The opinion of the court was delivered by: VANARTSDALEN
During the construction of Three Girard Plaza, Philadelphia, Pennsylvania, a fire occurred that was allegedly caused by the negligence of a subcontractor, John B. Kelly Company (Kelly). The general contractor, Turner Construction Company (Turner) was paid the full amount of the loss, $107,777 less $5,000 deductible, on its fire insurance policy. The insurance carriers, as subrogees of Turner, filed action in the name of Turner against Kelly. The basis of jurisdiction is diversity of citizenship.
Turner's fire insurance policy under Section 3 "Property Covered" insures:
all property, materials, equipment, machinery and supplies, contractors tools chargeable to the job, owned by the Assured or others and for which the Assured may be liable or assumes liability, to be used in or incidental to the construction.
Section 4, "Extension of Interests Covered" states:
It is specifically understood and agreed that this policy covers both the interest of the Assured and (contractors) and (sub-contractors) as additional Assureds hereunder, as their interests may appear. (emphasis added).
Section 20, "Company's Rights of Recovery" contains the following clause:
the company specifically waives its rights of subrogation against any person, firm or corporation insured hereunder.
Kelly contends that, as a subcontractor it became an additional assured under Section 4 of the policy and as such is a "person, firm or corporation insured hereunder" against whom the insurer has expressly waived a right of subrogation under Section 20 of the policy. Kelly has moved for summary judgment. The motion will be denied.
Normally, subrogation is allowed in favor of an insurer who pays a loss suffered by its insured which was occasioned by the negligence of a third party. Subrogation thus arises by operation of law and there is no need for the contract of insurance to contain an express stipulation as to subrogation. Roberts v. Fireman's Ins. Co., 376 Pa. 99, 101 A.2d 747 (1953); Fidelity Title and Trust Co. v. Peoples Natural Gas Co., 150 Pa. 8, 24 A. 339 (1892).
Subrogation, however, has been held not to lie against an insured. "No rights of subrogation can arise in favor of the insurer against its own insured, since by definition subrogation arises only with respect to the rights of the insured against third persons to whom the insurer owes no duty." 16 Couch on Insurance § 61:133 (2d ed. 1966). See, e.g., Graham v. Rockman, 504 P.2d 1351, 1356 (Alaska 1972); Home Ins. Co. v. Pinski Bros., Inc., 160 Mont. 219, 500 P.2d 945, 949 (1972). Although research has failed to locate any appellate court of Pennsylvania squarely deciding this question, lower court cases are in accord. See Allegheny College v. Crump, Inc., 21 D. & C. 2d 207 (1959); Hartford Mutual Ins. Co. v. McNally, 82 York Legal Record 110 (1968).
Defendant Kelly is not specifically named as an insured or as a co-insured. Kelly claims coverage under Section 4 of the policy insuring subcontractors as additional assureds "as their interests may appear." Turner disputes this interpretation on two grounds: (1) Kelly suffered no insurable loss as a result of the fire, therefore, it had no insurable interest and could not be an insured; (2) the insurance contract between the insurers and Turner covered actual damage to the property of the subcontractors and did not purport to insure their legal liability to others.
Kelly cites a line of cases, all stemming from two Louisiana decisions, which view the partial insuring of a party as immunizing it from a later subrogation action brought by the insurer. In Glens Falls Ins. Co. v. Globe Indemnity Co., 214 La. 467, 38 So.2d 139 (1948), the insurer issued a policy to Brewster Co., and/or Treadwell. Treadwell was the general contractor on a building owned by Brewster. A fire destroyed the building before it was completed and the insurer paid Brewster's claim. The court refused to allow the insurer to sue Treadwell for negligence as Treadwell was a named co-insured. The court pointed ...