IN THE SUPREME COURT OF OHIOCASE NO. 2008-0916

THE SUMMIT COUNTRY DAYSCHOOL,

Appeal No. C 0700044

Plaintiff,

V.

REPUBLIC-FRANKLIN INSURANCECOMPANY,

Defendant and Third-PartyPlaintiff-Appellant

V.

TURNER CONSTRUCTIONCOMPANY,

Third-Party Defendant-Appellee.

Mark A. Vander Laan, Esq. (0013297)Timothy S. Mangan, Esq. (0069287)DINSMORE & SHOHL, LLP1900 Chemed Center, 255 East Fifth StreetCincinnati, OH 45202Telephone: (513)977-8200Facsimile: (513)977-8141mark.vanderlaan(a),dinslaw.comtim. manganna.dinslaw. com

Lon Berk, Esq. (pro hac vice)Michael S. Levine, Esq. (pro hac vice)HUNTON & WILLIAMS, LLP1751 Pinnacle DriveMcLean, VA 22102Telephone: (703)714-7400Facsimile: (703)918-4050lberk@hunton.comm levine (i^,hunton. com

Counselfor Appellant Republic FranklinInsurance Company

TURNER CONSTRUCTIONCOMPANY'S MEMORANDUM INRESPONSE TO APPELLANT'SMEMORANDUM IN SUPPORT OFJURISDICTION

Pierre H. Bergeron (Esq.) (0071402)(Counsel of Record)

David A. Pepper (Esq.) (0071739)SQUIRE SANDERS & DEMPSEY LLP221 East Fourth Street, Suite 2900Cincinnati, Ohio 45202Telephone: (513)361-1200Facsimile: (513)361-1201pber eg rongssd.comdpepper(a ssd.com

Counsel for Appellee TurnerConstruction Company

MEDJOUN U 9 2()E;J

CLERK OF COURTSUPREME COURi OF OHIO

TABLE OF CONTENTS, ASSIGNMENTS OF ERROR,AND AUTHORITIES

PAGE

TABLE OF CONTENTS, ASSIGNMENTS OF ERROR,AND AUTHORITIES ....... .............................................................................................................. i

I. THIS CASE PRESENTS NO ISSUES OF PUBLIC OR GREAT GENERALINTEREST AND NO SUBSTANTIAL CONSTITUTIONAL QUESTION .................... 1

Authorities:S. Ct. Prac. R. III(B)(2) ........................................................................................... 1

State ex rel. Ross v. Guion, ( 1959), 82 Ohio L. Abs. 1, 161 N.E.2d 800 ............... 1

Flury v. Central Publishing House ofReformed Church ( 1928),118 Ohio St. 154 ..................................................................................................... 1

S. Ct. Prac. R. IV ..................................................................................................... 1

St. Paul Fire & Marine Ins. Co. v. Elkay Mfg. Co. (2003),2003 Del. Super. Lexis 13 ....................................................................................... 1

II. STATEMENT OF THE CASE ........................................................................................... 2

Authorities:R.C. 2305.31 ........................................................................................................... 2

III. RESPONSES TO REPUBLIC'S PROPOSITIONS OF LAW ........................................... 4

A. Proposition of Law No. 1: R.C. 2305.31 prohibits an agreement whereby aNegligent contractor obtains indemnity for damages through an agreementto pursue and receive the property owner's insurance policies . ................................... 4

Authorities:R.C. 2305.31 .................................................................................................. 4,5,6,7

S. Ct. Prac. R. III(B)(2) ........................................................................................... 4

Stickovich v. City of Cleveland (2001), 143 Ohio App.3d 13,757 N.E.2d 50 ......................................................................................................... 5

Best Friends Pet Care, Inc. v. Design Learned, Inc. (Conn. Ct. App. 2003),823 A.2d 329 ........................................................................................................... 5

Board of Education v. Valden Associates, Inc. (N.Y. Ct. App. 1979),389 N.E.2d 798 ....................................................................................................... 5

