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Continental Casualty Insurance Co. v. Darella Electric

February 9, 2010

CONTINENTAL CASUALTY INSURANCE COMPANY, AS SUBROGEE OF R.A.B. HOLDINGS, INC., PLAINTIFF,
v.
DARELLA ELECTRIC, INC., DEFENDANT/THIRD PARTY PLAINTIFF,
v.
FACILITY PROGRAM MANAGEMENT, INC., ET AL., THIRD PARTY DEFENDANTS.



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

OPINION

This matter comes before the Court on the motion for summary judgment by Defendant Darella Electric, Inc. ("Darella") [docket entry 24]. Opposition has been filed by Plaintiff Continental Casualty Insurance Company ("Continental Casualty") [docket entry 33] and by Third Party Defendants Facility Program Management, Inc., The Facility Design Group, Inc. and The Facility Group, Inc. (collectively, the "Facility Group") [docket entry 32]. This Court has reviewed the papers filed by the parties in connection with the instant motion for summary judgment and rules based on those submissions, and without oral argument, pursuant to Federal Rule of Civil Procedure 78. For the following reasons, Darella's motion for summary judgment will be granted in part and denied in part.

I. BACKGROUND

This subrogation action concerns property damage sustained by R.A.B. Holdings, Inc. ("R.A.B."), the insured and subrogor of Plaintiff Continental Casualty, during a renovation project in which Darella and the Facility Group were involved as subcontractor and contractor, respectively. The motion before the Court centers on whether, pursuant to contract, R.A.B. waived its subrogation rights with respect to Darella. The Court will thus provide only a brief synopsis of the facts relating to the services and damage out of which this dispute arises before turning to analysis of the relevant contractual provisions and law.

On June 1, 2006, R.A.B. Food Group LLC entered into a "Cost Plus a Fee Contract" with Facility Program Management, Inc. for the performance of design, construction and installation services in connection with a Plant Consolidation Project (the "R.A.B. Project") of R.A.B.'s food processing plant in Newark (the "R.A.B. Property"). (The Court will refer to this contractual agreement between R.A.B. and Facility Program Management, Inc. simply as the "Contract.") The Contract expressly permitted the Facility Group to enter into subcontracts to perform the work covered by the Contract. In performance of its obligations under the Contract, the Facility Group requested a bid from subcontractor Darella for certain electrical work, including the installation of a new power service transformer and new underground conduits to carry six 3,000-ampere conductors on the R.A.B. Property. At some point between the initial bid request and the finalization of the subcontract, the specifications for the work were changed so that the conductors would be installed in the steel conduit already in existence, rather than replacing the conduit. The March 30, 2007 subcontract entered into by Facility Program Management, Inc. and Darella (the "Subcontract") required, among other things, the installation of the six 3,000-ampere conductors into existing conduit.

Darella's work involving the removal of old conductors and installation of new conductors on the R.A.B. Property began in or about April 2007. On April 13, 2007, after this installation was completed, and after it had been inspected by both the City of Newark and the electric company, Public Service Electric & Gas ("PSE&G"), PSE&G turned on electrical service to the transformer associated with the new conductors, energizing the new conductors. Days later, an R.A.B. representative contacted Darella regarding a popping sounding heard in the area of the switch block for conductors at issue. In response, Darella's foreman for the electrical work on the R.A.B. Project, together with a PSE&G technician, inspected the area. Upon discovering some damage to one of the new conductors and the poor condition of the conduit's end, the Darella foreman performed repair work, which included applying a cold shrink to repair damaged insulation on one conductor and applying extra insulation material to the remaining conductors.

On May 29, 2007, a "catastrophic failure" of the new conductors occurred. Following this, the Facility Group issued a change order calling for Darella to install new conductors in new conduit. During the course of this work, portions of the existing conduit were removed from the ground. At this point, it was discovered that the existing conduit was in a very poor and corroded condition and that the site in and around which the conduit was located was quite deteriorated, among other reasons, due to water carried to the area by a decomposed storm pipe.

The failure of the new conductors and related power outage caused substantial damage to the R.A.B. Property. R.A.B. received $264,771.10 in benefits from its insurer, Continental Casualty, on the claim it filed in connection with this damage. In return, R.A.B. subrogated its rights against Darella to Continental Casualty. In the lawsuit before this Court, Continental Casualty alleges that Darella's negligence caused the R.A.B. Property damage. Its theory of the case is that the substandard and degraded condition of the existing conduit into which the new conductors were installed damaged the conductors' insulation and that Darella's failure to perform with due care all work related to the installation, including inspecting and testing the conduit for suitability, resulted in the failure and property damage.

On October 20, 2008, Darella filed a Third Party Complaint against the Facility Group for contribution and common law indemnification, alleging that the Facility Group provided Darella with designs and directions for the R.A.B. Project's electrical work and ordered the new conductors to be installed into existing conduit without first making adequate observations of site conditions and/or without requiring Darella to inspect the conduit for suitability. By letter of May 18, 2009, the Facility Group demanded indemnification and defense against these claims from Darella pursuant to the Subcontract. Darella did not accept the tender of defense, and the Facility Group counterclaimed to enforce its rights of defense and indemnification.

II. DISCUSSION

A. Legal Standard

The standard upon which a court must evaluate a summary judgment motion is well-established. Federal Rule of Civil Procedure 56(c) provides that summary judgment should be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Kreschollek v. S. Stevedoring Co., 223 F.3d 202, 204 (3d Cir. 2000). In deciding a motion for summary judgment, a court must construe all facts and inferences in the light most favorable to the nonmoving party. See Boyle v. County of Allegheny Pennsylvania, 139 F.3d 386, 393 (3d Cir. 1998). The moving party bears the burden of establishing that no genuine issue of material fact remains. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).

Once the moving party has properly supported its showing of no triable issue of fact and of an entitlement to judgment as a matter of law, the non-moving party "must do more than simply show that there is some metaphysical doubt as to material facts." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986); see also Anderson, 477 U.S. at 247-48. The Supreme Court has held that and Rule 56(e) "requires the nonmoving party to go beyond the pleadings and by her own affidavits, or by the "depositions, answers to interrogatories, and admissions on file," designate "specific facts showing that there is a genuine issue for trial." Celotex, 477 U.S. at 324 (quoting Fed. R. Civ. P. 56(e)); Big Apple BMW, Inc. v. BMW of N. Am., Inc., 974 F.2d 1358, 1363 (3d Cir. 1992), cert. denied, 507 U.S. 912 (1993) ("to raise a genuine issue of material fact . . . the [non-moving party] need not match, item for item, each piece of evidence proffered by the movant," but "must exceed the 'mere scintilla' threshold").

The motion for summary judgment before this Court has two aspects. Darella moves for summary judgment on Continental Casualty's Complaint. It also moves for summary judgment on the Facility Group's counterclaim against Darella to enforce the Facility Group's contractual ...


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