construction. Id. at 564.
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its covered losses, and sets out its own exclusions, endorsements,
amendments, definitions, coverage limits, and coverage premiums.
The subrogation waiver upon which Dyna Ten relies appears in an
endorsement to the commercial general liability coverage, as follows:
XTEND ENDORSEMENT
This endorsement modifies insurance provided under the following:
COMMERCIAL GENERAL LIABILITY COVERAGE PART
....
PROVISIONS
....
C. BLANKET WAIVER OF SUBROGATION
We waive any right of recovery we may have against any
person or organization because of payments we make for
injury or damage arising out of premises owned or occupied
by or rented or loaned to you; ongoing operations performed
by you or on your behalf, done under a contract with that
person or organization; “your work”; or “your products.” We
waive this right where you have agreed to do so as part of a
written contract, executed by you prior to loss.
In the commercial general liability coverage part, Travelers agreed to “pay
those sums [TLC] becomes legally obligated to pay as damages because of . . .
‘property damage’ to which this insurance applies.” The coverage excludes
“[p]roperty damage to . . . [p]roperty you [TLC] own, rent, or occupy, including
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any costs or expenses incurred by you . . . for repair, replacement,
enhancement, restoration or maintenance of such property for any reason.”
By contrast, in the “deluxe” property coverage form, Travelers agreed to
“pay for direct physical loss or damage to Covered Property caused by or
resulting from a Covered Cause of Loss.” “Covered Property” includes
“Buildings . . . described in the Declarations,” and the declarations specifically
describe the Tower.
When interpreting an insurance policy with multiple coverages, each of
the coverages, along with its definitions and exclusions, must be read as
separate and distinct. M.J.R. Corp. v. Scottsdale Ins. Co., 803 S.W.2d 426,
430 (Tex. App.—Dallas 1991, no writ). Separate coverages comprise distinct,
contemporaneous contracts. Id.; see also TIG Ins. Co. v. San Antonio YMCA,
172 S.W.3d 652, 660 (Tex. App.—San Antonio 2005, no pet.).
The subrogation waiver upon which Dyna Ten relies appears in the
“Xtend Endorsement,” which applies, by its express terms, solely to the
policy’s commercial general liability coverage. The commercial general liability
coverage applies to sums TLC was obligated to pay to third parties and
specifically excludes damages to property owned, rented, or occupied by TLC.
The “deluxe” property coverage, on the other hand, specifically covers property
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damage to the Tower. Thus, it appears that any payments made by Travelers
for damage caused by the HVAC water line leak would have been made under
the policy’s property coverage, not the commercial general liability coverage, 3
and the subrogation waiver in the “Xtend” endorsement does not apply.
We hold that Dyna Ten failed to establish as a matter of law that the
“Xtend” endorsement’s subrogation waiver applies to the facts of this case.
Therefore, to the extent the trial court relied on the endorsement’s subrogation
waiver as the basis for summary judgment, it erred.
Conclusion
Because neither the construction contract’s subrogation waiver nor the
insurance policy’s subrogation waiver bar Travelers’s claims against Dyna Ten
as a matter of law, we hold that the trial court erred by granting summary
3
… The coverage under which Travelers made payments is not entirely
clear from the record. Travelers simply alleged in its original petition that it
made payments “to or for the benefit of Tower under its policy of property
insurance.” But the burden of proving that the payments were made under the
commercial general liability coverage, thus triggering the “Xtend”
endorsement’s subrogation waiver, falls to Dyna Ten as the party seeking
summary judgment, and Dyna Ten filed no summary judgment evidence to carry
its burden. See Tex. R. Civ. P. 166a(c). On appeal, Travelers asserts in its fact
statement—without reference to the record—that it paid benefits under the
“deluxe” property coverage, and Dyna Ten does not dispute that assertion in
its own brief. See Tex. R. App. P. 38.2(a)(1)(B).
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judgment. We sustain Travelers’s sole issue, reverse the trial court’s judgment,
and remand the case to the trial court for further proceedings.
ANNE GARDNER
JUSTICE
PANEL: CAYCE, C.J.; GARDNER and MCCOY, JJ.
DELIVERED: August 26, 2009
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