Home Insurance Co. v. Bauman

FIRST DIVISION

AUGUST 11, 1997

No. 1-96-0069

HOME INSURANCE COMPANY, as Subrogee ) APPEAL FROM THE

of RONALD SLOVIN and ALLISON SLOVIN, ) CIRCUIT COURT

) OF COOK COUNTY.

Plaintiff-Appellant, )

)

v. )

)

JONATHAN BAUMAN d/b/a D.C.C.A. )

DEVELOPMENT, CONSULTING & )

CONSTRUCTION COMPANY, )

)

Defendant. )

)

and )

)

JOHN ARITO HEATING & AIR )

CONDITIONING COMPANY, ) HONORABLE

) MICHAEL J. HOGAN,

Defendant-Appellee. ) JUDGE PRESIDING.

PRESIDING JUSTICE CAMPBELL delivered the opinion of the court:

Plaintiff Home Insurance Company (Home) appeals from an order of the circuit court of Cook County dismissing its negligence claim against defendant John Arito Heating & Air Conditioning Company (Arito), a subcontractor per­forming work on property owned by Ronald and Allison Slovin, who were insured by Home.  Defendant Jonathan Bauman d/b/a D.C.C.A. Development, Consulting and Construction Company (Bauman), the general con­tractor for this work, was previously dismissed from this suit and is not a party to this appeal.

The record on appeal indicates the following facts.  On November 4, 1994, Home, as the subrogee of the Slovins, filed a two-count complaint sound­ing in negligence against both Bauman and Arito.  Count I of the com­plaint was against Bauman; count II was against Arito.  The complaint alleged that prior to September 8, 1992, the Slovins entered into a contract with Bauman for the construction of an addition to their residence in Lincolnwood, Illinois.  Bauman retained Arito for the purpose of installing heating, air conditioning and ventilation systems for the new addition.

Arito allegedly proceeded to install the heating, air conditioning and ventilation systems, including copper tubing lines, which allegedly required their soldering with a propane torch.  Home alleged that on September 8, 1992, Arito negligently burned a hole through a temporary natural gas line, result­ing in the ignition of the natural gas and attendant fire damage to the Slovins' property.  Home sought unspecified damages.

On March 28, 1995, the trial court dismissed the claim against Bauman with prejudice.  Home raises no issue regarding count I in this appeal.

On April 10, 1995, Arito filed a motion for summary judg­ment, based on the May 1, 1992, contract between the Slovins and Bauman (Contract).  Article 17 of the Contract provided in part as follows:

"17.3  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, 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.

* * * * *

"17.6  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 this Ar­ticle or any other property insur­ance ap­plicable to the Work, except such rights as they may have to the proceeds of such in­surance held by the Owner as trustee.  The Contractor shall require similar waivers in favor of the Owner and the Con­trac­tor by Subcontrac­tors and Sub-subcontractors."

On June 30, 1995, the trial court heard argument on the motion.  On Octo­ber 25, 1995, the trial court granted summary judgment in favor of Arito, "pur­suant to the holding in Village of Rosemont v. Lentin Lumber Co. , 144 Ill. App. 3d 651 (1st Dist. 1986)."  

Home filed a motion for reconsideration on November 8, 1995.  The trial court denied the motion for reconsideration and found that there was no just reason to delay an appeal on December 8, 1995.  Home filed a timely Notice of appeal to this court.

On appeal, Home contends that the trial court erred in granting summary judgment to Arito.  Summary judgment is properly granted if the pleadings, depositions, and admissions on file, together with any affida­vits, show there is no genuine issue as to any material fact and that the  moving party is entitled to judgment as a matter of law.   Alop v. Edgewood Valley Community Association , 154 Ill. App. 3d 482, 484, 507 N.E.2d 19, 21 (1987).  In this case, the trial court expressly relied on Village of Rosemont v. Lentin Lumber Co. , 144 Ill. App. 3d 651, 660, 494 N.E.2d 592, 597 (1986).  In Rosemont , the insured sought to recover damages against a contractor and two subcontractors connected with the construction of the Rosemont Horizon Arena after a portion of the roof collapsed during construction.   Rosemont , 144 Ill. App. 3d at 656, 494 N.E.2d at 595.  This court affirmed summary judgment in favor of the subcontractors, based on the language of a contract that is similar to the Contract in this case.

Home contends, however, that Rosemont is distinguishable from this case.  Home notes that the contract in Rosemont ex­pressly included subcontractors in its waiver provision:

" the Owner and Contractor waive all rights against (1) each other and the Subcontractors *** for damages caused by fire or other perils to the extent covered by insurance obtained pursuant to this Paragraph *** or any other property insurance applicable to the Work."   Rosemont , 144 Ill. App. 3d at 657, 494 N.E.2d at 595 (emphasis added).

