CONTRACT’S WAIVER OF SUBROGATION UPHELD

In September 2009, Waukegan Roofing Company, Inc (Waukegan) installed a new roof for Lewis Fresh Market Store (Lewis). The store had a fire during the roof installation that damaged the building and inventory and prevented ongoing business operations.

Lewis filed a claim with its insurer, Society Insurance Company, Inc (Society). As a result, Society reimbursed Lewis Fresh for the loss caused by the fire. In turn, Society, as subrogee of Lewis, filed suit against Waukegan for negligence. The trial court found in favor of Waukegan. Society appealed.

The Appellate Court reviewed the case.

Lewis and Waukegan entered into a contract to remove the old roof from the building and replace it with a new sloped roof. The contract stated that damage to the building and property could occur because of the extreme nature of the project of adding a slope. There was also an additional provision in the contract regarding Property Damage Insurance on the work site.

The Property Damage Insurance provision required Lewis to maintain an insurance policy on the work site to its full insurable value at its own expense during the project. The policy would need to include the interests of Lewis, the contractor, and subcontractors against fire, vandalism and other perils. Another provision contract waived all claims against each other for fire damages and other perils covered by the insurance provided in the above condition.

Society alleged that the fire and resulting damages were a direct and proximate cause of Waukegan's failure to take proper precautions when lifting an HVAC unit. It alleged that improper lifting caused damage to the gas line assembly, which led to the HVAC unit. The damage allowed gas to escape and ignited the fire. As a result, significant damage was sustained to the building and contents.

Waukegan argued that its contract with Lewis contained a subrogation waiver that prevented Society and Lewis Market from recovering damages. Fire loss was a specific peril that the subrogation waiver contemplated.

Since the contract did not define “work site,” it was the focus of the case. Did work site mean the entire building where Waukegan performed its work, or was it limited to the portion of the building where the work was performed? Society argued that since the term work site was not defined in the insurance portion of the contract, it was ambiguous.

Society maintained that the subrogation waiver provision was limited to the actual work site. It argued that the waiver was intended to be limited to the exterior roof area where work was performed, which they thought was a reasonable interpretation. However, the Court stated that the definition of work site was not limited to the exterior roof since it would render other contractual provisions meaningless.

As used in contract law proceedings, the best indication of the party's intent was the language of the entire contract and giving words and terms their plain and ordinary meaning.

The Appellate Court found that Waukegan recommended Lewis to cover, remove or store valuable inventory, items stored on shelves, or wall hangings during its work. It also required taking measures to protect and maintain the exterior of the building and the outside areas. Because of this clause, the Court determined it was reasonable to interpret the work site as not limited to the roof or exterior of the building.

The Court concluded the contract's language to be unambiguous and that the subrogation waiver provision extended beyond the building’s roof. The Appellate Court affirmed the judgment of the circuit court.

Society Insurance Co, as subrogee of Lewis Produce Market, Inc. Plaintiff-Appellant v. Waukegan Roofing Company, Inc, Defendant-Appellee, No. 2-11-0387, Order filed February 10, 2012