Continental Western Insurance Company v. Opechee Construction Corporation et al

Filing 50

ORDER denying 41 Motion for Summary Judgment. So Ordered by Judge Joseph A. DiClerico, Jr.(gla)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
Continental Western Insurance
Company
v.

Civil No. 15-cv-006-JD
Opinion No. 2015 DNH 194

Opechee Construction
Corporation, et al.
O R D E R
Continental Western Insurance Company (“Continental”)
brings a subrogation action against the general contractor,
Opechee Construction Company (“Opechee”), that built the Hampton
Inn in Dover, New Hampshire (“the hotel”), and two plumbing
subcontractors, North American Plumbing & Heating, LLC and Linx
Ltd.

The claims arise from extensive water damage at the hotel

caused by a pipe failure.

Opechee moves for summary judgment on

the ground that a waiver of subrogation provision in the
construction contract bars Continental’s claims, and North
American Plumbing & Heating, LLC has joined the motion.
Continental objects.
Standard of Review
Summary judgment is appropriate when “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); Santangelo v. New York Life Ins. Co., 785 F.3d

65, 68 (1st Cir. 2015).

“A genuine issue is one that can be

resolved in favor of either party and a material fact is one
which has the potential of affecting the outcome of the case.”
Gerald v. Univ. of Puerto Rico, 707 F.3d 7, 16 (1st Cir. 2013)
(quoting Perez-Cordero v. Wal-Mart Puerto Rico, Inc., 656 F.3d
19, 25 (1st Cir. 2011).

In deciding a motion for summary

judgment, the court draws all reasonable factual inferences in
favor of the nonmovant.

Kenney v. Floyd, 700 F.3d 604, 608 (1st

Cir. 2012) (internal citations omitted).
When the party moving for summary judgment bears the burden
of proof at trial, the movant “cannot prevail unless the
evidence that he provides on that issue is conclusive.”
E.E.O.C. v. Union Independiente de la Autoridad de Acueductos y
Alcantarillados de P.R., 279 F.3d 49, 55 (1st Cir. 2002)
(internal quotation marks omitted).

Evidence is conclusive when

the moving party’s showing is sufficient to preclude any
reasonable trier of fact from finding against it.

Id. (citing

Calderone v. United States, 799 F.2d 254, 258 (6th Cir. 1986);
Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986)).
That standard applies here because waiver is an affirmative
defense, see Fed. R. Civ. P. 8(c)(1), and the burden of proving
it is on Opechee.

Balamotis v. Hyland, 159 N.H. 803, 811 (2010)

(party using affirmative defense of release bears burden of

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proof); Gianola v. Cont'l Cas. Co., 149 N.H. 213, 214 (2003)
(party using waiver defense bears burden of proving it).
Background
In September of 2006, Opechee and the hotel’s owner,
Lafrance Bowden Hospitality, LLC (“Lafrance”), entered into a
written contract (the “Agreement”) governing the construction of
the hotel.

Lafrance and Opechee drafted the Agreement by

modifying an Associated General Contractors (“AGC”) form
agreement, entitled “Standard Form of Design-Build Agreement and
General Conditions Between Owner and Contractor.”
One of the provisions that Lafrance and Opechee modified in
the form AGC agreement was a waiver of subrogation provision.
That waiver of subrogation provision (the “Waiver”), as
modified, provides in pertinent part:
The Owner waives subrogation against the Contractor . . .
under property and consequential loss policies purchased
for the Project after its substantial completion.
Defendant Opechee Construction Corp’s Motion for Summary
Judgment, Agreement (Ex. B), at ¶9.6.3.
The Agreement also provided that Opechee had “about 12
months” to achieve “substantial completion,” which was the date
when Lafrance could “occupy or utilize the Project . . . for the
use for which it [was] intended.”

See Agreement, at ¶¶5.1, 5.2.

Upon substantial completion, Lafrance and Opechee were to sign a

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Certificate of Substantial Completion which would include, among
other things, a “punch list” identifying any outstanding items
that Opechee had to complete before finishing the project.
Paragraph 8.4 permitted Opechee to seek “the unpaid balance of
the Project” at substantial completion, except for 150% of the
estimated cost of the items on the punch list.

Lafrance was not

required to pay the amount retained for each punch list item
until Opechee had completed that item.
There is no dispute that Opechee substantially completed
the hotel in July of 2007, that Opechee then issued a
Certificate of Substantial Completion which included a punch
list, and that Lafrance made final payment to Opechee in
December of 2007.
Nearly six years after the final payment, a pipe flange in
the hotel’s mechanical room separated from a vertical pipe,
causing flooding throughout the building.

As a result of the

flooding, the hotel sustained substantial damage.

At the time,

Lafrance held a “businessowners” insurance policy that it had
purchased from Continental at some time after substantial
completion.

Under the terms of the policy, Continental paid

Lafrance $3,777,252.22 for the damage sustained during the
flooding.

Continental, as subrogee for Lafrance, brings tort

and contract claims against Opechee, North American Plumbing and

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Heating, LLC, and Linx Ltd., alleging that they improperly
designed, installed, or manufactured the pipe flange during the
hotel’s construction.
Discussion
Opechee moves for summary judgment on the ground that the
Waiver in the Agreement bars Continental from bringing suit as
the subrogee of its insured, Lafrance.

