MACON-BIBB CTY. INDUS. v. NORD BITUMI, U.S., 77 F.3d 417 (11th Cir. 1996)
MACON-BIBB COUNTY INDUSTRIAL AUTHORITY, PLAINTIFF-APPELLANT, v. NORD BITUMI,U.S., INC., DEFENDANT-APPELLEE.
No. 95-8371.United States Court of Appeals, Eleventh Circuit.
March 13, 1996.
Brandon A. Oren, John Dan Raines, III, Macon, GA, for appellant.
John B. McPhail, Atlanta, GA, for appellee.
Appeal from the United States District Court for the Middle District of Georgia.
Before TJOFLAT, Chief Judge, and RONEY and CAMPBELL[fn*], Senior Circuit Judges.
[fn*] Honorable Levin H. Campbell, Senior U.S. Circuit Judge for the First Circuit, sitting by designation.
PER CURIAM:
[1] This is an alleged subrogation claim by the fire insurer of a property owner against the allegedly negligent tenant of the property. On consent of the parties, United States Magistrate Judge Claude W. Hicks, Jr. decided the case. See28 U.S.C. § 636(c)(1). (Section 636(c)(3) allows appeal from the magistrate judge's judgment to be taken directly to this Court). Judge Hicks held that under the terms of the lease, the parties agreed to a waiver of subrogation and entered a summary judgment for the defendant. We affirm, essentially for the reasons set forth in the Order from which this appeal is taken, the material parts of which are incorporated herein as an Appendix.[fn1] SeeTuxedo Plumbing Heating Co. v. Lie-Nielsen, 245 Ga. 27,262 S.E.2d 794, 795 (1980).
[2] AFFIRMED.Page 418
APPENDIX
IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF
GEORGIA MACON DIVISION
Macon-Bibb County Industrial Authority, Plaintiff,
v.
Nord Bitumi, U.S., Inc., Defendant.
Civil Action No. 89-95-2-MAC(CWH)
Before the U.S. Magistrate Judge
ORDER
. . . . .
On April 1, 1984, plaintiff and defendant entered into a
five-year lease and option agreement. On October 1, 1984, while
the defendant was in possession of the leased premises, a fire
damaged the property; the INDUSTRIAL AUTHORITY contends that this
fire was caused by the negligence of defendant NORD BITUMI and/or
its employees. On April 9, 1985, plaintiff was paid $104,955 for
its loss by its insurer, St. Paul Surplus Lines Insurance
Company, pursuant to an agreement styled as a loan receipt. The
total loss was $109,955; there was a $5,000 insurance deductible.
Thereafter, St. Paul caused this lawsuit to be filed in the name
of its insured, MACON-BIBB COUNTY INDUSTRIAL AUTHORITY, seeking
to recover from NORD BITUMI through its subrogation rights the
money it paid to its insured for damages resulting from the fire.
In its motion for summary judgment, defendant NORD BITUMI,
U.S., INC. contends that under the language of the lease the
plaintiff waived its subrogation rights. The INDUSTRIAL
AUTHORITY disagrees.
The lease in question contains the following relevant
provisions:
10(a) Lessor's Insurance. Lessor agrees that it
will, at its own expense, except as hereinafter provided,
keep the premises insured against loss or damage by fire
with extended coverage endorsement in an amount sufficient
to prevent Lessor from being a co-insurer under the terms
of the applicable policies, but, in any event, in an
amount not less than eighty percent (80%) of the full
replacement value of the property of which the premises
are a part as determined from time to time. If, during
the term of this Lease or any renewal thereof, the cost
of Lessor's fire and extended coverage insurance should be
increased as a result of Lessee's occupancy, then Lessee
shall pay such increase.
10(b) Lessee's Insurance. Lessee agrees to maintain, at
its own expense, such fire and extended coverage insurance
on Lessee's personal property and improvements located on
the premises, in amounts as it may deem advisable. . . .
