Insurer’s Subrogation Rights Preserved
The insured's motion for partial summary judgment to eliminate the insurer's right to subrogation was denied. Fireman's Fund Ins. Co. v. S.A. Comunale Co, Inc., 2024 U,S. Dist. LEXIS 141930 (N.D. Ohio Aug. 9, 2024).
Fireman's Fund provided property insurance to Raisin Industries for property it owned and operated at the Tower City Avenue Shops (Mall). Fireman's Fund also provided property insurance to Jack Ohio, LLC for its Jack Casino located inside the Higbee Building in Cleveland, Ohio.
Terminal Tower was a skyscraper located directly above the Mall and was owned and operated by K&D Management. In 2017, K&D hired Cleveland Construction, Inc. to convert certain floors in Terminal Tower into residences. Cleveland Construction subcontracted with S.A. Comunale Co., Inc. to install a fire suppression system. A water loss event involving a Victaulic rigid coupling on the fire suppression system occurred, allowing a significant amount of water to escape the fire suppression system and into the adjacent Mall and Casino. Fireman's Fund paid approximately $33,000,000 to Raisin and approximately $3,000,00 to Jack pursuant to the policies it had with each.
Fireman's Fund filed a complaint alleging Comunale's negligence in installing the fire suppression system caused the water loss event. Comunale moved for summary judgment arguing three points: (1) Fireman's Fund paid Raisin and Jack on a volunteer basis such that it was not entitled to subrogation; (2) Fireman's Fund was obligated to provide evidence of diminution in value to support its claim and failed to do so; and (3) Fireman's Fund could not recover for the claims arising from payment to Jack because the Terminal Tower property was subject to an easement agreement containing a waiver of subrogation clause. The court addressed each of these arguments.
Comunale first argued that because both the Raisin policy and the Jack policy did not cover loss caused by alleged defective construction or workmanship, and Fireman's Fund alleged that the water loss was caused by negligent construction or workmanship, Fireman's Fund paid these excluded causes of loss as a volunteer and had no right to subrogate against Comunale. The court concluded that a question of fact existed as to whether Fireman's Fund was obligated to pay the water loss claims under the policies. If Fireman's Fund established at trial that water damage was a covered cause of loss under the policies and showed that Comunale's conduct caused or resulted in the water damage, Fireman's Fund was obligated to pay Raisin's and Jack's claims under the policies. Therefore, a question remained as to whether Fireman's Fund paid under an obligation and was entitled to subrogation, rendering summary judgment improper.
On the proof of damages issue, Comunale argued Fireman's Fund failed to present evidence regarding the fair market value of the real property before and after the loss and therefore could not present any evidence to prove its claimed damages. The court concluded that Fireman's Fund was not required to show evidence of the fair market value of each property before and after the damage. Either party could offer evidence of diminution of the market value of the property as a factor bearing on the reasonableness of the cost of restoration. But Fireman's Fund's failure to provide evidence of the fair market value of the relevant properties before and after the damage occurred did not warrant granting summary judgment.
Finally, Comunale argued that a waiver of subrogation clause was included in the Easement Agreement between K&D as owner of Terminal Tower and Jack as owner and operator of the Higbee Building. Comunale contended it was a "Permittee' under the Agreement and was entitled to the benefit of the Agreement, including the waiver of subrogation. The court disagreed with Comunale's interpretation of the Agreement. The language of the waiver provision indicated that no party to the agreement could be liable to the insurance company of another party by way of subrogation rights. For this provision to apply to Comunale, Comunale itself had to be a party as defined in the agreement. Thus, Comunale's status as a permittee did not mean that the waiver provision applied to it.
Comunale's motion for summary judgment was therefore denied.
