(concurring in part and dissenting in part).
Two issues are raised in this interlocutory appeal. The first is whether the trial court erred in granting summary judgment in favor of National Tank and Pipe Company, Inc., (National) and M. M. Sundt Construction Company, Inc., (Sundt) and dismissing the cross-claim of defendant Mission Insurance Company (Mission) which seeks subrogation against Sundt and National. The second issue asserted on this appeal is whether the trial court erred in denying Mission’s motion for summary judgment against National and Sundt, and refusing to dismiss their counterclaims against Mission. I dissent from the majority opinion’s disposition of the first issue and concur in part in the disposition of the second.
This litigation had its genesis in the suit by United Nuclear Corporation against National, Sundt, and Mission for damages which occurred to structures built by defendants at plaintiff’s uranium mill, near Churchrock, New Mexico, and seeking insurance proceeds for damage stemming from alleged negligent construction by defendants. Defendant Mission cross-claimed against defendants Sundt and National seeking subrogation against the co-defendants for the amount of any monies it may be required to pay plaintiff resulting from any losses covered under its insurance policy for any errors, defects or improper workmanship for which Sundt and National were determined to be responsible.
Mission filed a motion for summary judgment on the cross-claims against it brought by Sundt and National. The trial court denied such motion and Mission has also filed an interlocutory appeal as to that order.
Sundt and National (Builders) moved to dismiss Mission’s cross-claims against them on the ground that an insurance company cannot be subrogated against a co-insured under a builders risk insurance policy for reimbursement of any monies it has to pay another insured under the same policy.
It is undisputed that Sundt and National are insured parties under the policy of insurance issued by Mission to United Nuclear Corporation. The nexus of the dispute between Mission, National and Sundt is the extent of the coverage under the policy of insurance and the alleged ambiguity in the policy concerning the extent of coverage. Mission asserts that Sundt and National are insured under the policy only for losses to their own property, and that they are not insured under such policy for any liability defendants may be adjudicated to have to plaintiff for negligence or breach of contract arising out of the construction project. Plaintiff agreed pursuant to contracts with Sundt and National to obtain a builder’s risk insurance policy covering physical damage to the work including defendants’ interests in the work being performed under the contract. It is also undisputed that the cover sheet of the policy of insurance issued by Mission, listed as insured “each contractor * * * subcontractor * * * or material men as their interests may appear * *
The trial court, in a carefully articulated memorandum opinion, granted summary judgment in favor of Sundt and National on Mission’s cross-claim for subrogation. The trial court’s ruling was predicated in part on recognition of the general rule that no right of subrogation arises in favor of an insurer against its own insured. The court also denied Mission’s motion for summary judgment against Sundt and National.
A) Sundt and National’s Claim of Summary Judgment:
The majority opinion finds the contract of insurance to be ambiguous and reverses the trial court’s order granting summary judgment with instructions to interpret the ambiguous provisions of the policy and to determine the extent of insurance coverage intended under the contract of insurance.
This disposition fails to address a major basis relied upon by the trial court in its order granting summary judgment against Mission on its cross-claim, i.e., that an insurer has no legal right of subrogation against an insured party under a contract of insurance. This issue is a matter of first impression in this jurisdiction and should be dispositive of appellant’s cross-claim on this appeal.
Under the facts herein this is not a case where there is an issue of whether or not there is any coverage, instead it embodies an issue as to what was the extent of insurance coverage.
The trial court’s dismissal of the insurer’s counterclaim for subrogation against Sundt and National is consistent and follows the rule recognized in a majority of jurisdictions that an insurer may not be subrogated against a contractor who is insured against damage to his own property under a builder’s risk policy, even though the subcontractor’s negligence may have resulted in a loss to another co-insured.
In South Tippecanoe School Building Corp. v. Shambaugh & Son, Inc., 395 N.E.2d 320 (Ind.Ct.App.1979), the court quoted with approval from Morsches Lumber v. Probst, 388 N.E.2d 284 (Ind.Ct.App.1979), stating:
“[A]n agreement to insure is an agreement to provide both parties with the benefits of insurance. Individuals understand that insurance will protect them against the consequences of their own negligence and more than likely assume that if one who is a part to a contract agrees as part of his or its duties to provide insurance, that the insurance will protect both of them regardless of the cause of the loss (excepting, of course, wanton and willful acts) * * *."
* * * * * *
Our statements here and * * * in Morsches are consistent with the weight of authority from other jurisdictions which holds that a builder’s risk insurer is not entitled to subrogate against one whose interests are insured even though the party’s negligence may have occasioned the loss, in the absence of design or fraud. Though the cases are many, we highlight excerpts but from these few we think representative of the majority and better reasoned, and with which we are now aligned: Baugh-Belarde Construction Co. v. College Utilities Corp., 561 P.2d 1211 (Alaska 1977); St. Paul Fire and Marine Insurance Co. v. Murray Plumbing and Heating Corp., 65 Cal.App.3d 66, 135 Cal.Rptr. 120 (1976); Board of Education v. Hales, 566 P.2d 1246 (Utah 1977); Midwest Lumber Co. v. Dwight E. Nelson Construction Co., 188 Neb. 308, 196 N.W.2d 377 (1972); and, Commerce and Industry Insurance Co. v. Orth, 254 Or. 226, 458 P.2d 926 (1969).