Home also cites two cases from other jurisdictions holding that there was no waiver of the right to subrogation.  See Touchet Valley Grain Growers, Inc. v. Opp & Seibold General Construction, Inc. , 19 Wash. 2d 334, 831 P.2d 724 (Wash. 1992); Fortin v. Nebel Heating Corp. , 429 N.E.2d 363 (Mass. App. 1981).  

Home argues that summary judgment was improper because the Contract did not contain an express waiver regarding subcontrac­tors.  A waiver is the intentional relinquishment of a known right, which may be made by express agreement or implied from the conduct of the party alleged to have committed waiver; in the latter situation, the implied waiver must be shown clearly and unequivocally.   E.g. , Ryder v. Bank of Hickory Hills , 146 Ill. 2d 98, 585 N.E.2d 46 (1991).

However, unlike this case, the contract language in Touchet Valley did not require the general contractor to obtain waivers from the subcontractor.  The contract language in Fortin is more similar to the language of the Contract in this case, providing that: "Contractor shall require similar waivers by Subcontractors . . . in accordance with [§]5.3.1.5."  The Fortin court stated that  section 5.3.1.5 applied to contracts between the general contractor and the subcontractor, and could not "be construed as requiring insertion in the subcontract of waivers between the owner and the subcontrac­tor."   Fortin , 429 N.E.2d at 365.  In this case, section 17.6 the Contract specifically requires the general contractor to obtain "similar waivers" in favor of the owner from the subcontractors; it does not solely refer to waivers between the general contractor and subcontractors.  Thus, Touchet Valley and Fortin are distinguishable from this case.

Moreover, Rosemont does not rely on the cases cited by Home.  The Rosemont opinion relies on South Tippecanoe School Building v. Shambaugh & Son, Inc. , 182 Ind. App. 350, 395 N.E.2d 320 (1979), which involved an insurer's attempt to recover from a subcontractor.  Indeed, Rosemont cites South Tippecanoe School Building for the proposition that "[a]bsent fraud or design, a builder's risk insurer is not entitled to subrogate against one whose interests are insured."   Rosemont , 144 Ill. App. 3d at 660, 494 N.E.2d at 597.  The Rosemont court also stated that the contract language in South Tippecanoe School Building was "vi­rtually identical" to the language at issue in Rosemont .   Rosemont , 144 Ill. App. 3d at 660, 494 N.E.2d at 598.

The contract language at issue in South Tippecanoe School Building is even closer to the language at issue in this case than the language in Rosemont .   South Tippecanoe School Building , 182 Ind. App. at 354-55, 395 N.E.2d at 323.  The contract in South Tippecanoe School Building did not expressly include the subcontractors in its waiver provision.  The Indiana court relied not only on the language requiring the execution of waivers by subcontractors, but also language requiring the contractor to indemnify the owner against claims arising out of the subcontrac­tor's negligence, but expressly excluding injury or destruction to the Work itself, to conclude that such provisions evinced an intent to place the risk of loss on the Work on insurance and to treat the subcontractor as an insured.   South Tippecanoe School Building , 182 Ind. App. at 360-61, 395 N.E.2d at 326.  Section 10.11 of the Contract in this case contains a similar exclusion from indemnification.  The Indiana court also relied on language identical to section 17.3 of the Contract to conclude that the subcontractor's interests were insured under the owner's policy.   South Tippecanoe School Building , 182 Ind. App. at 354-55, 360-61, 395 N.E.2d at 323, 326.

In sum, the trial court was correct to follow Rosemont , not only because it is the closest Illinois authority, but also because Rosemont relies on South Tippecanoe School Building , which involved a contract with language even more similar to the Contract at issue here.

Home argues that Arito cannot rely on the Contract because Arito was not a party to the Contract.  However, Home's insureds, the Slovins, were parties to the Contract.  Section 17.3 of the Contract obligated the Slovins to purchase and maintain insurance on the Work that included the interest of the subcontractor.  The Contract as a whole demonstrates the intent of the parties to place the risk of loss regarding the Work on insurance.  The plain language of section 17.3 also clearly demonstrates that the contracting parties intended to confer this benefit directly upon nonparty subcontractors.  Thus, Arito falls within the scope of the Rosemont opinion.  Indeed, given the Contract and facts and circumstances of this case, Arito may well be consid­ered a third-party beneficiary of the Contract.  See XL Disposal Corp. v. John Sexton Contractors Co. , 168 Ill. 2d 355, 361, 659 N.E.2d 1312, 1316 (1995); Premier Electric Construction Co. v. American National Bank of Chicago , 276 Ill. App. 3d 816, 829, 658 N.E.2d 877, 888 (1995).

Finally, Home contends that the summary judgment is against the public policy that contracts should be enforced as written.  However, as the trial court correctly interpreted the contract, the summary judgment does not violate public policy.

For all of the aforementioned reasons, the judgment of the circuit court of Cook County is affirmed.

Affirmed.

BUCKLEY, J., and GALLAGHER, J., concur.