In Rabun & Assoc. Construction, Inc. v. Berry , Nos. A05A1079, A05A1080, 2005 WL 3099879 (Ga. App. Nov. 21, 2005), a Georgia appeals court ruled that language in a proof of loss statement did not effectively assign insured's rights or interests to their homeowners insurer, and insureds were allowed to bring action against a contractor and subcontractor for damages to their home and property.
Danielle Berry and Mark Squillante (the appellees) hired the Gudaitis appellants as general contractors on a home renovation. Rabun & Associates Construction served as the subcontractor. Rainwater that entered through an opening in the appellees' roof caused structural and personal property damage. Damage was allegedly caused by the workers not properly securing tarps over the opening.
The appellees submitted a proof of loss statement to their insurer, Fireman's Fund. A dispute arose over the loss amount, and Fireman's paid appellees a lesser amount than requested for the damages. The appellees executed a Release and Settlement Agreement, in which Fireman's waived subrogation rights against any party responsible for or contributing to the damage.
Appellees filed a complaint against the contractor and subcontractor for damages. The Gudaitis claimed that appellees “waived their right to sue them for the damages arising in this case by virtue of a contractual clause which required appellees to maintain insurance coverage during the construction period.” The contract required the homeowners to carry fire, theft, and liability insurance for the entire length of the project. The contract, however, did not require the homeowner to carry rain or storm coverage, which is what caused the loss.
The contractor said that the absence of rain listed as a peril requiring insurance in the contract was a “linguistic shortcoming” and that the parties intended to shift the risk of property damage to the insured. The court said that when “the language of a contract is unambiguous, no construction is required or permissible and the terms of the contract must be given an interpretation of ordinary significance…[the court is not] at liberty to rewrite or revise a contract under the guise of construing it.”
The court also found that the proof of loss did not subrogate or assign appellees' rights or title in any cause of action arising from the claims, only to interest in the property that was damaged. Further, Fireman's also waived its subrogation rights in the Release and Settlement Agreement.
Because Fireman's payment to the appellees was made due to a separate contractual obligation, and payments were not made on behalf of the appellants, the court found that appellants were not entitled to reduce their tort liability by the amount Fireman's paid to appellees, who were authorized to maintain their cause of action for the full amount of their losses.