Ralph Korte Construction Co. v. Springfield Mechanical Co.(Ill. Ct. App. 1977), 54 I11. App. 3d 445 ................................................................. 5

Liberty Mut. Ins. Group v. Travelers Prop. Cas. (2002),2002 Ohio App. LEXIS 4473 ................................................................................. 7

Dayton Power & Light Co. v. Enerfab Inc. (2007),2007 Ohio App. LEXIS 386 ................................................................................... 7

Flury v. Central Publishing House of Reformed Church ( 1928),118 Ohio St. 154 ..................................................................................................... 1

B. Proposition of Law No. 2: On a motion to dismiss, the trial court cannotinfer facts adverse to the moving party ......................................................................... 8

C. Proposition of Law No. 3: A waiver of subrogation clause only applies andextends to the extent of the express terms of the waiver provision .............................. 9

Authorities:State ex. Rel. Royal v. City of Columbus (1965), 3 Ohio St. 2d 154 ....................... 9

D. Proposition of Law No. 4: The Court of Appeals ignored the plain languageof the CMA ................................................................................................................... 9

CONCLUSION . ....................................................................:..................................................... 10

CERTIFICATE OF SERVICE

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I. THIS CASE PRESENTS NO ISSUES OF PUBLIC OR GREAT GENERALINTEREST AND NO SUBSTANTIAL CONSTITUTIONAL QUESTION

Appellee Turner Construction Company ("Turner") respectfully requests that this Court

deny the discretionary appeal filed by Appellant Republic-Franklin Insurance Co. ("Republic").

Republic's memorandum merely attempts to relitigate its unsuccessful, case-specific arguments

from below. In doing so, it fails to make even the type of argument required to gain this Court's

jurisdiction-namely, that this case rises to the level of raising a "public or great general

interest" or a "substantial constitutional question." See S. Ct. Prac. R. III(B)(2); State ex rel.

Ross v. Guion, (1959), 82 Ohio L. Abs. 1, 161 N.E.2d 800, 803 (explaining that Supreme Court

jurisdiction requires issues that reflect more than the simple interests of the parties). Instead, it

simply raises case-specific arguments that carry no significance beyond the parties to this case.

And while Republic half-heartedly suggests that this case presents a conflict between the

districts, it proves unable to explain the nature of the conflict, nor did it ever attempt to certify

such a conflict. See Flury v. Central Publishing House ofReformed Church (1928), 118 Ohio St.

154, 159-60; S. Ct. Prac. R. IV. The purported conflict is illusory, and Republic offers no other

reason why this case beckons this Court's scrutiny. Indeed, the case involves the interpretation

of a routine waiver of subrogation clause in a construction contract. Republic fails to mention

that courts across the country have interpreted this contract consistently with the First District.

As described by a recent Delaware decision, "there has been no hesitancy in upholding and

enforcing such waiver provisions in both federal and state courts throughout the United States."

St. Paul Fire & Marine Ins. Co. v. Elkay Mfg. Co. (2003), 2003 Del. Super. Lexis 13, * 15.

Waiver of subrogation clauses thus provide certainty and limit litigation costs in the

construction industry. Yet Republic neglects to mention another detail - its insurance agreement

with Summit Country Day School ("Summit") specifically permitted waiver of subrogation

rights. If Republic really found such provisions objectionable, it had an easy solution at its

disposal - it could have precluded Summit from waiving subrogation rights. Instead, it did the

opposite, and its claims represent little more than regret over the nature of its bargain. This case

therefore does not present an issue of great public importance, but rather a routine claim in which

one party tries to evade the consequences of specific terms in a contract it executed.

The balance of Republic's arguments for review do not even present true propositions of

law (e.g, "The Court of Appeals ignored the plain language of the CMA."), and are thus

unsuitable for this Court's review. In any event, these issues involve narrow case-specific

matters, rendering them inappropriate for review, and Republic also tries to smuggle in issues

that it did not raise below. Such efforts all fall short of raising a general, public interest, and

confirm the fact that this Court should not undertake review of the First District's decision.

