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Anderson Burton Construction, Inc. v. Environmental Control Specialists, Inc.

United States District Court, D. Hawaii

August 22, 2018

ANDERSON BURTON CONSTRUCTION, INC., a California corporation, Plaintiff,
ENVIRONMENTAL CONTROL SPECIALISTS, INC., a Hawaii corporation; IN & OUT BUILDERS, INC., a Hawaii corporation; and DOES 1-10, Defendants.


          J. Michael Seabright, Chief United States District Judge


         On October 2, 2017, Anderson Burton Construction, Inc. (“Plaintiff” or “ABC”) filed its First Amended Complaint (the “FAC”), ECF No. 38, bringing claims against Environmental Control Specialists, Inc. (“ECS”) and In & Out Builders, Inc. (“IOB”) (collectively, “Defendants”) for declaratory judgment, breach of contract, breach of implied and/or express warranties, and negligence.

         This suit involves weather-related damage to the Haleakala Visitor Center at Haleakala National Park (the “Visitor Center”) that occurred during remodeling of the Visitor Center involving Plaintiff, the general contractor, and Defendants, the subcontractors. FAC ¶¶ 8-14; ABC Concise Statement of Fact (“CSF”) ¶ 3, ECF No. 135. Plaintiff alleges that the weather-related damage occurred as a result of one or both of Defendants improperly installing a temporary roof covering on the Visitor Center. FAC ¶¶ 15-20.

         IOB moves for summary judgment (and is substantively joined by ECS), arguing that Plaintiff waived its right to subrogation in the IOB Subcontract. The court agrees, and accordingly, only Plaintiff's $5, 000 deductible, which is not covered by the waiver, remains at issue.

         Thus, IOB's Motion for Summary Judgment No. 1 Re: Waiver of Subrogation is GRANTED IN PART, as to the $698, 799.99 payment by Navigators Specialty Insurance Company (“Navigators”), and DENIED IN PART, as to the $5, 000 deductible; ECS's Motion for Substantive Joinder is likewise GRANTED IN PART and DENIED IN PART, as to the Motion for Summary Judgment No. 1 Re: Waiver of Subrogation.[1]


         A. Factual Background

         On August 31, 2015, the National Park Service entered into a contract with Plaintiff, the general contractor, to remodel the Visitor's Center. FAC ¶ 8. Plaintiff then entered into two subcontracts, one with ECS on September 15, 2015 (the “ECS Subcontract”), and one with IOB on September 18, 2015 (the “IOB Subcontract”) (collectively, the “Subcontracts”). FAC ¶¶ 9, 10; ECF Nos. 38-2, 38-3. Defendants were hired as subcontractors to “Replace Built-Up Roof and Strengthen Building Structure for Seismic Resistance . . . [and] Reconfigure Vestibule/Entrance Doors” of the Visitor Center. ECF Nos. 38-2 at 7, 38-3 at 7.

         On September 21, 2015 through September 25, 2015, ECS worked on the roof of the Visitor's Center, removing old asbestos-containing roofing material. IOB CSF ¶ 5, ECF No. 101. ECS installed temporary protective plastic sheeting on the roof to protect the Visitor's Center from the weather. Id. IOB was not working on the roof on September 21, 2015 to September 24, 2015. Id. ¶¶ 8, 9. On September 25, 2015, IOB repaired the tongue and groove on part of the roof, which involved removing the protective plastic sheeting installed by ECS. Id. ¶¶ 9, 10.

         On or about September 25 and 26, 2015, the interior of the Visitor's Center sustained weather-related damage. Id. ¶ 17. The parties dispute whether the weather that caused the damage was typical weather for the location or more extreme weather caused by Tropical Storm Niala. ABC CSF ¶ 3, ECF No. 135. The parties also dispute whether Plaintiff, IOB, or ECS was responsible for the plastic sheeting failure. See FAC ¶ 26; ECS Answer ¶ 12, ECF No. 43; IOB CSF ¶¶ 7, 12, ECF No. 101.

         Plaintiff carried commercial general liability insurance issued by Navigators for the policy period of May 12, 2015 to May 12, 2016. ECF No. 141-2 at 10. Plaintiff submitted a claim to Navigators for $731, 805 for the damage to the Visitor's Center. ABC CSF ¶ 4, ECF No. 135. Navigators paid Plaintiff's claim, under Plaintiff's commercial general liability policy, in the amount of $698, 799.99. IOB CSF ¶ 8, ECF No. 99. Plaintiff paid a $5, 000 deductible. Waters Decl. ¶ 6, ECF No. 136-1.

         B. Procedural History

         On October 2, 2017, Plaintiff filed its FAC, bringing claims for declaratory judgment, breach of contract, breach of implied and/or express warranties, and negligence against ECS and IOB. ECF No. 38. On April 4, 2018, IOB filed several motions for summary judgment, including: Motion for Summary Judgment No. 1 Re: Waiver of Subrogation, ECF No. 98.[2] Plaintiff filed an Opposition on May 23, 2018, ECF No. 123, and IOB filed a Reply on May 30, 2018, ECF No. 140. On April 11, 2018, ECS moved for substantive joinder, ECF No. 108, which Plaintiff opposed on May 23, 2018, ECF No. 131. A hearing was held on June 21, 2018. ECF No. 170.


