BRUNNQUELLIRON WORKS, INC v. CHESTERFIELD BOARD OF EDUCATION v. NJSBA INSURANCE GROUP
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SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2188-15T4
BRUNNQUELL IRON WORKS, INC.,
Plaintiff-Respondent,
v.
CHESTERFIELD BOARD OF EDUCATION,
Defendant/Third-Party
Plaintiff-Appellant,
v.
NJSBA INSURANCE GROUP,
Third-Party Defendant.
__________________________________
Submitted September 11, 2017 – Decided February 16, 2018
Before Judges Sabatino and Ostrer.
On appeal from Superior Court of New Jersey,
Law Division, Burlington County, Docket No.
L-1896-12.
Barnaba & Marconi, LLP, attorneys for
appellant (Dennis M. Marconi and Tyler L.
Williams, on the briefs).
Bolan Jahnsen Dacey, attorneys for respondent
(Terrence J. Bolan, on the brief).
PER CURIAM
A fire at the construction site of a new elementary school
caused the Chesterfield Board of Education to incur direct losses
to the building, and loss of use and consequential damages. The
Board blamed the fire on the negligence of its contractor,
Brunnquell Iron Works, and sought from Brunnquell the damages it
was unable to recover from its insurers. Brunnquell successfully
argued the Board's claim was barred by the contract between
Brunnquell and the Board – specifically, the American Institute
of Architects (AIA) General Conditions of the Contract for
Construction, AIA Document A201/CMa – 1992. The Board now appeals
from the trial court's order granting Brunnquell summary judgment.
We affirm.
When reviewing a grant of summary judgment, we employ the
same standard as the motion judge under Rule 4:46-2(c). Henry v.
N.J. Dep't of Human Servs.,
204 N.J. 320, 330 (2010). We consider
whether "the competent evidential materials presented, when viewed
in the light most favorable to the non-moving party, are sufficient
to permit a rational factfinder to resolve the alleged disputed
issue in favor of the non-moving party." Brill v. Guardian Life
Ins. Co. of Am.,
142 N.J. 520, 540 (1995).
For purposes of Brunnquell's motion, the amount of the Board's
losses and what caused them, are not material. We assume, as the
2 A-2188-15T4
Board alleged, that negligent welding and trimming operations by
Brunnquell caused the fire. We also assume the Board suffered
various forms of consequential and loss of use damages as a result
of the fire. These consisted of: "hard costs" – above-normal
expenses incurred to expedite the installation of ductwork and
electrical work; additional construction management and
architectural fees, to keep the project moving; delay claims by
contractors, for extra time they had to remain on site; and
expenses incurred to move students into temporary locations.
Furthermore, we assume that the Board's insurers did not fully
indemnify it for these losses.1
The issues before us are legal. We must ascertain the meaning
of relevant provisions of the AIA contract, and whether they shield
Brunnquell from the Board's claims. We perform that task de novo.
See Kieffer v. Best Buy,
205 N.J. 213, 222 (2011) (stating "[t]he
interpretation of a contract is subject to de novo review by an
appellate court").
1
We need not explore the Board's claims against its insurers,
Peerless Insurance, and the New Jersey School Boards Association
Insurance Group. We note that the Board settled a claim against
the latter, for significantly less than it sought, under its "extra
expense extension" coverage. Regardless of whether all its losses
were covered, the Board characterizes them before us as loss of
use and consequential damages, for which, it argues, Brunnquell
is responsible.
3 A-2188-15T4
The AIA contract, at Article 11, sets forth the respective
responsibilities of the Board as "Owner," and Brunnquell as
"Contractor," to procure insurance against losses related to the
construction project.2 The provisions are designed to oblige the
owner to procure insurance, up to the cost of the project itself,
for the contractor's benefit as well as its own. See Justin Sweet,
Sweet on Construction Industry Contracts: Major AIA Documents §
22.04[A], at 16 (2018) (stating this section requires owners to
purchase and maintain property insurance "for the interests of the
owner and all contractors, subcontractors, and sub-
subcontractors"). If the owner fails to procure insurance, it is
required to advise the contractor in writing, so the contractor
can procure insurance and charge it to the owner; and if the owner
fails to advise the contractor, then the owner shall bear all
costs attributable to its failure.