H. STATEMENT OF THE CASE

In 2003, Summit decided to construct a new state of the art building (new lower school)

at its Grandin Road campus (the "Project"). The new building site was located immediately

behind and adjacent to Sununit's upper school building. This case is guided by the terms of the

contractual documents agreed to by Appellee Turner Construction Company ("Turner"),

Summit, and Republic prior to the collapse.

In July 2003, Republic issued a Commercial Property Policy ("the Policy") to Summit for

a one-year period to insure Summit's existing buildings.' Among other provisions, the Policy

permitted Summit to waive its recovery rights against another party in writing, if such waiver

was given prior to a loss to Summit's covered property or covered income.2

1 T.d. 44, Ex. B (references to the record are to the record filed with the First District).2 T.d. 44, Ex. B (Bates 0024).

2

Less than two weeks later, Turner and Summit entered into a construction management

agreement with respect to the Project (the "CMA"), which did exactly that.3 Under the CMA,

Summit agreed to waive recovery rights against Tumer as permitted by Republic, which included

waiving all rights for damages caused by "fire or other perils" to properties "adjoining or

adjacent to the site" covered by property insurance 4

On January 18, 2004, a wall of the east wing of the upper school building collapsed. The

loss was covered by the Republic Policy. The Policy, which included coverage for collapse,

provided replacement cost property coverage for buildings and business personal property on the

adjacent upper school building, business income, extra expense, blanket tuition and fees.

Republic initially adjusted the claim and acknowledged coverage under the Policy by paying

Summit $250,000. Both Summit and Republic considered that amount as an initial payment, and

both understood that it was insufficient to rebuild the upper school building and allow classes to

resume by the fall term. Summit experienced difficulties with Republic's claims adjusters, and

Republic has never paid Summit any funds thereafter. Because of the extreme hardship of the

situation, in February 2004, Summit and Turner entered into an agreement whereby Turner

agreed to advance Summit funds and Summit agreed to repay Turner from the insurance

proceeds from Republic.

Over a year later, Summit filed a Complaint against Republic for breaching its obligation

to make payment for covered losses under the Policy. Republic responded by bringing a Third-

Party Complaint against Turner, alleging that Turner had caused the collapse and was liable for

3 The CMA is a Standard Fonn of Agreement Between Owner and Construction Manager, 1991Edition - Electronic Form, Form No. A121/CMc-1991 (the "A121/CMc"). The A121/CMcincorporated by reference the 1987 Edition of the AIA Document A201, General Conditions ofthe Contract for Construction (the "A201"). T.d. 44, Ex. C (Bates 0078-0131).4 T.d. 44, Ex. C, ¶ 11.3.5 (Bates 00128).

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the losses. The Court of Common Pleas ultimately granted Turner's motion to dismiss

Republic's Third-Party Complaint, holding that Summit had waived Republic's subrogation

rights in a valid pre-loss waiver as permitted by the Policy.

The First District unanimously affirmed this decision. It recognized that Turner was not

seeking indemnification in such a manner as to implicate R.C. 2305.31, but was rather seeking to

enforce a waiver of subrogation provision. (Judgment Entry at 4). The court further found that

Republic was ignoring the plain language of the statute and trying to apply it to a situation where

it was never intended. According to the court, Turner was the hired party under the contract,

and therefore the promisor, and Sununit was the promisee under the statute. (Judgment Entry at

4-5). "Since Summit was not attempting to force Turner to indemnify Summit for its own

negligence, we hold that R.C. 2305.31 is not applicable in this case." (Judgment Entry at 5).

The court also rejected a series of other arguments advanced by Republic that it does not

seriously press before this Court.

III. RESPONSES TO REPUBLIC'S PROPOSITIONS OF LAW

A. Proposition of Law No. 1: R.C. 2305.31 prohibits an agreement whereby anegligent contractor obtains indemnity for damages through an agreement topursue and receive the property owner's insurance policies.

