Hanover Insurance Company v. Hoeft Builders, Inc.
- Donovan Frank
- 0:20-cv-00977
- U.S. District Court · District of Minnesota
- 6
Judge Frank denied Hoeft Builders’ motion to dismiss Hanover Insurance’s claims, allowing litigation over whether a contract’s subrogation waiver binds the insurer.
Hanover Insurance Company’s claims against Hoeft Builders, Inc. will proceed past the motion-to-dismiss stage, subject to discovery about whether the contract included an enforceable waiver of subrogation.
What happened
In Hanover Insurance Company v. Hoeft Builders, Inc., Hanover sought reimbursement from Hoeft for water damage at a hotel construction project. Hanover alleged that Hoeft failed to protect the project from rain and that the damage affected 48 of the 50 units.
Hoeft argued that the parties’ contract included a standard subrogation waiver that barred Hanover, as the insurer, from bringing these claims. Hanover disputed that the waiver was part of the agreement, alleging that Hoeft did not provide the document containing the waiver until after the damage occurred.
The court denied Hoeft’s motion to dismiss, finding that Hanover’s allegations raised a plausible question about whether the parties agreed to the waiver. Judge Donovan W. Frank said discovery should address the parties’ agreement and whether Isanti Hotel had access to the relevant contract terms.
The detailed version
- Hanover Insurance Company v. Hoeft Builders, Inc. · No. 0:20-cv-00977
- Donovan Frank
- Sept. 30, 2020
Background
Isanti Hotel Partners, LLC entered into a construction contract with Hoeft Builders, Inc. for construction of a 50-unit hotel. Hoeft served as the construction manager. The contract, AIA Document A134-2009, referred to and incorporated AIA Document A201-2007, which contained a waiver of subrogation. That waiver stated that the owner and contractor waived rights against each other for losses covered by property insurance.
Hanover Insurance Company, as Isanti Hotel’s insurer and subrogee, alleged that rain damaged 48 of the 50 hotel units during construction. Isanti Hotel made an insurance claim, and Hanover paid under the policy. Hanover then brought claims against Hoeft for negligence, willful and wanton negligence, gross negligence, and breach of contract, alleging that Hoeft failed to protect the project from the elements.
Motion to Dismiss
Hoeft moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not state a legally sufficient claim. Hoeft argued that the subrogation waiver in AIA Document A201-2007 barred all of Hanover’s claims. Hanover disputed that A201-2007 was part of the parties’ agreement, alleging that Hoeft first provided it to Isanti Hotel in January 2019, after the alleged losses had occurred.
The court considered the motion under the rule that it must accept the complaint’s factual allegations as true and draw reasonable inferences in Hanover’s favor. The court declined to decide Hanover’s alternative argument that the waiver could not bar claims for willful and wanton negligence or gross negligence.
Court’s Analysis and Ruling
The court held that the complaint’s allegations were sufficient to cast doubt on whether the parties mutually agreed to incorporate A201-2007’s general conditions into their contract. Although A134-2009 referred to A201-2007, the court concluded that the timing and circumstances alleged by Hanover made it possible that the parties had not intended to be bound by those terms.
The court stated that discovery should address the circumstances surrounding the agreement, including whether Isanti Hotel had access to A201-2007 and whether there was a custom or practice of including AIA general conditions in construction contracts. It therefore denied Hoeft’s motion to dismiss. The court emphasized that Hoeft’s success at the motion-to-dismiss stage did not guarantee success at summary judgment and stated that Hoeft might prevail if discovery showed that the parties knew of and had access to the general conditions.
Read the full 6-page opinion on CourtListener, the free public archive maintained by the Free Law Project.