Section 11.3.1 establishes the owner's obligation to insure
for the benefit of itself and the contractor:
[The Board] shall purchase and maintain . . .
property insurance in the amount of the
initial Contract Sum as well as subsequent
modifications thereto for the entire Work at
the site on a replacement cost basis without
voluntary deductibles. Such property
insurance shall be maintained . . . until
final payment has been made . . . or until no
2
Both parties assume that the Board is the "Owner" and Brunnquell
is the "Contractor" as used in the contract.
4 A-2188-15T4
person or entity other than [the Board] has
an insurable interest in the property required
by this Section 11.3 to be covered, whichever
is earlier. This insurance shall include
interests of [the Board], [Brunnquell],
Subcontractors, and Sub-subcontractors in the
Work.
Section 11.3.1.1 describes the required coverage:
Property insurance shall be on an "all-risk"
policy form and shall insure against the
perils of fire and extended coverage and
physical loss or damage . . ., and shall cover
reasonable compensation for Architect's
services and expenses required as a result of
such insured loss. Coverage for other perils
shall not be required unless otherwise
provided in the Contract Documents.
Section 11.3.1.2 describes the owner's obligation to inform the
contractor if it does not insure, and the consequences of not
doing so:
If [the Board] does not intend to purchase
such property insurance required by the
Contract and with all of the coverages in the
amount described above, [the Board] shall so
inform [Brunnquell] in writing prior to
commencement of the Work. [Brunnquell] may
then effect insurance which will protect the
interests of [Brunnquell], Subcontractors and
Sub-subcontractors in the Work, and by
appropriate Change Order the cost thereof
shall be charged to [the Board]. If
[Brunnquell] is damaged by the failure or
neglect of [the Board] to purchase or maintain
insurance as described above, without so
notifying [Brunnquell], then [the Board] shall
bear all reasonable costs properly
attributable thereto.
5 A-2188-15T4
Other courts that have analyzed identical or comparable AIA
provisions agree that the contract is designed to impose an
insurance obligation upon the owner, and to avoid the
inefficiencies of double-coverage. See Nodaway Valley Bank v.
E.L. Crawford Constr., Inc.,
126 S.W.3d 820, 829 (Mo. Ct. App.
2004) (observing that an insurance procurement requirement is
intended to relieve each party of liability, avoid both parties
having to insure against the same risk, and shift the risk of fire
to a single insurer); see also Ins. Co. of N. Am. v. E.L. Nezelek,
Inc.,
480 So. 2d 1333, 1335 (Fla. Dist. Ct. App. 1985) (interpreting
provision as "imposing an affirmative duty on the owner to purchase
insurance for the benefit of the contractor"); Chadwick v. CSI,
Ltd.,
629 A.2d 820, 825-26 (N.H. 1993) (stating that "the insurance
provisions of the standard AIA contract" are designed "to ensure
that injuries or damage incurred during the construction project
are covered by the appropriate types and limits of insurance, and
that the costs of that coverage are appropriately allocated among
the parties"); Jalapenos, LLC v. GRC Gen. Contractor, Inc.,
939 A.2d 925, 931 (Pa. Super. Ct. 2007) (affirming dismissal of owner's
action against contractor after construction fire, noting that
owner was obliged to procure insurance, or advise contractor of
its failure to do so).
6 A-2188-15T4
The contract specifically shields the contractor from
liability to the owner for loss of use and consequential losses
caused by fire and other hazards. Instead, it leaves it to the
owner to insure itself against such losses. Section 11.3.3,
entitled "Loss of Use Insurance," states:
[The Board], at [the Board's] option, may
purchase and maintain such insurance as will
insure [the Board] against loss of use of [the
Board's] property due to fire or other
hazards, however caused. [The Board] waives
all rights of action against [Brunnquell] for
loss of use of [the Board's] property,
including consequential losses due to fire or
other hazards however caused.