12(a) Indemnity by Lessee. Lessee agrees to indemnify
and hold harmless Lessor from and against all claims of
whatever nature arising from any act, omission, or
negligence of Lessee, or Lessee's contractors, licensees,
agents or employees, or arising from any accident,
injury or damage whatsoever caused to any person, or to
the property of any person, occurring during the terms
of this Lease in or about the premises, including the
streets and roads upon the property of Lessor used by
Lessee for access to and from the premises, or arising
from any accident, injury or damage occurring outside
the premises where such accident, damage or injury
results, or is claimed to be resulted, from any act or
omission on the part of the Lessee or its contractors,
licensees, agents or employees. . . .
12(c) Liability Insurance Requirements. For the foregoing
purpose, the Lessee agrees during the term hereof to
maintain adequate public liability and other insurance
with reputable insurance companies approved by Lessor, and
upon request, to furnish Lessor with certificates of
insurance evidencing such fact. The insurance coverage
to be maintained by Lessee shall be as follows:
(i) Comprehensive general liability insurance against
claims for bodily injury, death and property damage
occurring in or about the premises, affording minimum
single limit protection of One Hundred Thousand Dollars
($100,000)
Page 419
with respect to personal injury or death and
property damage occurring or resulting from one
occurrence; and
(ii) Workmen's Compensation and employer's liability
insurance in accordance with the statutory requirements
of the State of Georgia.
This is a diversity case; thus, under Erie Railroad Co. v.
Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938),
Georgia law is applied to decide the substantive issues. Under
Georgia law, the construction of a contract is a question of law
for the court. O.C.G.A. § 13-2-1. See also Early v.
Kent, 215 Ga. 49, 108 S.E.2d 708 (1959) (where the terms of the
contract are plain and unambiguous, construction is for the court
rather than the jury) and Sims' Crane Service, Inc. v. Reliance
Ins. Co., 514 F. Supp. 1033, 1036 (S.D.Ga. 1981) (construction and
interpretation of written contract is a matter of law for the
court and properly subject to disposition on summary judgment),
aff'd 667 F.2d 30 (11th Cir. 1982). (Note: subsequent history,
not in the original).
Under Georgia law, where parties to a business transaction
mutually agree that insurance will be provided as a part of the
bargain, such agreement must be construed as providing mutual
exculpation to the bargaining parties who must be deemed to have
agreed to look solely to the insurance in the event of loss and
not to liability on the part of the opposing party. Tuxedo
Plumbing Heating Co. v. Lie-Nielsen, 245 Ga. 27,
262 S.E.2d 794, 795 (1980). See Pettus v. APC, Inc., 162 Ga. App. 804,
293 S.E.2d 65 (1982); Central Warehouse Development Corp. v.
Nostalgia, Inc., 210 Ga. App. 15, 435 S.E.2d 230, 232 (1993). See
also Frank Briscoe Co. v. Georgia Sprinkler Co., 713 F.2d 1500,
1504 (11th Cir. 1983).
Upon review of all matters brought to the attention of the
court by counsel for the parties, the undersigned is convinced,
particularly in light of the provisions of clause ten set out
above, that under Georgia law there has been a waiver of
subrogation by the parties in this case. The court specifically
finds from the lease agreement itself that the parties mutually
agreed to provide insurance coverage as a part of their bargain.
The provisions of the lease speak for themselves and are
unambiguous; both the INDUSTRIAL AUTHORITY and NORD BITUMI
contemplated that in the event of fire damage such as that which
occurred in October of 1984, they would look to the insurance
coverage required by the terms of the lease to reimburse them for
any fire loss. Indeed, NORD BITUMI was even required under the
agreement (as part of the bargain) to pay for any increase in the
fire and extended coverage insurance on the premises resulting
from its occupancy.[fn2]
Plaintiff's argument that the indemnity clause (clause twelve
set out above) shows that the parties intended for the plaintiff
to still be able to pursue negligence claims against the
defendant for damages to the premises is unavailing. The
presence of an indemnification clause in a contract has not been
found to override a waiver of subrogation created as a result of
a mutual insurance requirement. See cases cited above, notably
Tuxedo.
