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MU Chptr. of the Sigma Pi Fraternity of the U.S., Inc. v. Northeast Constr. Servs.

Supreme Court of New York, Appellate Division, Third Department

June 15, 2000, Decided ; June 15, 2000, Entered

86029A, 86029B

Opinion

 [*579]  [**678]   Crew III, J.

Plaintiff Mu Chapter of the Sigma Pi Fraternity of the United States, Inc. (hereinafter Sigma Pi) contracted with defendant to perform renovations and improvements upon its fraternity house, including the construction of a four-story addition. On April 28, 1994, the day defendant commenced work on the project, a fire broke out which resulted in a total loss of the existing structure. Sigma Pi received payment of $ 670,000 from its insurance company, plaintiff CNA Insurance Companies, to cover the damages to the existing fraternity structure. Thereafter, Sigma Pi commenced action No. 1 to recover the uninsured losses sustained as the result of the fire, 1 which it claims was caused by defendant's negligent use of acetylene torches. Following joinder of issue and discovery, defendant moved for partial summary judgment dismissing certain portions of the complaint. Sigma Pi opposed the motion and cross-moved for summary judgment [***3]  on the issue of defendant's liability. Supreme Court denied Sigma Pi's cross motion, granted defendant's motion and dismissed Sigma Pi's complaint in its entirety.

In the interim CNA, as subrogee of Sigma Pi, commenced action No. 2 to recover from defendant the $ 670,000 it paid to  [*580]  Sigma Pi for damages incurred as a result of the fire. Following joinder of issue and discovery, defendant moved for summary judgment on the ground that CNA's action was barred by Sigma Pi's waiver of the subrogation clause contained in its contract with defendant. CNA cross-moved for partial summary judgment striking and/or limiting defendant's fourth and fifth affirmative defenses relating to waiver of subrogation and its sixth affirmative defense relating to dismissal pursuant to CPLR 3211 (a) (4). Supreme Court,  [***4]  inter alia, granted defendant's motion  [**679]  and dismissed CNA's complaint. These appeals ensued.

At issue in both appeals are the terms of the insuring plan contained in the "General Conditions of the Contract for Construction" of the American Institute of Architects executed by Sigma Pi and defendant. With respect to action No. 1, article 11 of the General Conditions required Sigma Pi to purchase property insurance in the amount of the initial contract sum ($ 664,222) in order to protect the interests of, among others, defendant and any subcontractors in the work. In the event that Sigma Pi did not purchase the required insurance, defendant was to be notified of such election in writing in order that it might obtain such insurance and, by appropriate change order, charge Sigma Pi therefor. Finally, the General Conditions provided that in the event Sigma Pi both failed to purchase said insurance and failed to so notify defendant, Sigma Pi would bear all reasonable costs attributable to such failure. The record reflects that Sigma Pi neither purchased insurance in the contract amount nor notified defendant of its intention not to do so. Rather, Sigma Pi relied upon [***5]  an existing policy insuring the extant fraternity house structure and contents for $ 645,000. Additionally, Sigma Pi purchased an "installation floater" in the amount of $ 200,000 to cover building materials in transit to or located on the site that had not yet become part of the realty.

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273 A.D.2d 579 *; 709 N.Y.S.2d 677 **; 2000 N.Y. App. Div. LEXIS 6690 ***

Mu Chapter of the Sigma Pi Fraternity of the United States, Inc., Appellant, v. Northeast Construction Services, Inc., Respondent. (Action No. 1.) CNA Insurance Companies, as Subrogee of the Sigma Pi Fraternity of the United States, Inc., Appellant, v. Northeast Construction Services, Inc., Respondent. (Action No. 2.)

Prior History:  [***1]  Appeals (1) in action No. 1, from an order of the Supreme Court (Relihan, Jr., J.), entered February 16, 1999 in Tompkins County, which, inter alia, granted defendant's motion for summary judgment dismissing the complaint, and (2) in action No. 2, from an order of said court, entered February 5, 1999 in Tompkins County, which, inter alia, granted defendant's motion for summary judgment dismissing the complaint.

Disposition: Order entered February 16, 1999 modified, on the law, without costs, by reversing so much thereof as granted the motion to dismiss that portion of the complaint of plaintiff Mu Chapter of Sigma Pi Fraternity of the United States Inc. seeking to recover damages for the cost of replacing the fraternity house in excess of the moneys previously paid by and received from plaintiff CNA Insurance Companies under an existing policy of insurance; motion denied to that extent; and, as so modified, affirmed; order entered February 5, 1999 affirmed, without costs.

CORE TERMS

damages, fraternity, summary judgment, waive, insuring