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Performance Services, Inc. v. Hanover Insurance Co.

Court of Appeals of Indiana

October 31, 2017

Performance Services, Inc., an Indiana Corporation and Huntingburg Machine Works, Inc., an Indiana Corporation, Appellants-Defendants,
v.
Hanover Insurance Company, as Subrogee of the Southwest Dubois County Schools, Appellee-Plaintiff.

         Appeal from the Dubois Circuit Court No. 19C01-1408-CT-476 The Honorable Nathan A. Verkamp, Judge

          Attorneys for Appellant Richard T. Mullineaux Crystal G. Rowe Alyssa C.B. Cochran Kightlinger & Gray, LLP New Albany, Indiana

          Attorney for Appellee Peter S. Kovacs Peter Kovacs Law PC Fishers, Indiana

          BROWN, JUDGE.

         [¶1] This interlocutory appeal involves a subrogation action that arose from a property insurance claim made by Southwest Dubois County School Corporation ("Southwest") with its insurer, Hanover Insurance Company ("Hanover"), in connection with damage which occurred during a multi-phase construction and renovation project to a high school that Southwest owns and operates. The claim was settled, and Hanover, as subrogee for Southwest, brought an action against two subcontractors who worked on the project seeking reimbursement for the insurance claim. The subcontractors, Performance Services, Inc. ("PSI") and Huntingburg Machine Works, Inc. ("Huntingburg"), appeal the trial court's order denying their joint motion for summary judgment. They raise two issues, one of which we find dispositive: whether the trial court erred in denying PSI and Huntingburg's summary judgment motion because Hanover's subrogation rights are waived. We reverse and remand.

         Facts and Procedural History

         [¶2] Southwest owns and operates Southridge High School located in Huntingburg, Indiana. Hanover is the property insurer for the school. In 2009, Southwest decided to undertake a construction and renovation project ("Project") at the school which was to occur in phases. Phase 1A consisted of adding a new auxiliary gym and boiler room to the existing school. Phase 1B was the renovation of the entire school, one section of the school at a time.

         [¶3] On April 1, 2009, Southwest contracted with The Skillman Corporation ("Construction Manager") to serve as the construction manager for the Project and to oversee the renovations and coordinate the activities of contractors that subsequently would be hired to perform the work on the Project. The executed contract between Southwest and the Construction Manager (the "Construction Manager Contract") was comprised of the American Institute of Architects' (AIA) standard form B801TM CMa-1992 titled "Standard Form of Agreement Between Owner and Construction Manager." The Construction Manager Contract incorporated by reference the AIA Document A201/CMaTM General Conditions of the Contract for Construction, Construction-Manager Advisor Edition (the "A201/CMa") which, among other things, defined certain terms not defined in the Construction Manager Contract. The Construction Manager's services were contracted to span a thirty-six month period. The Construction Manager was responsible for reviewing Southwest's construction plan, approving a detailed estimate of probable construction costs, assisting Southwest in achieving a budget for construction costs, reviewing design documents, preparing a project schedule, updating the project schedule, advising on the division of work among contractors, and inspecting the contractors' final work product. The Construction Manager also was responsible for awarding contracts on Southwest's behalf, even though the contracts would be signed by Southwest and the various contractors. Under Section 10.4 of the Construction Manager Contract, Southwest and the Construction Manager agreed to waive all subrogation rights against each other and all contractors for any damage that might occur during the Project that was covered by property insurance. Appellants' Appendix Volume 2 at 92.

         [¶4] One aspect of the Project included the installation of an energy-efficient heating, ventilation, and air conditioning ("HVAC") replacement system. On July 12, 2010, Southwest contracted with PSI for the purchase and installation of the system (the "PSI Contract"). The PSI Contract did not include a subrogation waiver, and it did not incorporate by reference the Construction Manager Contract. The PSI Contract did include an integration clause, providing: "all previous conversations, correspondence, agreements, or representations not included in the Agreement are not part of the Agreement." Id. at 26.

         [¶5] On January 11, 2011, PSI contracted with Huntingburg, as a subcontractor, to complete the piping and sheet metal work for the HVAC replacement system (the "Huntingburg Subcontract"). The Huntingburg Subcontract contained a subrogation-waiver clause that provided that Huntingburg's insurance carriers had "no right of subrogation against" PSI or Southwest "with respect to losses arising out of or in connection with the Work on the Project under the Subcontract, " and also included a liability-indemnification provision. Id. at 165, 171.

         [¶6] At some point during the construction process, water escaped from an uncapped pipe and flowed through the ceiling of Southridge High School's technology room and onto the school's computer, phone, and intercom processing equipment. The damage was discovered on September 26, 2011. Southwest reported the loss to Hanover on September 29, 2011. The damages totaled $698, 661.71. On August 10, 2012, Hanover settled Southwest's insurance claim for the full amount of the damages. Southwest released Hanover from any further claims related to the property damage. The release was executed on August 6, 2012.

         [¶7] On August 18, 2014, more than two years after the release was executed, Hanover, as Southwest's subrogee, filed suit against PSI and Huntingburg for negligence and to be reimbursed for the insurance claim. PSI and Huntingburg filed a joint motion for summary judgment arguing that Hanover's claims were barred by the waiver of subrogation clause in the Construction Manager Contract. Hanover filed a cross-motion for summary judgment, a hearing was held on the motions, and the trial court denied both summary judgment motions. PSI and Huntingburg timely moved the trial court to certify for interlocutory appeal the denial of their summary judgment motion. The trial court granted their motion and certified the order, and this Court has granted permission to bring the interlocutory appeal.

         Discussion

         [¶8] The issue is whether the trial court erred in denying PSI and Huntingburg's joint summary judgment motion because Hanover's claims are barred by the waiver of subrogation clause found in the Construction Manager Contract. Our standard of review of a summary judgment motion is the same standard used in the trial court:

[S]ummary judgment is appropriate only where the evidence shows there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. All facts and reasonable inferences drawn from those facts are construed in favor of the non-moving party. The review of a summary judgment motion is limited to those materials designated to the trial court.

Tom-Wat, Inc. v. Fink, 741 N.E.2d 343, 346 (Ind. 2001) (internal citations omitted). The moving party bears the initial burden of making a prima facie showing that there are no genuine issues of material fact and that it is entitled to judgment as a matter of law. Reed v. Reid, 980 N.E.2d 277, 285 (Ind. 2012). Summary judgment is improper if the movant fails to carry its burden, but if it succeeds, then the nonmoving party must come forward with evidence establishing the existence of a genuine issue of material fact. Id. We construe all factual inferences in the nonmoving party's favor and resolve all doubts as to the existence of a material issue against the moving party. Id.

         [¶9] PSI and Huntingburg argue that the trial court erred by denying their motion for summary judgment because "the undisputed material facts demonstrate that Hanover's claims against [them] are barred" by the waiver-of-subrogation clause contained in the Construction Manager ...


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