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 con-
tractor 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 judg-
ment, 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 in-
          surance upon the entire Work at the site to
          the full insurable value thereof.  This in-
          surance 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 ex-
          tended coverage and shall include "all risk"
          insurance for physical loss or damage includ-
          ing, 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 Ar-
          ticle or any other property insurance ap-
          plicable to the Work, except such rights as
          they may have to the proceeds of such in-
          surance 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 ex-
pressly 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 subcontrac-
tors.  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 "vi-
rtually 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 subcontrac-
tor'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.