The Charter Oak Fire Insurance Company v. Wisconsin Electric Power Company et al

Filing 50

DECISION AND ORDER signed by Judge Lynn Adelman on 6/16/17 GRANTING 35 Motion for Reconsideration by The Charter Oak Fire Insurance Company; dismissal of Charter Oaks claims against WEPCO is VACATED; DENYING 43 Second Motion to Dismiss for Failure to State a Claim by URS Corporation. (cc: all counsel) (gc)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
THE CHARTER OAK FIRE INSURANCE
COMPANY,
Plaintiff,
v.

Case No. 16-C-0281

WISCONSIN ELECTRIC POWER COMPANY and
URS CORPORATION,
Defendants.

DECISION AND ORDER
Plaintiff, The Charter Oak Fire Insurance Company, filed a complaint alleging
claims for negligence and breach of contract against Wisconsin Electric Power
Company (“WEPCO”) and a claim for negligence against URS Corporation. In a prior
order, I granted WEPCO’s motion to dismiss Charter Oak’s claims against it for failure
to state a claim upon which relief may be granted. See Jan. 13, 2017 Dec. and Order,
ECF No. 31. Before me now is Charter Oak’s motion for reconsideration of that order.
Also before me is URS’s own motion to dismiss the claims that Charter Oak alleged
against it.
I. BACKGROUND
According to the allegations of the amended complaint, Charter Oak issued a
property insurance policy to Metropolitan Environmental Services, a company that
performs dredging and excavation services. In August 2011, Metropolitan and WEPCO
entered into a contract under which Metropolitan agreed to provide dredging services to
WEPCO at its Oak Creek power plant. The area to be dredged was located at the
bottom of a bluff, between the bluff and the shore of Lake Michigan.

At approximately the same time that Metropolitan was performing its dredging
work at the bottom of the bluff, WEPCO and URS were engaged in a separate
construction project at the top of the bluff.

On the morning of October 31, 2011,

Metropolitan had its heavy equipment on site at the bottom of the bluff, near the Lake
Michigan shoreline, when a section of the bluff collapsed, resulting in a large quantity of
earth sweeping across the dredging area and pushing Metropolitan’s heavy equipment
into the lake. The bluff collapse did not injure anyone, but it caused significant damage
to Metropolitan’s equipment.
Charter Oak paid Metropolitan $749,096.82 for the damage to its heavy
equipment. Charter Oak now seeks to exercise its subrogation rights and recover its
payment to Metropolitan from WEPCO and URS. It alleges that WEPCO and URS
were negligent in the performance of the construction work at the top of the bluff, and
that such negligence was the cause of the collapse. Charter Oak also alleges that, in
the contract between WEPCO and Metropolitan for the dredging work, WEPCO agreed
to indemnify Metropolitan for losses caused by WEPCO’s own negligence.
In its motion to dismiss the amended complaint, WEPCO argued that several
provisions of the contract between it and Metropolitan barred Charter Oak from
recovering the payments it made to Metropolitan under its policy.1 However, in my
decision on the motion, I addressed only one of those reasons, which was based on a
provision of the contract that I described as a “subrogation waiver.” I concluded that
WEPCO had shown that this waiver applied and barred all of Charter Oak’s claims

1

Charter Oak attached the contract to its amended complaint, and therefore I may
consider the contract without converting the defendants’ motions to dismiss into motions
for summary judgment. See, e.g., Tierney v. Vahle, 304 F.3d 734, 738 (7th Cir. 2002).
2

against it. Charter Oak now contends that this conclusion was erroneous. WEPCO
contends that the conclusion was correct, and it also asks me to decide the other issues
it raised in its original motion to dismiss. URS, in its motion to dismiss, contends that
the subrogation waiver in the contract between Metropolitan and WEPCO also bars
Charter Oak’s claim against it.
II. DISCUSSION
A. Subrogation Waiver
As I explained in my original decision, the contract between WEPCO and
Metropolitan contains language requiring Metropolitan to procure certain forms of
insurance.