In South Tippecanoe, the court observed that there are numerous considerations which violate public policy in permitting subrogation by an insurer against an insured party under a policy of insurance. Quoting in part Baugh-Belarde, supra, the court noted:
‘We base our decision on several policy considerations. First, a severe conflict of interest would exist if an insurer were permitted to recover from one of its own insureds. [A]n insured * * * [is] under an implied duty to cooperate with its insurer in * * * any loss covered under the policy * * *. [The insurer] could use [the insured’s] [cooperation in the investigation of the loss to build a liability case against the insured subcontractor. Such a conflict of interest would result in a breach of the fiduciary relationship between the insurer and its insured. * * * A second policy reason for not permitting a builder’s risk insurer to subrogate against its insured, regardless of the extent of the insured’s property in the construction project, is reduction of litigation. * * * Our third policy consideration concerns the tremendous burden which would be placed on subcontractors * * * if a builder’s risk insurer were permitted to recover against its own insured. * * * All three of these policy problems can be avoided by viewing the builder’s risk policy as a single policy which protects each insured against his own negligence.’
The majority rule proscribing a right of subrogation on the part of an insurer against an insured party is also followed in St. Paul Fire & Marine Insurance Co. v. Murray Plumbing and Heating Corp., 135 Cal.Rptr. 120, 65 Cal.App.3d 66 (1976), which states:
[T]he bulk of authority elsewhere establishes the principle that an insurer may not subrogate against a coinsured of its subrogor. We see no reason not to follow this line of authority particularly since the logic and equities would seem to support such a rule. As was said in Home Insurance Company v. Pinski Brothers, Inc. (1972), 160 Mont. 219, 500 P.2d 945 at 949:
‘To permit the insurer to sue its own insured for a liability covered by the insurance policy would violate * * * basic equity principles, as well as violate sound public policy. * * *
No right of subrogation can arise in favor of an insurer against its own insured since, by definition, subrogation exists only with respect to rights of the insurer against third persons to whom the insurer owes no duty. 16 Couch on Insurance 2d, § 61:133; * * *."
The majority of jurisdictions which have examined the question whether an insurance company who has extended coverage to an insured party may be subrogated against their own insured have consistently held that an insurer, upon the payment of a loss to one insured under its policy, cannot as subrogor recover the amount paid from a co-insured under the same policy even though the latter’s negligence may have occasioned the loss, in the absence of fraud or intentional conduct on the latter’s part. General Insurance Co. of America v. Stoddard Wendle Ford Motors, 67 Wash.2d 973, 410 P.2d 904 (1966); Transamerica Insurance Co. v. Gage Plumbing and Heating Co., 433 F.2d 1051 (10th Cir. 1970); St. Paul Fire & Marine Insurance Co. v. Murray Plumbing and Heating Corp., supra; Harvey’s Wagon Wheel Inc. v. MacSween, 606 P.2d 1095 (Nev.1980).
The trial court correctly granted summary judgment dismissing Mission’s cross-claim against Sundt and National. Summary judgment is proper where the moving party is entitled to judgment as a matter of law. N.M.R.Civ.P. 56(c), N.M.S.A.1978; Worley v. United States Borax and Chemical Corp., 78 N.M. 112, 428 P.2d 651 (1967); Institute for Essential Housing, Inc. v. Keith, 76 N.M. 492, 416 P.2d 157 (1966); Harvey’s Wagon Wheel, Inc. v. MacSween, supra.
By reversing the trial court and remanding for determination of the extent of insurance coverage of Sundt and National under the builder’s risk policy, the majority decision places New Mexico in the camp of -those jurisdictions which follow the minority rule and which permits an insuror to be subrogated against a co-insured. See Public Service Co. of Oklahoma v. Black & Veatch Consulting Engineers, 328 F.Supp. 14 (N.D.Okl.1971); Paul Tishman Co. v. Carney & Del Guidice, Inc., 36 App.Div.2d 273, 320 N.Y.S.2d 396 (1971); Turner Construction Co. v. John B. Kelly Co., 442 F.Supp. 551 (E.D.Pa.1976).
Since under the majority rule cited above, an insurer has no right of subrogation, absent fraud or intentional conduct, against an insured party, it logically flows that the trial court’s order denying Mission’s motion for summary judgment was also correct.
B) Mission’s Claim for Summary Judgment :
Mission’s motion for summary judgment was aimed at dismissal of the cross-claims of National and Sundt which contend that Mission is liable for all claims asserted by U.N.C. against National and Sundt in this suit. The insurance policy is ambiguous as to what the extent and magnitude of coverage is under the policy as to Builders. Further fact finding as to the intent of the parties on this issue is necessary. This issue should be vacated and remanded to receive extrinsic evidence on the question as to the precise extent of Mission’s coverage, under the policy. I therefore concur in the majority opinion’s result as to that portion of the trial court’s judgment.
I would, however, affirm the order of the trial court granting summary judgment against Mission on its cross-claim against Sundt and National and which held Mission is precluded from subrogation rights against Sundt and National.