         Summary judgment is proper where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). Federal Rule of Civil Procedure (“FRCP”) 56(a) mandates summary judgment “against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); see also Broussard v. Univ. of Cal. at Berkeley, 192 F.3d 1252, 1258 (9th Cir. 1999).

         “A party seeking summary judgment bears the initial burden of informing the court of the basis for its motion and of identifying those portions of the pleadings and discovery responses that demonstrate the absence of a genuine issue of material fact.” Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007) (citing Celotex, 477 U.S. at 323). “When the moving party has carried its burden under Rule 56[(a)], its opponent must do more than simply show that there is some metaphysical doubt as to the material facts [and] come forward with specific facts showing that there is a genuine issue for trial.” Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586-87 (1986) (citation and internal quotation signals omitted); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986) (stating that a party cannot “rest upon the mere allegations or denials of his pleading” in opposing summary judgment).

         “An issue is ‘genuine' only if there is a sufficient evidentiary basis on which a reasonable fact finder could find for the nonmoving party, and a dispute is ‘material' only if it could affect the outcome of the suit under the governing law.” In re Barboza, 545 F.3d 702, 707 (9th Cir. 2008) (citing Anderson, 477 U.S. at 248). When considering the evidence on a motion for summary judgment, the court must draw all reasonable inferences on behalf of the nonmoving party. Matsushita Elec. Indus. Co., 475 U.S. at 587; see also Posey v. Lake Pend Oreille Sch. Dist. No. 84, 546 F.3d 1121, 1126 (9th Cir. 2008) (stating that “the evidence of [the nonmovant] is to be believed, and all justifiable inferences are to be drawn in his favor.” (citations omitted)).


         IOB argues that this action is a subrogation action brought by Plaintiff's insurer, Navigators, through Plaintiff, and that “Plaintiff contractually waived subrogation rights against IOB.” ECF No. 98-1 at 6. Plaintiff responds that it had contractually waived subrogation rights only for “property insurance” claims, and not for liability insurance claims. ECF No. 123 at 2. Applying California law pursuant to the choice of law provisions in the Subcontracts, the court determines that Plaintiff's commercial general liability insurance is “other property insurance, ” and thus is included under the subrogation waiver clauses of the Subcontracts. As a result, Plaintiff may not recover the $698, 799.99 payment made by Navigators, and the only recovery available to Plaintiff is its $5, 000 deductible. The court allows ECS to join IOB's motion for summary judgment concerning waiver of subrogation.

         A. California Law Applies

         As an initial matter, IOB argues that Hawaii law should apply, even though the IOB and ECS Subcontracts' choice of law clauses both provide that California law should apply. These choice of law clauses, identical in both Subcontracts, provide in relevant part, “[d]isputes arising under this Subcontract solely between PRIME CONTRACTOR and SUBCONTRACTOR shall be governed by the laws of the State of California.” ECF Nos. 38-3 at 16, 38-2 at 16 (emphasis added). IOB argues that the word “solely” in the choice of law clause supports its position that the choice of law clause does not apply here because this case involves a dispute between Plaintiff, IOB, and ECS. The court disagrees, and determines that California law governs.

         “In a diversity case, ‘federal courts apply the substantive law of the forum in which the court is located, including the forum's choice of law rules.'” Downing v. Abercrombie & Fitch, 265 F.3d 994, 1005 (9th Cir. 2001) (quoting Ins. Co. of N. Am. v. Fed. Express Corp., 189 F.3d 914, 921 (9th Cir. 1999)). And, “[u]nder Hawaii law, courts ‘look to the state with the most significant relationship to the parties and subject matter' in a choice-of-law analysis.” Standard Register Co. v. Keala, 2015 WL 3604265, at *6 (D. Haw. June 8, 2015) (quoting Mikelson v. United Servs. Auto. Ass'n, 107 Haw. 192, 198, 111 P.3d 601, 607 (2005) (square brackets omitted).

         “[A]s a general rule, the construction and legal effect to be given a contract is a question of law.” Found. Int'l, Inc. v. E.T. Ige Constr., Inc., 102 Haw. 487, 494-95, 78 P.3d 23, 30-31 (2003) (citation and internal quotation marks omitted). “[A]bsent an ambiguity, . . . contract terms should be interpreted according to their plain, ordinary, and accepted sense in common speech.” Id. at 495, 78 P.3d at 31 (citation and internal quotation marks omitted); see also Amfac,Inc. v. Waikiki Beachcomber Inv. Co., 74 Haw. 85, 108, 839 P.2d 10, 24 (1992) (providing that “terms of a contract should be interpreted according to their plain, ordinary and accepted use in common speech, unless the contract indicates a different meaning” (citation omitted)). “[A] contract should be construed as a whole and its meaning determined from the entire context and not from any particular word, phrase, or clause.” Haw. Med. Ass'n v. Haw. Med. Serv. Ass'n,Inc.,113 Haw. 77, 92, 148 P.3d 1179, 1194 (2006) (citations and internal quotation marks omitted). The court looks “no further than the four corners of the document to determine whether an ambiguity exists, ” and “[t]he parties' disagreement as to the meaning of a contract or its terms does not render clear language ambiguous.” Stanford Carr Dev. Corp. v. Unity House, ...

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