See Contract at pp. 2–4.2

The required coverages were for workers

compensation and several forms of liability insurance, including Commercial General
Liability (CGL) insurance or its “equivalent.” Id. The contract also required WEPCO to
be included as an additional insured under the CGL policy. Id. at 3. And the contract
contained the following subrogation waiver, on which I relied in my original decision:
[Metropolitan] waives the right of subrogation, and waives all rights against
[WEPCO] and its agents, officers, directors and employees for recovery of
damages to the extent these damages are covered by any of the
insurance required above.
Id.
WEPCO argued in its original motion that, given Metropolitan’s waiver of the right
of subrogation, Charter Oak cannot now step into Metropolitan’s shoes and attempt to
assert any rights against WEPCO that Metropolitan would have had under contract or
tort law. See Br. at 11–14, ECF No. 17. WEPCO, in its opening brief, anticipated that

2

The contract between WEPCO and Metropolitan is attached as Exhibit A to the
amended complaint, ECF No. 14-1. In this opinion, citations to the “Contract” are to this
document.
3

Charter Oak would argue that the subrogation waiver did not apply because it paid
Metropolitan under a policy of property insurance, which is a form of coverage that the
contract did not expressly require Metropolitan to procure. WEPCO then made three
counterarguments. First, it argued that property insurance is the “equivalent” to the
forms of insurance required under the contract and therefore falls within the waiver. Id.
at 12.

Second, it argued that the damages that Metropolitan incurred in the bluff

collapse would be “covered” by Metropolitan’s CGL policy.

Id.

Specifically, in

connection with this second argument, WEPCO included the following in its opening
brief:
Second, WEPCO is an Additional Insured under the CGL and
excess policies. This is meaningful because WEPCO, as an Additional
Insured, is an entity “covered” by Metropolitan’s CGL policy against any
claims for negligence causing property damage on the project. If Charter
Oak is correct that WEPCO was negligent and could bear liability for the
bluff collapse (which is denied), WEPCO’s potential liability would fall
within the CGL policy and therefore be in the category of “damages
covered by any of the insurance required above.” This is no technicality;
the entire purpose of requiring the insurance, adding the company as an
additional insured, and including a subrogation waiver is to place the sole
risk of loss on a third party commercial entity whose purpose is to
underwrite and cover such risks—the insurance company. Charter Oak
underwrote the risk, and it paid out under the terms of its policy. It has no
subrogation claim against WEPCO.
Id. at 12–13.

WEPCO then, in its third argument, argued that if there were any

ambiguity as to whether the subrogation waiver applied to bar Charter Oak’s claim, the
court should construe that ambiguity in WEPCO’s favor. Id. at 13.
As WEPCO anticipated, Charter Oak, in its response brief, argued that the
subrogation waiver did not apply because Charter Oak paid Metropolitan under a
property policy. Br. in Opp. at 10–11, ECF No. 21. However, Charter Oak did not
respond to the three specific arguments that WEPCO made in its opening brief as to

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why Charter Oak’s claims were within the scope of the subrogation waiver even though
Charter Oak made payments under a property policy. See id. Charter Oak merely cited
the relevant contract language and asserted in conclusory fashion that it did not apply to
payments made under a property policy.

Indeed, Charter Oak’s entire argument

consisted of four sentences, which I can reproduce here:
While it is true that the Contract contains a Waiver of Subrogation,
it specifically states that the waiver only applies to the extent damages are
paid under a policy of insurance required to be purchased under the
Contract.
The policies required to be purchased under the
WEPCO/Metropolitan Contract are: CGL, automobile, professional liability,
environmental impairment and aircraft liability.
Nowhere in the
WEPCO/Metropolitan Contract is there a requirement that Metropolitan
purchase property insurance. Thus, the Waiver of Subrogation clause
does not apply to the current payments which were made under a policy of
property insurance and the current action should be allowed to proceed.
Id. at 11 (quotation of subrogation waiver and citations to record omitted).
In deciding WEPCO’s original motion to dismiss, I accepted WEPCO’s argument
that the subrogation waiver applies whenever Metropolitan’s damages would be
“covered” by one of the policies that the contract required Metropolitan to procure, even
if the insurer did not actually make payments under one of those policies. See Dec. and
Order at 4–5.