Continental objects,

arguing that its claims are not barred because the Waiver only
applies to claims covered by insurance policies that were in
effect during the hotel’s construction, not to policies covering
the functioning hotel.

Alternatively, Continental argues that

even if the subrogation waiver is construed to apply to postconstruction claims, it only bars claims for damage to the hotel
building, but not claims for damages to furnishings or for
business interruption losses.
A. Interpretation of the Waiver
Lafrance agreed to waive subrogation “on all property and
consequential loss policies purchased for the Project after its
substantial completion.”

Agreement, at ¶9.6.3.

Continental dispute the meaning of “Project.”

Opechee and
Continental

argues that the policy covering the hotel at the time of the
water damage was not “purchased for the Project” because the
“Project” ended when Opechee finished the hotel and received

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final payment.

Under Continental’s interpretation, the Waiver

applies only to claims for losses covered by policies in effect
between substantial completion and the final payment (while
Opechee was working on the outstanding punch list items).
In response, Opechee argues that the term “Project” means
the “tangible creation” of the work on the Project, existing
after construction and including the completed hotel.

Under

Opechee’s interpretation, the term “Project” contains no
temporal limitation and, by extension, the Waiver applies to all
policies covering the hotel after substantial completion and for
the life of the hotel.

Opechee also contends that Continental’s

interpretation of the Waiver is unreasonable because it would
shift the risk of loss associated with construction to
Lafrance’s insurance carriers for only a short “gap” period,
while Opechee’s carriers would absorb that risk for nearly the
entire construction schedule.
Under New Hampshire law,1 the interpretation of a contract,
including whether a contract term is ambiguous, is ultimately a

Both Opechee and Continental cite New Hampshire law in
their briefs, and the court “is free to honor [their] reasonable
agreement regarding which state’s law applies.” OneBeacon Am.
Ins. Co. v. Commercial Union Assur. Co. of Canada, 684 F.3d 237,
241 (1st Cir. 2012). Accordingly, the court will apply New
Hampshire law.
1

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question of law.

Birch Broad., Inc. v. Capitol Broad. Corp.,

161 N.H. 192, 196 (2010) (citing Behrens v. S.P. Constr. Co.,
153 N.H. 498, 500 (2006).

When interpreting a contract, the

court must “give the language used by the parties its reasonable
meaning, considering the circumstances and the context in which
the agreement was negotiated, and reading the document as a
whole.”

In re Liquidation of Home Ins. Co., 166 N.H. 84, 88

(2014) (internal quotations omitted).

Absent ambiguity,

however, “intent will be determined from the plain meaning of
the language used in the contract.”
omitted).

Id. (internal quotations

“The language of a contract is ambiguous if the

parties to the contract could reasonably disagree as to the
meaning of that language.”

Found. for Seacoast Health v. Hosp.

Corp. of Am., 165 N.H. 168, 172 (2013) (quoting Birch Broad.,
161 N.H. at 196).2
The Agreement defines the “Project” as the “total
construction to be designed and constructed of which the Work is
a part.”

Agreement, at ¶1.3.

the Agreement.

“Construction” is not defined in

Because “construction” can commonly mean either

To the extent Continental argues that the waiver cannot be
enforced because it fails to meet the requirements of a valid
exculpatory provision, that argument has been addressed and
rejected by the New Hampshire Supreme Court. See Chadwick v.
CSI, Ltd, 137 N.H. 515, 523-24 (1993).
2

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a structure or the act or process of building a structure,3 the
phrase “total construction” does not lend itself to one plain
meaning.

The use of the modifying phrase “to be designed and

constructed” suggests that the phrase “total construction”
refers to the completed hotel.
constructed.”

Structures are “designed and

Conversely, the phrase “designed and constructed”

makes little sense if the “total construction” is an act or
process.
On the other hand, the first page of the Agreement
describes the “Project” as the “[c]onstruction of a 93 unit
Hampton Inn Hotel on an approximately 2.0 acre parcel of land at
Hotel Drive in Dover, NH.”

The phrase “construction of”

followed by a description of the hotel plainly refers to the act
or process of building the hotel.

It does not refer to a

tangible creation as Opechee suggests.

Thus the description on

the cover page suggests that the “Project” is a process with a
defined beginning and end point.
In addition, in some places, the Agreement refers to the
“Project” as the process of building the hotel.

3See

See Agreement,

The American Heritage Dictionary of the English
Language 395 (4th ed. 2000) (defining construction as “1 (a) The
act or process of constructing, (b) The art, trade, or work of
building . . . (2) A structure, such as a building, framework or
model.”); Sabinson v. Trustees of Dartmouth Coll., 160 N.H. 452,
458, 999 A.2d 380, 386 (2010) (using dictionary definition to
determine the common and plain meaning of contract term).
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at ¶10.1.1 (setting forth contingency plan for what happens if
“the Project is stopped for a period of thirty (30) days . . .
through no act or fault of the Contractor”).

