S.S.D.W. Co. v. Brisk Waterproofing Co.

Order, Supreme Court, New York County (Martin B. Stecher, J.), entered February 18, 1988, which granted defendant-respondent’s motion for summary judgment dismissing the complaint and which, sua sponte, also dismissed the third-party complaint, modified, on the law, to reinstate the complaint only to the extent that it seeks damages for losses to portions of the building not included in the contractual work and to reinstate the third-party complaint, and otherwise affirmed, without costs.

Plaintiff-appellant, the owner of Carnegie Towers located at 115 East 87th Street in Manhattan, entered into a contract with defendant-respondent which was to replace windows and perform corrective work on the exterior walls of the building and the floor slab of the parking garage for the sum of $1 million. The agreement was embodied in the American Institute of Architects’ (AIA) form contract for construction projects of limited scope, together with the addenda thereto, the contract drawings and specifications. The contract required the owner to maintain an all-risk insurance policy "upon the entire Work at the site to the full insurable value thereof.” Paragraph 17.6 thereof provided: "The Owner and Contractor waive all rights against each other for damages * * * covered by insurance obtained pursuant to this Article or any other property insurance applicable to the Work”.

A fire in 1984, which started in a shack constructed by respondent on a fifth-floor terrace, caused approximately $140,000 in damages to the hallways and apartments and to the exterior work on the building. Appellant recovered $139,351.74 from its property insurer seven months after the fire. This negligence action to recover for property damages caused by the fire was instituted in appellant’s name; however, it is not disputed that appellant’s insurer is the real party in interest, suing as appellant’s subrogee.

Respondent moved for summary judgment dismissing the complaint on the ground that the contractual waiver of appellant’s subrogation rights barred the action, citing Trump-Equitable Fifth Ave. Co. v H.R.H. Constr. Corp. (106 AD2d 242 [1st Dept], affd, 66 NY2d 779 [1985]), wherein it was held that the waiver of subrogation clause, identical to the one herein, was a complete bar to the insurer’s action as subrogee. Supreme Court granted the motion and, sua sponte, dismissed respondent’s third-party action against the electrical subcontractor.

We find the court’s reliance on Trump-Equitable Fifth Ave. Co. (supra) misplaced. That case is distinguishable on the facts. There the "work” to be performed by the contractor and insured under the owner’s all-risk policy was the construction of an entirely new building. In this case, however, the work was more limited in scope, involving only "corrective work to the masonry and concrete portions of the exterior walls” of an existing building. There was no waiver affecting recovery for damages to the work site, as Supreme Court erroneously concluded. The waiver barring recovery extended only to "damages covered by insurance * * * applicable to the Work”. The fact that the contract work was spread over approximately 30 stories of this high-rise building does not, as the dissent contends, expand the scope of this technical term to include the building in its entirety. The word "work” as used in the AIA standard forms has a technical meaning in the construction industry, denoting either the construction project itself or the labor and materials required therefor (see, Whitacre Constr. Specialties v Aetna Cas. & Sur. Co., 86 AD2d 972 [4th Dept], affd 57 NY2d 1018 [1982]).

We also must disagree with the dissent’s argument that the waiver of subrogation was intended to effect a "final adjustment” between the parties as to any and all insured losses to the property arising from the repair work to be performed. The owner’s obligation under article 17 was to obtain coverage for its interest and that of the contractor "in the Work.” Any other coverage the owner may have had for the property was not, by the terms of paragraph 17.6, subject to the waiver of subrogation therein. To the extent that the fire damaged portions of the building other than the exterior walls and areas defined as part of the "Work”, appellant is entitled to recover for that loss. Consequently, summary judgment was warranted only as to that portion of the complaint seeking recovery for damages to areas defined as part of the contract work. Concur—Ross, J. P., Asch and Rosenberger, JJ.