I then noted that WEPCO had argued in its opening brief that the

damages to Metropolitan’s heavy equipment would have been within the scope of the
CGL policy that the contract required Metropolitan to procure, and which named
WEPCO as an additional insured. Id. I then assumed that, because Charter Oak did
not in its response brief dispute that the damages would have been covered by the CGL
policy, Charter Oak agreed with WEPCO on this point. Id. I thus found that Charter
Oak’s claims against WEPCO were within the scope of the subrogation waiver and
dismissed them.

5

In its motion for reconsideration of my decision, Charter Oak does not argue that
my interpretation of the subrogation waiver was erroneous. That is, Charter Oak does
not dispute that the subrogation waiver would bar its claims against WEPCO if
Metropolitan’s damages would have been covered by Metropolitan’s CGL policy or
another policy identified in the contract, even if Charter Oak paid out under a property
policy.3 Instead, Charter Oak argues that I should have rejected WEPCO’s argument
that Metropolitan’s damages would have been covered by the CGL policy, even though
Charter Oak did not respond to this argument in its brief in opposition to WEPCO’s
original motion to dismiss. In connection with this argument, Charter Oak first points out
that, on a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the court is
limited to considering the allegations of the complaint and any attached exhibits. It then
notes that the allegations of the amended complaint and the attached exhibits did not
establish that Metropolitan’s damages would have been covered by the CGL policy that
the contract required Metropolitan to procure.

Thus, argues Charter Oak, it was

improper for me to find, in the course of ruling on a motion to dismiss under Rule
12(b)(6), that Metropolitan’s damages would have been covered by the CGL policy.
Charter Oak’s argument that the complaint and attached exhibits do not establish
that Metropolitan’s damages would have been covered by a CGL policy is an excellent
one: nothing in the complaint or attached exhibits suggests that Metropolitan’s CGL
policy would have covered Metropolitan for damage to its equipment caused by
WEPCO’s negligence. Indeed, now that I think about it, it seems quite unlikely that
3

To be sure, Charter Oak states in its motion for reconsideration that it “disagrees” with
my interpretation of the subrogation waiver, but it does not ask me to reconsider my
interpretation or explain why it thinks my interpretation is wrong. Br. at 4 n.2, ECF No.
36.
6

Metropolitan’s CGL policy would have covered Metropolitan for damage to its own
equipment. After all, a liability policy covers the insured’s liability to a third party and
does not pay out when the conduct of a third party damages the insured’s own property.
Although WEPCO is an additional insured under the policy, I doubt that the terms of the
policy provide that WEPCO is covered for its own negligence that results in damage to
Metropolitan. Rather, the policy likely provides that WEPCO is covered for vicarious
liability to a third party based on acts or omissions committed by Metropolitan. In any
event, I need not decide this coverage issue now.

The important point is that the

amended complaint and the attached exhibits do not show that the CGL policy required
by the contract would have covered the loss that Metropolitan incurred when the bluff
collapsed.
Although Charter Oak’s argument about what a court may consider in the context
of a Rule 12(b)(6) motion is an excellent one, the fact remains that Charter Oak did not
make this argument in response to WEPCO’s motion to dismiss. Thus, Charter Oak
could be deemed to have waived the argument. See United Central Bank v. KMWC
845, LLC, 800 F.3d 307, 310 (7th Cir. 2015) (arguments raised for the first time in a
motion for reconsideration are waived). Charter Oak, in its motion for reconsideration,
contends that its failure to make this argument should be excused because it had no
obligation to respond to WEPCO’s argument that Metropolitan’s damages were covered
by the CGL policy. Charter Oak claims that it had no obligation to respond to this
argument because the argument was “wholly conclusory, perfunctory, unsubstantiated
and undeveloped.”4 However, this is wrong. It is true that WEPCO’s argument could be
4