In other places,

however, the Agreement refers to the “Project” as a building or
structure.

Agreement, at ¶ 2.2.4 (“At the completion of the

Work, [the contractor] shall remove all of his waste material
and rubbish from and around the Project . . . .”)

Given this

duality, both Opechee and Continental have offered reasonable
interpretations of the Waiver.
Opechee contends that Continental’s interpretation of the
Waiver is unreasonable in light of the Agreement’s negotiated
scheme to allocate insurance and risk.

Opechee claims, and

Continental does not dispute, that Paragraph 9.4.1 required
Opechee to purchase insurance covering the Project until
substantial completion.

In Paragraph 9.6.1, Opechee waived

subrogation on the insurance policy that it was required to
purchase under Paragraph 9.4.1.

Opechee argues that it is

implausible that it would agree to bear the cost of shifting the
risk of loss on the Project to its insurance carriers until
substantial completion in exchange for Lafrance agreeing to
waive subrogation for only a short gap period between
substantial completion and final payment.

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Opechee cites no language in the Agreement, however, that
shows Lafrance and Continental intended to divide the burden of
insurance evenly.

Negotiated insurance obligations and

subrogation waivers may demonstrate a comprehensive plan for
allocating the risk associated with building the hotel.
Chadwick, 137 N.H. at 515.

See

It does not follow, however, that

the only reasonable result of a negotiated and comprehensive
allocation plan is a proportionate split in burden between
Lafrance and Opechee.

This is particularly true where, as here,

the parties negotiated a complex agreement with many
interrelated provisions.
Opechee also argues that its interpretation is supported by
several cases that have enforced subrogation waivers in the
American Institute of Architects (“AIA”) general conditions form
to bar claims for post-construction losses.4

Opechee contends

that the analysis of those cases is applicable and persuasive
here because the AIA waivers contain “nearly identical” language
to the Waiver.
The form AIA contract in the cases Opechee cites, however,
contains two critical contractual provisions that distinguish it
from the modified AGC waiver at issue here.

First, the form AIA

The Agreement between Opechee and Lafrance, however, was a
modified version of an AGC standard form contract.
4

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contract contains a provision that expressly provides that the
waiver applies to “the completed Project” and “after final
payment.”

See, e.g., Middleoak Ins. Co. v. Tri-State Sprinkler

Corp., 931 N.E.2d 470, 471 (Mass. App. Ct. 2010).

Second, the

form AIA contract makes it clear that the subject of the
insurance policy being waived includes the completed
construction and services.

See, e.g., Id.; Town of Silverton v.

Phoenix Heat Source Sys., Inc., 948 P.2d 9, 13 (Colo. App.
1997).

Opechee has not cited comparable provisions in the

Agreement.

For these reasons, the court declines to adopt the

reasoning of cases interpreting the form AIA contract.

Because

both Opechee and Continental provide reasonable interpretations
the Waiver is ambiguous.
B. Resolving the Ambiguity
When a court identifies an ambiguity in an agreement, it
must determine under “an objective standard, what the parties,
as reasonable people, mutually understood the ambiguous language
to mean.”

Found. for Seacoast Health, 165 N.H. at 172-73.

When

applying this standard, the court “should examine the contract
as a whole, the circumstances surrounding execution and the
object intended by the agreement, while keeping in mind the goal
of giving effect to the intentions of the parties.”

Id.

As

discussed above, because Opechee is the moving party on waiver,

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the evidence that it presents must be conclusive to secure
summary judgment.

Union Independiente, 279 F.3d at 55.

Opechee has not met this standard.

There is scant evidence

in the record about Opechee’s and Lafrance’s intent concerning
the Waiver.

The only pertinent evidence is the Certificate of

Substantial Completion.

That document, when taken in the light

most favorable to Continental, only shows that Lafrance became
responsible for insuring the project at substantial completion.
It does not explain the purpose of the post-substantial
completion Waiver.
For this reason, a genuine issue of material fact still
exists as to the waiver defense.

Sunapee Difference, LLC v.

State, 164 N.H. 778, 790 (2013) (resolving ambiguity in contract
“necessarily involves factual findings . . . thus an argument
between the parties about the meaning of an ambiguous
contractual term is typically an argument about a material
fact”) (internal quotations omitted).

Therefore, Opechee has

not shown it is entitled to summary judgment based on the
Waiver.
C. Waiver Limited to Building Damage
Continental argues that even if the Waiver were construed
to apply to post-construction losses, it still only bars claims
for damage to the hotel building.

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Because Opechee has not shown

that the Waiver bars Continental’s claims at this stage of the
litigation, resolving Continental’s alternative theory is
unnecessary.
Conclusion
For the reasons stated above, Opechee’s motion for summary
judgment (document no. 41) is denied.
SO ORDERED.
__________________________
Joseph A. DiClerico, Jr.
United States District Judge

October 6, 2015
cc:

John F. Brady, Esq.
Christie Burnett, Esq.
Doreen F. Connor, Esq.
Adams R. Mordecai, Esq.
Matthew D. Sweet, Esq.
Thomas J. Underwood, Jr., Esq.
James G. Walker, Esq.

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