In December 1990, Indiana University entered into a contract with Goheen General Construction as one of three prime contractors for the renovation of the Student Building on the campus. Goheen then entered into a subcontract with Structural Components, Inc. (SCU), and SCU entered into a contract with Indiana Erectors. On December 17, employees of Indiana Erectors caused a fire which damaged the building, and the water used to extinguish the fire damaged an adjacent building. The University had a general insurance policy issued by Allendale Mutual, and it paid the insured approximately $1.9 million dollars. No additional policy had been obtained to cover the renovation, and none of the contractors or subcontractors was named as an additional insured under the University's policy.
In December 1992, the trustees of the University filed this action against Indiana Erectors for damages and breach of contract. The jury in the trial court returned a verdict in favor of IU for $1.9 million. This appeal followed.
Indiana Erectors asserted it was entitled to judgment because it had been an intended insured under the contractual relationships between IU, Goheen, and the subcontractors; but the trial court found there was nothing in the contract between IU and Goheen by which IU had agreed to purchase insurance to cover the subcontractors, although the contract between IU and Goheen provided for a builders risk policy to protect Goheen. Nothing was said about protection of subcontractors.
Indiana Erectors continued to work on the Student Building after the fire, and it contended it was under the impression that IU's insurance had covered the loss; that it was not notified until long after its work had been completed that IU and/or its insurance carrier intended to hold Indiana Erectors responsible; that IU had approved its work and had made payment in full.
The higher court found that while the jury's award was based on a breach of contract, the action could appropriately be characterized as a subrogation action. It also pointed out that neither an owner nor an owner's insurance carrier can be bound by a subcontract to which neither was a party.
In conclusion, the court found that there was no problem in IU's keeping Indiana Erectors on the job and paying for work which was ultimately completed in a satisfactory manner, and thereafter demanding damages from Indiana Erectors for the fire damage.
The judgment entered in the trial court in favor of Indiana University was affirmed.
Indiana Erectors, Inc. Appellant v. The Trustees of Indiana University--No.
53A091-9703-CV-88--Court of Appeals of Indiana--October 15, 1997--686
North Eastern Reporter 2d 878.