Charter Oak repeats the phrase that WEPCO’s argument was “wholly conclusory,
perfunctory, unsubstantiated and undeveloped” at least eight times in its briefs. I am
7

described as undeveloped because it did not cite to parts of the amended complaint and
attached exhibits showing that the CGL policy would have covered the damages. But
this does not mean that Charter Oak was free to ignore the argument altogether in its
response brief. At the very least, Charter Oak should have argued that WEPCO waived
the argument by failing to fully develop it. See Morgan v. City of Chicago, 822 F.3d 317,
336 n.50 (7th Cir. 2016) (noting that a party can waive a waiver argument by failing to
raise it). Better still, Charter Oak should have just noted that the CGL policy was not
attached to the complaint and that therefore the court could not conclude on a motion to
dismiss that the policy covered the damages. But Charter Oak did not do either of
these things, and therefore I assumed that Charter Oak agreed with WEPCO that the
CGL policy covered the damages.
For these reasons, I could conclude that Charter Oak waived the argument that
the complaint and attached exhibits do not show that the CGL policy covered
Metropolitan’s damages. However, I will not do so. First, whether or not I enforce
Charter Oak’s waiver and uphold the dismissal of the claims against WEPCO, the case
will still proceed against the second defendant, URS.5 Because the court will have to
deal with the merits of Charter Oak’s negligence claim even if it enforces the waiver,
enforcing the waiver will not significantly conserve judicial resources. Second, enforcing
the waiver and dismissing Charter Oak’s claims against WEPCO strikes me as an
overly harsh sanction for Charter Oak’s failure to raise an argument in its response
tempted to hold oral argument on Charter Oak’s motion for reconsideration just so I can
hear its lawyer repeat this phrase a few more times, preferably while doing his or her
best Jackie Chiles impersonation. See https://www.youtube.com/watch?v=jpcEietIoxk.
5

Although URS has filed its own motion to dismiss, I will deny that motion for reasons
explained later in this opinion.
8

brief, especially where, as here, it is clear that the argument would have been
meritorious.

Thus, I will reconsider my dismissal of Charter Oak’s claims against

WEPCO. Moreover, for the reasons explained above, I conclude that the complaint and
attached exhibits do not establish that Metropolitan’s damages were covered by the
CGL policy that the contract required Metropolitan to procure. Thus, I vacate my prior
rationale for dismissing WEPCO from this case.6
B. WEPCO’s Other Arguments, and URS’s Motion to Dismiss
Having decided to reconsider and vacate my prior rationale for dismissing
WEPCO, I must now address the other arguments that WEPCO makes in support of its
motion to dismiss. I also address URS’s motion to dismiss.
1. Arguments based on “Contractor’s Risk” provision
WEPCO contends that Charter Oak’s claims must be dismissed because they
are barred by a section of the contract entitled “Contractor’s Risk.” Contract at 11–12.
This section provides, in relevant part, as follows:
The Company does not guarantee the accuracy of plats or borings, nor
the position of pipes or other underground objects. The Contractor shall
take all risks and responsibilities of the fitness or sufficiency of any
procedures, methods, ways, works or appliances which the
Company may have adopted prior to the execution hereof
preliminarily to or in aid of the work and the Contractor shall inform itself,
by examination, of the conditions of the site of the work.
....
The Contractor shall take all risks and responsibilities on account of
quicksands, springs, character and position of bedrock and the like,
6

I also note that WEPCO is not entitled to dismissal on the ground that property
insurance is “equivalent” to a CGL policy. Again, this cannot be determined from the
complaint and attached exhibits. Moreover, property insurance is an entirely different
form of insurance than liability insurance, and thus I doubt that it could reasonably be
thought to be equivalent to CGL insurance.
9

and floods, frost, freezing, fire, all action of the elements, casualties
and other difficulties encountered, and it shall have no claim against
the Company for delays or extra expense incurred thereby
occasioned.
The Company at no time assumes risk of loss for any personal
property (such as, but not limited to, owned equipment,
leased/rented/borrowed equipment, tools, employee tools and
clothing) of the Contractor, its subcontractors, or their employees
whether at the Company’s site or not.
Id. (emphasis added).
WEPCO contends that the emphasized parts in the excerpt above bar Charter
Oak’s claims against it. This presents a question of contract interpretation governed by
Wisconsin law. Under Wisconsin law, a court’s primary goal in contract interpretation is
to give effect to the parties’ intent, as expressed in the language of the contract.
Maryland Arms Ltd. P’ship v. Connell, 326 Wis. 2d 300, 311 (2010).

The court must

“interpret the language consistent with what a reasonable person would understand the
words to mean under the circumstances.”

