Cmty. Ass'n Underwriters of Am., Inc. v. Restoration Specialties, Inc.

552 F.Supp.3d 333

COMMUNITY ASSOCIATION UNDERWRITERS OF AMERICA, INC., Plaintiff,

v.RESTORATION SPECIALTIES, INC. et al., Defendants.

No. 3:20-cv-00328 (JAM)

United States District Court, D. Connecticut.

Signed August 5, 2021

Benjamin Wharton, Pro Hac Vice, de Luca Levine, LLC, Blue Bell, PA, Sharon Baldwin, Blackburn & Donnelly, LLC, Windsor Locks, CT, for Plaintiff.

Alexandria McFarlane, Gfeller Laurie LLP, West Hartford, CT, Joseph James Blyskal, III, Gordon & Rees LLP, Glastonbury, CT, for Defendant Restoration Specialties, Inc.

Richard W. Bowerman, Shaleem Yaqoob, Barclay Damon LLP, New Haven, CT, for Defendant Charter Oak Environmental, LLC.

ORDER GRANTING MOTIONS FOR SUMMARY JUDGMENT

Jeffrey Alker Meyer, United States District Judge

This lawsuit arises from water damage at a condominium property in Stamford, Connecticut. A property insurance company paid the owner's claim for the water damage and now seeks by subrogation to recover against two defendant contractors who the insurance company alleges caused the damage during a roof replacement project at the property.

But the insurance company's effort to proceed by subrogation fails to account for waiver of subrogation provisions that were embedded in the construction contract between the property owner and the contractors. Although the insurance company argues that these provisions do not apply in this case, its arguments are not convincing. Accordingly, I will grant the defendants’ motions for summary judgment against the insurance company.

BACKGROUND

The Arbor Green Condominium Association, Inc. ("Arbor Green") is a condominium association company with a property that includes 21 living units in a single building at 25 Second Street in Stamford, Connecticut.¹ Arbor Green's property was insured by the plaintiff Community Association Underwriters of America, Inc. ("CAUA").²

This lawsuit arises from property damage that occurred during a roofing replacement project at the Arbor Green property. Because the building's roofing was in very poor condition, Arbor Green's owners authorized the solicitation of bids in November 2018 to replace the roof.³ Arbor Green accepted a bid from the defendant Restoration Specialties, Inc. ("RSI") to do the work for about $500,000.⁴

Michael Rhodes owned one of the units at the Arbor Green building, and he was serving at the time as president of Arbor Green.⁵ In that role, he was responsible for contracting for the roof repairs on behalf of Arbor Green.⁶

A written contract was entered into for the roofing work, using a standard form contract issued by the American Institute of Architects ("AIA").⁷ Although the parties agree that there was a contract and that Rhodes was one of the signatories to this contract, they do not agree about whether Rhodes signed the contract on behalf of Arbor Green.

The completed AIA Contract states on the first page that it is between the "Owner"—who is identified as "Mike Rhodes, 25 Second Street, E1, Stamford, CT"—and the "Contractor"—who is identified as "Restoration Specialties, Inc. Tim O'Donoghue, President."⁸ The principal signature page includes a signature line for "Owner" and identifies "Mike Rhodes," along with a corresponding signature line for "Contractor" that identifies "Tim O'Donoghue, President."⁹ Besides one reference in the invitation to bid form, the contract does not otherwise reference Arbor Green or Rhodes's position as president of Arbor Green.¹⁰

Under a heading titled "Waiver of Subrogation," the AIA Contract states in pertinent part:

§ 17.2.2.7.1 The Owner and Contractor waive all rights against (1) each other and any of their subcontractors, sub-subcontractors, agents, and employees, each of the other ... for damages caused by fire, or other causes of loss, to the extent those losses are covered by property insurance required by this Agreement or other property insurance applicable to the Project, except such rights as they have to proceeds of such insurance.... The policies of insurance purchased and maintained by each person or entity agreeing to waive claims pursuant to this Section 17.2.2.7 shall not prohibit this waiver of subrogation. This waiver of subrogation shall be effective as to a person or entity (1) even though that person or entity would otherwise have a duty of indemnification, contractual or otherwise, (2) even though that person or entity did not pay the insurance premium directly or indirectly, or (3) whether or not the person or entity had an insurable interest in the damaged property.