To support its argument that there was no "mutual exculpatory
agreement," plaintiff INDUSTRIAL AUTHORITY relies heavily on the
decision of the Court of Appeals of Georgia in Alimenta
Processing Corp. v. South Georgia Pecan Co., 185 Ga. App. 330,
364 S.E.2d 84 (1987). In that case, the court found "a contrary
intent . . . so obviously expressed" in the lease contract
between the parties. However, unlike Alimenta, this is not a
case "where a contrary intent is so obviously expressed."
Moreover, as noted by the dissent in Alimenta, the presence in
Tuxedo of hold harmless language similar to the Alimenta release
provisions relied upon by the majority in Alimenta, did not alter
Page 420
the Supreme Court of Georgia's decision in Tuxedo. See Alimenta,
supra, 364 S.E.2d at 86-87 (McMurray, J., dissenting) (noting
also that the language in question further demonstrates the
parties' intention to look to the insurance for protection
against loss).
A careful reading of paragraphs 12(a) and 12(c) of the lease
contract herein reveals these provisions were written to protect
the plaintiff from third party claims arising from the
defendant's (and defendant's agent's) negligence "in or about"
and "outside" the premises. The provision in question does not
specifically mention any recovery for fire damage occurring to
the premises itself; it deals only with the protection from third
party negligence claims. See Vasche v. Habersham Marina,
209 Ga. App. 263, 433 S.E.2d 671, 673 (1993) wherein the court
distinguished between provisions in a rental agreement covering
damage caused by a marina's negligence in launching and
retrieving boats and loss occasioned by the theft of boats.
In addition, paragraph 12(c) of the lease agreement entitled
Liability Insurance Requirements (emphasis added) evinces the
intention of the parties that coverage afforded by liability
insurance coverage rather than the parties themselves would pay
for any losses covered by liability insurance. See McAbee
Construction Co. v. Georgia Kraft Co., 178 Ga. App. 496,
343 S.E.2d 513, 514-15 (1986). This dovetails nicely with paragraph
10(a) which reflects the same intention insofar as fire insurance
coverage is concerned.
Under the circumstances outlined above, MACON-BIBB COUNTY
INDUSTRIAL AUTHORITY cannot recover from NORD BITUMI, U.S., INC.
for liability mutually agreed by the parties to be covered by
insurance, and St. Paul Surplus Lines Insurance Company suing in
the name of the INDUSTRIAL AUTHORITY under the terms of the loan
receipt given upon payment of insurance proceeds cannot have
rights superior to its insured. See Tuxedo, supra,
262 S.E.2d at 795.
. . . . .
SO ORDERED, this 8th day of MARCH, 1995.
/s/ Claude W. Hicks, Jr.
United States Magistrate Judge
[fn1] There has been a suggestion that our decision should be
stayed pending the Georgia Supreme Court's consideration of
Southern Trust Insurance Co. v. Center Developers, Inc.,
217 Ga. App. 215, 456 S.E.2d 608 (1995). It seems more efficient to
issue this opinion and let the matter pend on a Petition for
Rehearing if the parties are so advised.
[fn2] Under O.C.G.A. § 13-2-2, parol evidence is
inadmissible to add to, take from, or vary a written contract;
words in the contract generally bear their usual and common
significance; and, the construction which will uphold a contract
in whole and in every part is preferred. See also Hornsby v.
Holt, 257 Ga. 341, 359 S.E.2d 646, 648 (1987) (under the parol
evidence rule, in the absence of fraud, accident, or mistake,
this court is not to go beyond the written terms of the contract
to ascertain the parties intent).