Id. If the contract’s language is

unambiguous, the court may not consider extrinsic evidence. Town Bank v. City Real
Estate Dev., LLC, 330 Wis. 2d 340, 356 (2010). Only when the contract is ambiguous,
meaning it is susceptible to more than one reasonable interpretation, may the court look
beyond the face of the contract and consider extrinsic evidence.

Id. Whether the

contract is ambiguous is a question of law for the court. MS Real Estate Holdings, LLC
v. Donald P. Fox Family Trust, 362 Wis. 2d 258, 273 (2015).
In the present case, WEPCO can succeed on its motion to dismiss only if the
cited portions of the contract unambiguously bar Charter Oak’s claims.

If they are

ambiguous, then further proceedings will be needed to resolve the ambiguity, including

10

possibly a trial.7

And I conclude, for the reasons explained below, that the only

provisions of the “Contractor’s Risk” section that could reasonably be construed to bar
Charter Oak’s claims are ambiguous.
The first provision on which WEPCO relies states that Metropolitan “shall take all
risks and responsibilities of the fitness or sufficiency of any procedures, methods, ways,
works, or appliances which the Company may have adopted prior to the execution
hereof.” This provision reads like it was drafted by a lawyer who practiced law in the
late 1800s, and I am not sure what it is supposed to mean. My best guess is that it
means WEPCO is not liable if Metropolitan decides to adopt any dredging practices that
WEPCO may have employed prior to hiring Metropolitan to compete the work. In any
event, the provision does not suggest that WEPCO would not be liable for its own
negligence in causing the bluff above the dredging project to collapse. So this provision
does not bar Charter Oak’s claims.
The second provision on which WEPCO relies states that Metropolitan will “take
all risks and responsibilities on account of quicksands, springs, character and position of
the bedrock and the like, and floods, frost, freezing, fire, all action of the elements,
casualties and other difficulties encountered, and it shall have no claim against the
Company for delays or extra expense thereby occasioned.” WEPCO contends that this
provision means that Metropolitan is “assuming the risk of any harm caused by the
natural environment surrounding the project site, including the adjoining bluff.” Br. in
Opp. at 17, ECF No. 40. While this much may be true, it does not follow that the

7

Charter Oak contends that any ambiguity in the contract must be construed against
WEPCO as the drafter, but for purposes of WEPCO’s motion to dismiss I need not
decide whether this contention is correct.
11

provision means that Metropolitan was agreeing to hold WEPCO (or anyone else)
harmless for its acts or omissions that may have caused the harm to the natural
environment that, in turn, caused harm to Metropolitan. This is perhaps best explained
by way of an example.
Assume for purposes of this example that the adjoining bluff was located on
WEPCO’s neighbor’s property, and that it was the neighbor’s negligence that caused
the bluff to collapse. Also assume that the collapse of the bluff qualifies as an event
described in the provision under review—perhaps it was an event caused by the
“character and position of bedrock and the like.” Finally, assume that the collapse of the
bluff delayed the dredging project, made it more expensive for Metropolitan to complete,
and also damaged Metropolitan’s heavy equipment that was on site. The provision
under review would require Metropolitan to finish the dredging project even though
doing so would now be more expensive than Metropolitan had anticipated when it
signed the contract.

Further, the provision would prevent Metropolitan from billing

WEPCO for any extra expenses it incurred in finishing the project.

However, the

provision would not bar Metropolitan from suing WEPCO’s neighbor for its negligence in
causing the bluff to collapse.

This is because nothing in the provision says that

Metropolitan cannot sue the party that caused the event that interfered with the project.
It just says that Metropolitan is responsible for finishing the project and cannot bill
WEPCO for the extra work. For similar reasons, it is at least reasonable to interpret the
provision as allowing Metropolitan to sue WEPCO for its own negligence in causing the
bluff to collapse.

