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Argonaut Great Central Insurance Co. v. DiTocco Konstruction

December 21, 2007

ARGONAUT GREAT CENTRAL INSURANCE COMPANY, PLAINTIFF,
v.
DITOCCO KONSTRUCTION, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Simandle, District Judge

[referred to Docket Items 40, 45 & 47]

OPINION

This matter arises out of a fire that occurred at a T.G.I. Friday's restaurant in Turnersville, New Jersey in 2005. In short, Plaintiff Argonaut Great Central Insurance Co., as alleged subrogee for the owners of the T.G.I. Friday's, brings negligence and breach of warranty claims against DiTocco Konstruction, Inc., John Suggs (d/b/a JMS Services) and Ronald G. Maise (d/b/a Gloucester County Plumbing) (collectively, the "Defendants"). Defendants now individually move for summary judgment [Docket Item Nos. 40, 45 and 47] on the grounds that Argonaut's insureds, the owners of the T.G.I. Friday's, had previously waived any subrogation rights they had against the Defendants. The central issue in this case is whether the waiver of the subrogation clause present in the construction contract between the owners of the T.G.I. Friday's and the Defendants applies to post-construction losses. For the reasons expressed below, the Court holds that the waiver does apply to post-construction losses. Therefore, the Court will grant the Defendants' motions for summary judgment.

I. BACKGROUND

A. The 1999-2000 Renovation of the T.G.I. Friday's Restaurant

This matter involves a T.G.I. Friday's restaurant located on Route 42 in Turnersville, New Jersey. The restaurant is owned by two entities: Brick Township Pubs, Inc. and Northeast Concepts, Inc. (collectively, the "Owners"). In August, 1999, Brick Township Pubs, Inc. entered into an agreement with a construction company named Design Kontractors, Inc. to renovate and remodel the restaurant. The agreement between the parties governing the construction of the restaurant is called Standard Form of Agreement between Owner and Contractor, AIA Document A101-1997 (the "Construction Contract"). Defendant DiTocco Konstruction, Inc. actually performed the renovation and remodeling work contemplated in the Construction Contract, serving as general contractor for the restaurant renovation project. Defendants Ronald G. Maiese (d/b/a Gloucester County Plumbing) and John Suggs (d/b/a JMS Services) served as subcontractors on the project.

According to the Affidavit of Thomas H. DiGiorgio (president of DiTocco Konstruction, Inc.), although the original Construction Contract was executed by Design Kontractors, Inc., the job was completely re-bid due to a change order and construction did not actually begin until February 19, 2000. (DiTocco Konstruction Reply Br. at Ex. A, Affidavit of Thomas H. DiGiorgio ¶ 7.) The parties disagree on the relationship between Design Kontractors, Inc. and DiTocco Konstruction, Inc. According to Plaintiff, DiTocco Konstruction, Inc. and Design Kontractors, Inc. are separate companies. According to DiTocco Konstruction, Design Kontractors, Inc. was merged into DiTocco Konstruction, Inc. in February of 2000 (with DiTocco Konstruction as the surviving entity). This was accomplished upon the filing of Articles of Merger with the Secretary of State in Florida in 2000, prior to the start of construction. (Articles of Merger of Design Kontractors, Inc. into DiTocco Construction, Inc.) Pursuant to the merger, DiTocco Konstruction assumed all rights and liabilities under the Construction Contract. (DiGiorgio Aff. ¶¶ 5-7.) Thus, at the time construction began, Design Kontractors and DiTocco Konstruction were fully merged and the surviving entity was DiTocco Konstruction.

B. The Standard Form of Agreement between Owner and Contractor, AIA Document A101-1997

The Construction Contract, Standard Form AIA Document A101-1997, incorporates by reference a document titled General Conditions of the Contract for Construction known as AIA Document A201-1991 (the "General Conditions"). The General Conditions includes a waiver of subrogation provision (Section 11.4.7) which states:

The Owner and Contractor waive all rights against (1) each other and any of their subcontractors, subsubcontractors, agents and employees . . . for damages caused by fire, or other causes of loss to the extent covered by property insurance obtained pursuant to this paragraph 11.4 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.

General Conditions § 11.4.7. "Work" is defined as "the construction and services required by the Contract Documents, whether completed or partially completed, and includes all other labor, materials, equipment and services provided or to be provided . . . ." General Conditions § 1.1.3.

The General Conditions also contains a subrogation continuation clause for damages suffered after Work is completed. The clause states, in pertinent part:

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, the Owner shall waive all rights in accordance with the terms of Section 11.4.7 for damages caused by fire or other causes of loss covered by this separate property insurance. All separate policies shall provide this waiver of subrogation by endorsement or otherwise.

General Conditions § 11.4.5. The meaning of this subrogation continuation clause is at the heart of this dispute.

C. The Fire at the T.G.I. Friday's Restaurant

On February 15, 2005, almost five years after the project was completed, a fire destroyed the restaurant and all of the equipment inside. According to the Gloucester County Fire Marshal's report, heat from the restaurant's kitchen broiler ignited an accumulation of grease inside the wall behind the broiler. The fire occurred, according to the fire marshal's report, because DiTocco Konstruction and its subcontractors negligently installed a broiler and broiler table directly against a combustible wood wall in the kitchen of the restaurant and the contractors failed to seal cut-outs in ...


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