Willis Realty Associates v. Cimino Construction Co.

CLIFFORD, Justice,

with whom RUDMAN, Justice, joins, dissenting.

I agree with the Court that the trial court correctly determined that Maine Printing was not a party to the contract with Cimino and that Cimino was not a coinsured under the Royal Globe policy. Because I would conclude that the waiver of subrogation provision in the contract was inapplicable to the claims pursued in the names of Willis Realty and Maine Printing, however, I respectfully dissent.

This Court reviews the trial court’s decision de novo, and construes the contract as a matter of law. The trial court, however, did not decide the case as a matter of law on a motion for summary judgment. Rather, the trial court heard extrinsic evidence to determine the intent of the parties as to whether the waiver of subrogation provision in Article 11.3.6 applied to this action brought by Royal Globe. In the case of this contract that I would conclude is ambiguous, that factual determination should be reviewed for clear error, and I find no such error. See Titcomb v. Saco Mobile Home Sales, Inc., 544 A.2d 754, 757 (Me.1988) (if contract ambiguous, and relevant extrinsic evidence is resorted to by the court in construing it, the interpretation is a question of fact reviewable on appeal under a clear error standard).

Giving effect to the intent of the parties is the cardinal rule of construction in construing the terms of a contract. Palmer v. Nissen, 256 F.Supp. 497, 503 (D.C.Me.1966) (iciting Ames v. Hilton, 70 Me. 36, 43 (1879)). That intent is to be discerned from the contract itself, “construed in respect to the subject matter, motive and purpose of making the agreement and the object to be accomplished.” Foster v. Foster, 609 A.2d 1171, 1172 (Me.1992); see also Cushing v. State, 434 A.2d 486, 494 (Me.1981).

Under Article 11.3.11 of the AIA standard form contract, unless “otherwise provided,” the owner is obligated to provide insurance on the entire work at the site, covering the interests of the owner, the contractor, and subcontractors, commonly known as builder’s risk insurance.2 In this case, the parties did provide otherwise, agreeing by letter to a change in Article 11.3.1 to provide that Cimino, the contractor, as opposed to Willis Realty, the owner, would assume the obligation to procure this insurance. Cimino, in fact, did purchase builder’s risk insurance pursuant to the terms of the contract. That builder’s risk policy, however, was not purchased in time to cover this incident.3

Under Article 11.3.6,4 the parties agreed to waive all claims for damages covered by insurance obtained pursuant to Article 11.3 or “any other property insurance applicable to the Work.” Because Cimino did not purchase builder’s risk insurance until after the date of the wall collapse, there was no insurance procured pursuant to Article *129111.3 within the meaning of the waiver as applied to this lawsuit. This Court concludes as a matter of law that the unambiguous intent of the parties to this contract is that the preexisting general business and property liability insurance policy that Willis Realty and Maine Printing (not a party to the contract) maintained with Royal Globe was insurance “applicable to the Work” within the meaning of Article 11.-3.6. I disagree.

The “Work” is defined in Article 1.1.3 of the contract as comprising the completed construction required by the contract. The contract provided for the construction of an entirely new building, albeit attached to the existing building. The wall that collapsed was part of the existing building and the damages flowing from that collapse were the result of the harm to the wall and to the business, Maine Printing, housed in the existing building. Although the harm was caused by construction activity, the existing property and the damage to it are separate and distinct from the work.

The insurance contemplated under Article 11.3.6 is the kind of policy purchased by Cimino, the party responsible under the contract for procuring such insurance, albeit too late to cover this incident, insuring the value of the work and including the interests of the owner, the contractor, and all subcontractors. The preexisting “Business Guard Policy” issued by Royal Globe that insured the existing buildings and paid damages to Maine Printing for damaged inventory and lost business, and to Willis Realty for damage to the existing building, on the other hand, is, in my view, insufficiently related to the work to be within the meaning of “insurance applicable to the Work” in Article 11.3.6.

Cimino’s expansive definition of the term “work” is belied by the builder’s risk policy that it eventually purchased, that, by its terms, excludes damage to the existing building. Although Cimino relies on cases broadly construing the definition of “work” in similar contractual provisions, those cases all involved insurance coverage purchased by the owner pursuant to the owner’s obligation under the contract, and almost every one of them involved builder’s risk insurance designed to indemnify the owner and contractor for damages to the project. Here, on the other hand, Willis Realty, as the owner, had no obligation or intention to procure such insurance; the Royal Globe policy is a general business insurance policy insuring the interests of Willis Realty and its tenant, Maine Printing, in the existing building and is not a builder’s risk policy designed to cover the work itself or to benefit Cimino in any way.

In S.S.D.W. Co. v. Brisk Waterproofing Co., Inc., 76 N.Y.2d 228, 557 N.Y.S.2d 290, 556 N.E.2d 1097 (1990), New York’s Court of Appeals, in construing a provision similar to the within contract between Willis Realty and Cimino, concluded that the waiver of subrogation clause was intended to include only insurance covering property in which the contractor had an insurable interest, that it barred subrogation only for damages to the work itself, and did not extend to cover all damages flowing from the work. That court’s construction of the standard AIA contract gives effect to the contractor’s obligation to carry insurance for “damages other than to the work itself,” id. 557 N.Y.S.2d at 293, 556 N.E.2d at 1100, and when applied to the facts of this case, is persuasive.

Had the parties intended that the contract provision waive all claims against each other to the extent covered by any insurance policy, they could have so provided. They did not do so in Article 11.3.6. I would defer to the trial court and affirm it’s conclusion that the Royal Globe policy was not insurance “applicable to the Work.”

. Article 11.3.1 of the contract in this case provides:

Unless otherwise provided, the owner shall purchase and maintain property insurance upon the entire work at the site to the full insurable value thereof. This insurance shall include the interests of the owner, the contractor, subcontracts, 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.

. On the other hand, the contractor is obligated under the contract to carry liability insurance for damages "other than to the work itself.” Article 11.1.5.

. In addition, by its terms, the policy purchased by Cimino excludes damage to the existing building.

. Article 11.3.6 of the contract provides in pertinent part:

The Owner and Contractor waive all rights against ... each other ... for damages caused by fire or other perils to the extent covered by insurance obtained pursuant to Paragraph 11.3 or any other property insurance applicable to the Work except such rights as they may have for the proceeds of such insurance held by the Owner, as trustee.