§ 17.2.2.7.2 If during the Project construction period the Owner insures properties, real or personal or both, at or adjacent to the site by property insurance under policies separate from those insuring the Project, or if after final payment property insurance is to be provided on the completed Project through a policy or policies other than those insuring the Project during the construction period, to the extent permissible by such policies, the Owner waives all rights in accordance with the terms of Section 17.2.2.7.1 for damages caused by fire or other causes of loss covered by this separate property insurance.¹¹

RSI eventually completed the work pursuant to the AIA Contract, and Arbor Green in turn paid RSI for its work pursuant to the AIA Contract.¹² The owners of Arbor Green voted to approve a loan and an assessment on the condominium owners to pay RSI for the work completed pursuant to the AIA Contract.¹³

But at some point before RSI's work was completed, there was a roof leak at the property which caused CAUA to pay $80,000 to Arbor Green pursuant to its property insurance policy.¹⁴ According to the deposition testimony of Rhodes, a worker for RSI or for one of its subcontractors—co-defendant Charter Oak Environmental, LLC ("Charter Oak")—told him that the roof leak occurred when they "tried to snake the drain and punched right through it."¹⁵ Although the parties agree that the leak occurred prior to RSI's completion of the roofing project, they do not agree that the leak occurred as a result of work that was required to be performed by RSI or Charter Oak pursuant to the AIA Contract.¹⁶

CAUA has filed this lawsuit as subrogee of Arbor Green against RSI and Charter Oak. The amended complaint pleads separate counts against both defendants for negligence and breach of implied warranties.¹⁷ CAUA alleges that RSI "was retained to perform roofing services and supply roofing materials at the subject property," and that its subcontractor, Charter Oak, "negligently attempted to unclog a roof drain with a broom stick, and otherwise performed its work carelessly and not in compliance with the applicable standards of care."¹⁸

Both defendants have moved for summary judgment. They argue that CAUA's lawsuit is barred by the waiver of subrogation provisions in the AIA Contract.

DISCUSSION

The principles governing the Court's review of a motion for summary judgment are well established. Summary judgment may be granted only if "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The Court must view the facts in the light most favorable to the party who opposes the motion for summary judgment and then decide if those facts would be enough—if eventually proven at trial—to allow a reasonable jury to decide the case in favor of the opposing party. The Court's role at summary judgment is not to judge the credibility of witnesses or to resolve close contested issues but solely to decide if there are enough facts that remain in dispute to warrant a trial. See generally Tolan v. Cotton , 572 U.S. 650, 656–57, 134 S.Ct. 1861, 188 L.Ed.2d 895 (2014) (per curiam ); Benzemann v. Houslanger & Assocs., PLLC , 924 F.3d 73, 78 (2d Cir. 2019).¹⁹

The right of subrogation refers in general to the right of one party who has paid compensation to an injured party for harm caused by another party to "stand in the shoes" of the injured party and to seek relief from the responsible party. Insurance companies often bring subrogation actions. In this context, subrogation refers to the right of the insurer to be put in the position of its insured so that it may pursue recovery from parties who are legally responsible to the insured for a loss that has been paid by the insurer. See Albany Ins. Co. v. United Alarm Servs., Inc. , 194 F. Supp. 2d 87, 93 (D. Conn. 2002).

Sometimes, however, parties to contracts agree that if one party causes harm to the other party for which the injured party is compensated by insurance, then the injured party will give up its right to seek recovery from the responsible party. This type of agreement is commonly called a "waiver of subrogation," because it has the effect of "waiving" or precluding a subrogation action by the injured party's insurance company. See generally Stephen D. Palley and Arlan D. Lewis, Subrogation Waivers , CONSTR. LAW. (Fall 2011).

CAUA does not raise a general objection to the enforceability of waiver of subrogation provisions.²⁰ Instead, CAUA raises two objections to the enforceability of the particular provisions at issue in this case, and I will consider these two objections in turn.

1. Whether Arbor Green is a party to the AIA Contract and its waiver of subrogation provisions

CAUA argues that there is a genuine fact issue about whether Arbor Green was even a party to the AIA Contract and its waiver of subrogation provisions. CAUA emphasizes that the contract was signed only by Rhodes as "owner," rather than signed by Rhodes in an official corporate or representative capacity for Arbor Green.

According to CAUA, because the terms of the contract are clear, the parol evidence rule bars consideration of any extrinsic evidence of Rhodes's capacity when he signed the AIA Contract. But the law is plainly to the contrary. As the Connecticut Supreme Court has long recognized, "agency, trust, equitable relation or equity may be shown by parol evidence." HLO...