Other courts have relied upon this provision to shield
contractors for delay damages and other consequential losses that
the contractor allegedly caused. See Best Friends Pet Care, Inc.
v. Design Learned, Inc.,
823 A.2d 329, 339 (Conn. App. Ct. 2003)
(noting, in case of construction fire that delayed completion of
pet care facility, waiver provision shielded contractor from loss
of use claims); Rosemount v. Lentin Lumber Co.,
494 N.E.2d 592,
601 (Ill. App. Ct. 1986) (holding that under waiver provision,
plaintiff owner accepted consequential damages from roof collapse
in construction project); MU Chapter of the Sigma Pi Fraternity
of the U.S., Inc. v. Northeast Constr. Servs.,
709 N.Y.S.2d 677,
680 (App. Div. 2000) (holding that waiver precluded plaintiff from
7 A-2188-15T4
seeking loss of use and consequential damages arising out of
construction fire).
As the language of 11.3.3 is plain and unambiguous, we are
obliged to give it effect. Manahawkin Convalescent v. O'Neill,
217 N.J. 99, 118 (2014). Based on its clear terms, the Board
waived any claim against Brunnquell for loss of use and
consequential damages caused by fire – regardless of whether it
was caused by Brunnquell's negligence. Instead, the contract
obliged the Board to insure itself against such a loss.
We are unpersuaded by the Board's argument that the waiver
in 11.3.3 is contingent upon the Board's purchase of insurance.
There is simply no textual support for that interpretation. Under
the contract's plain language, the Board's option to purchase
insurance to insure itself against risk of loss of use is
independent of its waiver of claims against others.3
3
The Board's argument might have had greater force under a prior,
1976, version of the AIA contract, which expressly provided that
the owner's waiver only extended to risks already covered by its
own insurance. See Sweet on Construction Industry Contracts, §
22.04[I] at 51 (discussing 1976 version). However, the 1992 form
that the parties used in this case is not so limited. Obviously,
the drafters intended to adopt a broad waiver; they previously
drafted a narrow one, but dropped it. Cf. Restatement (Second)
of Contracts § 214(c) (1981) (stating that "[a]greements . . .
prior to . . . the adoption of a writing are admissible in evidence
to establish . . . the meaning of the writing").
8 A-2188-15T4
The Board also misplaces reliance on Brunnquell's own
insurance obligation. Section 11.1.1.5 states:
[Brunnquell] shall purchase . . . such
insurance as will protect [Brunnquell] from
claims . . . which may arise out of or result
from [Brunnquell's] operations under the
Contract and for which [Brunnquell] may be
legally liable . . . [including] claims for
damages, other than to the Work itself,
because of injury to or destruction of
tangible property, including loss of use
resulting therefrom . . . .
The provision also requires Brunnquell to purchase insurance for,
among other things, workers compensation and bodily injury. The
provision does not impose liability on Brunnquell to indemnify the
Board. Rather, it requires Brunnquell to insure itself against
claims, including "loss of use," "for which [it] may be legally
liable." This provision does not contradict the Board's waiver
of any loss of use or consequential damage claim against
Brunnquell. See Chadwick, 629 A.2d at 826 (distinguishing between
owner bearing "the risk of any loss of use of its property or for
fire damage to its insured property," and risks borne by general
contractor for claims of third parties for workers' compensation
or personal injury).
The Board's claim also finds no support in the contract's
waiver of subrogation provisions, section 11.3.7, which states:
[The Board] and [Brunnquell] waive all rights
against each other . . . for damages caused
9 A-2188-15T4
by fire or other perils to the extent covered
by property insurance obtained pursuant to
this Section 11.3 or other property insurance
applicable to the Work . . . . A waiver of
subrogation shall be effective as to a person
or entity even though that person or entity
would otherwise have a duty of
indemnification, contractual or otherwise,
did not pay the insurance premium directly or
indirectly, and whether or not the person or
entity had an insurable interest in the
property damaged.
The Board correctly notes that the parties waived subrogation only
of insured claims. However, we need not chart the precise
boundaries of the coverage the Board was obliged to secure under
section 11.3.1, or in fact did secure.4 The non-waiver of
subrogation of uncovered claims at most preserves any pre-existing
right of action. Based on the waiver of loss of use and
consequential damage claims in section 11.3.3, the Board had no
right of action against Brunnquell for its losses.
Affirmed.
4
Before the trial court, the parties disputed the scope of the
Board's insurance obligation, and whether its claims against
Brunnquell were "covered," notwithstanding the Board's settlement
with its insurer. We need not resolve that dispute.
10 A-2188-15T4
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