Republic's first proposition of law asserts that Ohio's anti-indemnity statute prohibits

everyday waivers of subrogation clauses. But as the courts below correctly concluded, the

statute is wholly inapplicable to the circumstances of this case. Most importantly for this Court's

purposes, Republic neglects to explain the necessary "great general" or "public" interest needed

to gain this Court's jurisdiction. See S. Ct. Prac. R. III(B)(2).

Republic maintains that Summit's first-party waiver of claims against Turner equates to a

promise to indemnify Turner that contravenes O.R.C. § 2305.31. Although that statutory

provision has been on the books for more than three decades, no court has interpreted it to apply

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to a waiver of first-party claims as urged by Republic here. Instead, it addresses the safety of

third parties by regulating promises to indemnify a negligent party against liability for a third-

party claim, and it protects contractors from being required to indemnify the party hiring them as

a condition for being hired. See Stickovich v. City of Cleveland (2001), 143 Ohio App.3d 13, 28-

29, 757 N.E.2d 50, 62 ("The purpose of R.C. 2305.31 is to protect worker safety and contractors

from being compelled to assume liability for the negligence of others. Neither purpose is harmed

by permitting standard commercial liability insurance for which an independent third-party

insurer is paid a premium to accept the risk of loss. Injured workers are compensated and

contractors do not bear the harsh burden of bearing the cost for others' negligence. This common

sense reading of R.C. 2305.31 is also consistent with the purposes of insurance law."). It is

hardly remarkable, therefore, that courts in other states have rejected arguments similar to

Republic's attempt to apply anti-indemnity statutes to waivers of subrogation. See, e.g., Best

Friends Pet Care, Inc. v. Design Learned, Inc. (Conn. Ct. App. 2003), 823 A.2d 329, 333-35;

Board ofEducation v. Valden Associates, Inc. (N.Y. Ct. App. 1979), 389 N.E.2d 798, 799; Ralph

Korte Construction Co. v. Springfield Mechanical Co. (Ill. Ct. App. 1977), 54 111. App. 3d 445,

447-48. If Republic's view prevailed, decisions carefully weighing the commonplace waivers of

subrogation in construction circumstances would be meaningless, for such waivers would be

barred in all instances. Turner is not seeking indemnification from Republic, but rather is

seeking to enforce a valid waiver of subrogation that Republic itself permitted, through a Policy

it drafted, and for which it received compensation to accept the risk of the loss that occurred.

Furthermore, on its face, the statute remains inapplicable, and certainly not a viable

reason for the Court to exercise jurisdiction here. The anti-indemnity statute applies when one

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party ("the promisee," under the statute) hires another ("the promisor") to perform work, and it

voids the contract if it requires the promisor to indemnify the negligence of the promisee:

A covenant, promise, agreement, or understanding in, or in connection with orcollateral to, a contract or agreement relative to the design, planning, construction,alteration, repair, or maintenance of a building, structure, highway, road,appurtenance, and appliance, including moving, demolition, and excavatingconnected therewith, pursuant to which contract or agreement the promisee,or its independent contractors, agents or employees has hired the promisor toperform work, purporting to indemnify the promisee, its independentcontractors, agents, employees, or indemnities against liability for damagesarising out of bodily injury to persons or damage to property initiated orproximately caused by or resulting from the negligence of the promisee, itsindependent contractors, agents, employees, or indemnities is against publicpolicy and is void....

Ohio Rev. Code 2305.31 (emphasis added). In the most common scenario, the statute prevents a

contractor, the promisee, from hiring a subcontractor, the promisor, and requiring the hired

subcontractor to indemnify the contractor for the contractor's own negligence as a condition for

being hired. Thus, the hiring party must be the promisee. Turner is not a promisee, because it

was the party hired. Republic's memorandum in support of jurisdiction concedes that Summit is

the promisee, but Republic conspicuously avoids labeling Turner as the promisor or the

promisee. (Republic Mem. at 7). There is a reason why Republic avoids this issue. If it

acknowledges (as the First District found) that Turner is the promisor, that would be fatal to its

attempt to implicate R.C. 2305.31. But if it insisted that Turner was a promisee, then both

parties are promisees, which both makes no sense and illustrates the inapplicability of the statute.