Although Metropolitan would still be responsible for finishing the

dredging project at the originally agreed upon price, Metropolitan could sue WEPCO for

12

its negligence in causing the damage to its heavy equipment. Again, nothing in the
provision states that Metropolitan was agreeing to hold WEPCO or any other party
harmless for its own negligence. Metropolitan was only agreeing to finish the project at
the contract price even if one of the listed events occurred.
The third provision of the “Contractor’s Risk” section at issue states that WEPCO
“at no time assumes risk of loss for any personal property . . . of the Contractor . . .
whether at [WEPCO’s] site or not.” This provision comes close to barring Charter Oak’s
claim for damage to Metropolitan’s personal property. However, I still think there is a
reasonable interpretation of this provision under which WEPCO is liable for its own
negligence in causing damage to Metropolitan’s property, such that the provision is
ambiguous. The ambiguity lies in the phrase “assumes the risk.” What, exactly, is this
supposed to mean? On the one hand, it could mean that Metropolitan is agreeing to
hold WEPCO harmless for any damage that occurs to its personal property at any time,
even if the damage was caused by WEPCO’s negligence.
reasonable interpretation.

But there is another

Even before Metropolitan and WEPCO entered into the

contract, WEPCO had a duty to exercise ordinary care to prevent injury to Metropolitan
and all other persons. See, e.g., Brandenburg v. Briarwood Forestry Servs., LLC, 354
Wis. 2d 413, 418 (2014) (noting that, under Wisconsin law, every person is subject to a
duty to exercise ordinary care in all of his or her activities). Thus, in a sense, WEPCO
could never “assume” any risk of loss relating to its own negligence—WEPCO was
already exposed to that risk, even before the parties entered into the contract. All
WEPCO could do was relieve itself that risk, which is arguably different than not
assuming the risk. Under this interpretation of the provision, it means only that WEPCO

13

was making clear that it was not assuming any responsibility for Metropolitan’s personal
property beyond the responsibility it already had under tort law. In other words, the
provision makes clear that WEPCO was not agreeing to act as an insurer of
Metropolitan’s equipment.

Thus, for example, if Metropolitan damaged a piece of

equipment while performing dredging services, the provision would make clear that
Metropolitan was not entitled to reimbursement from WEPCO.

But the provision

arguably does not also mean that if WEPCO’s own negligence caused damage to a
piece of Metropolitan’s equipment, WEPCO would be relieved of its common-law
responsibility to pay damages. For these reasons, I find that the provision is ambiguous
and that I cannot use it to dismiss Charter Oak’s claims.
2. Additional argument based on subrogation waiver
In its brief in opposition to Charter Oak’s motion for reconsideration, WEPCO for
the first time argues that the subrogation waiver is not limited to waiving subrogation
rights when the loss would be covered by one of the insurance policies required by the
contract. Instead, argues WEPCO, the provision means that Metropolitan generally
waived “the right of subrogation” as to all of its insurers, such that none of Metropolitan’s
insurers could ever exercise a right of subrogation against WEPCO. URS, in its motion
to dismiss, piggybacks on this argument and expands it: according to URS, the
subrogation waiver prevents any of Metropolitan’s insurers from exercising rights of
subrogation against anyone, not just WEPCO. Thus, argues URS, Charter Oak cannot
sue it for negligence.
WEPCO’s and URS’s argument is based on the placement of a comma after the
word “subrogation”:

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[Metropolitan] waives the right of subrogation, and waives all rights against
[WEPCO] and its agents, officers, directors and employees for recovery of
damages to the extent these damages are covered by any of the
insurance required above.
Contract at 3. The argument is that the use of this comma, and the lack of a second
comma after “for recovery of damages,” means that the phrase “to the extent these
damages are covered by any of the insurance required above” does not apply to the
waiver of the right of subrogation. Under this argument, the subrogation waiver could
be understood as two independent sentences.
“[Metropolitan] waives the right of subrogation.”

The first sentence would be
The second sentence would be

“[Metropolitan] waives all rights against [WEPCO] and its agents, officers, directors and
employees for recovery of damages to the extent these damages are covered by any of
the insurance required above.”

WEPCO and URS contend that the first sentence

should be understood as an unqualified waiver of all of Metropolitan’s insurers’
subrogation rights, while the second sentence means that Metropolitan cannot bring a
claim against WEPCO if its claim would be covered by the insurance required by the
contract.
I am not convinced that WEPCO’s and URS’s interpretation of this provision is
reasonable. For one thing, interpreting the first part of the subrogation waiver as being
broader than the second part leads to an unreasonable result: under the second part,
Metropolitan would be permitted to sue WEPCO for damages that are not covered by
the forms of insurance required by the contract, but if Metropolitan had other forms of
insurance that covered it for those damages, the first part of the provision would bar its
insurers from exercising their rights of subrogation.

Why would the parties have

intended to permit Metropolitan to sue WEPCO for damages not covered by the

15

required forms of insurance, but prohibit Metropolitan’s insurers from doing so? Since
this is likely not the result that the parties intended, I doubt that WEPCO’s and URS’s
interpretation of the subrogation waiver is reasonable. See Gottsacker v. Monnier, 281
Wis. 2d 361, 375 (2005) (stating that court “should adopt a construction that will render
the contract a rational business instrument so far as reasonably practicable”).
Another problem is that I doubt that any reasonable business entity would agree
to a clause in a contract that says nothing more than that someone “waives the right of
subrogation.”

This phrase, standing alone, is vague, and thus it does not clearly

delineate the scope of the waiver. Just about any reasonable business entity would
expect to have the scope of the waiver further defined, and that’s what the phrase “to
the extent these damages are covered by any of the insurance required above” appears
to do. It is true that this meaning would be clearer if the parties had included a second
comma after “recovery of damages,” but the omission of the comma does not, by itself,
suggest that the parties understood the phrase “[Metropolitan] waived the right of
subrogation” to be a freestanding provision of the contract.
URS contends that the subrogation waiver must be freestanding and not limited
to the forms of insurance required by the contract because the required forms are
worker’s compensation and liability insurance, under which an insurer typically does not
have a right of subrogation. Thus, argues URS, the waiver must have been intended to
apply to other forms of insurance, such as the property policy at issue in this case,
under which insurers have subrogation rights. However, while it may be true that under
the required policies insurers do not have subrogation rights, it would not be
unreasonable to suppose that WEPCO wanted to take a belt-and-suspenders approach,

16

under which it negotiated for the waiver of subrogation rights under the required policies
just in case some circumstance arose in which an insurer that issued one of the
required policies attempted to assert a subrogation right against WEPCO. Because of
this, and in light of the other reasons I have given in favor of a narrower interpretation of
the subrogation waiver, I conclude that, at the very least, the waiver does not
unambiguously waive the right of subrogation with respect to damages that are not
covered by the forms of insurance required by the contract.
3. WEPCO’s argument for resolving ambiguities in its favor
Finally, WEPCO argues that if there is any ambiguity in the contract about
whether the parties intended to waive the subrogation rights of Metropolitan’s property
insurer, that ambiguity should be resolved in its favor.

WEPCO contends that the

contract’s failure to specify that Metropolitan was required to have property insurance
was a “ministerial oversight,” and that therefore I must construe the contract to preclude
Metropolitan’s property insurer from having a right of subrogation against WEPCO. Br.
in Opp. at 21. However, the complaint and attached exhibits—which are the only parts
of the record that I may consider on a motion to dismiss under Rule 12(b)(6)—do not
suggest that a ministerial oversight led to the omission of property insurance from the
list of required insurance. The forms of insurance listed in the contract are all forms of
liability insurance that insure Metropolitan against claims made by third parties. This
suggests that WEPCO wanted to make sure that Metropolitan had adequate liability
insurance that would pay damages to WEPCO or a third party in the event that
Metropolitan caused an accident while completing the dredging project.

Moreover,

WEPCO’s demanding to be included as an additional insured suggests that it was

17

concerned about a third party’s trying to hold it vicariously liable for Metropolitan’s
conduct. It would be consistent with this intent for WEPCO to have excluded property
insurance from the list of required insurance, as Metropolitan’s property insurance
would not have protected WEPCO from claims made by an injured third party or
provided coverage to WEPCO in the event that Metropolitan damaged WEPCO’s
property. Thus, the extant provisions of the contract do not suggest that the parties
intended to require Metropolitan to procure property insurance but failed to do so
because of an oversight.
III. CONCLUSION
For the reasons stated, IT IS ORDERED that Charter Oak’s motion for
reconsideration is GRANTED. My dismissal of Charter Oak’s claims against WEPCO is
VACATED.
IT IS FURTHER ORDERED that URS’s second motion to dismiss is DENIED.
Dated at Milwaukee, Wisconsin, this 16th day of June, 2017.

/s Lynn Adelman
LYNN ADELMAN
District Judge

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