Republic resolved this dilemma below by the clever use of brackets in its brief to the First

District to suggest that the statute applies because Turner is both the promisor and promisee at

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once.5 The First District easily saw through this ruse because such an interpretation vitiates the

purpose (not to mention the plain language) of the statute.

Republic's inability to explain how Turner allegedly fits under the statute illustrates the

futility of this Court's review. There is no reason for this Court to accept a case in order to

interpret R.C. 2305.31 when Republic cannot even articulate how the statute applies in this

situation. This is yet another reason why Republic does not offer any developed argument as to

why a "public or great general interest" is implicated in this case, as opposed to matters affecting

only the narrow interests of the parties involved.

Finally, Republic also attempts to manufacture a conflict between the First District and

other Ohio districts on this issue, but no such conflict exists. Proving the point, Republic fails to

explain what the nature of the conflict is. Both cases it cites-Liberty Mut. Ins. Group v.

Travelers Prop. Cas.6 and Dayton Power & Light Co. v. Enerfab Inc.7-have no application to

this case and do not involve first-party waiver of subrogation clauses. They involve situations

that at least arguably fall within the ambit of the statute. Neither case involves an argument that

the party hired under the agreement is the promisee rather than the promisor, as urged by

Republic. Indeed, in neither case did the courts resolve arguments remotely similar to arguments

presented by Republic. Most important, Republic has not certified its alleged conflict with the

5 See Republic Br. at 4 n.19.6 (2002), 2002 Ohio App. LEXIS 4473 (holding that §2305.31 does not permit enforcement ofliability insurance coverage purchased by a subcontractor, who agreed to perform its contractualduties for the construction manager, for the protection against the negligence of that generalcontractor).' (2007), 2007 Ohio App. LEXIS 386. DP&L, the promisee, attempted to be covered for itsnegligence as an "additional insured" under the insurance policy of its contractor, Enerfab.

7

court below, nor sought to do so. See Flury v. Central Publishing House of Reformed Church

(1928), 118 Ohio St. 154, 159-60. In sum, no conflict exists.

B. Proposition of Law No. 2: On a motion to dismiss, the trial court cannot inferfacts adverse to the moving party.

A core principle of Supreme Court jurisdiction is that its purpose is not to review issues

of fact argued below, or review how well-settled law applies to the particular circumstances of a

case. By their very nature, such disputes only implicate the narrow interests of the parties to a

lawsuit, as opposed to the broader public interest necessary for this Court's review. But in its

second "proposition of law," Republic simply asks this Court to review such narrow issues from

below. For this reason alone, this second proposition fails to give this Court a reason to exercise

jurisdiction.

Second, it appears that the basis of this Proposition of Law relies on a typographical error

in the First District's decision. While the court did say that it must "make all reasonable

inferences in favor of the moving party," (Judgment Entry at 3), the cases to which it cites stand

for the proposition that all inferences must be made in favor of the nonmoving party. Moreover,

the court also made clear that it "must accept all factual allegations in the complaint as true" and

that "it must appear beyond all doubt that Republic can prove no set of facts entitling it to relief."

(Judgment Entry at 3). There is no need for the Court to accept a case to correct a typographical

error in an opinion, particularly when the typo in no way affected the outcome of the case.

To illustrate the point, Republic fails to identify any facts actually construed against it.

Republic insists that the First District refused to accept the allegation that Turner was negligent

in causing the collapse, apparently disregarding the part of the First District opinion wherein the

court observed: "Due to allegedly negligent excavating by Turner, a portion of the existing

school building collapsed. . . ." (Judgment Entry at 2). Next, Republic claims that the First

8

District improperly concluded that the work Turner was performing occurred "adjoining or

adjacent to" the insured location. Republic never disputed this conclusion before the First

District below. It is difficult to see how the First District went astray if Republic never contested

the point below.

C. Proposition of Law No. 3: A waiver of subrogation clause only applies andextends to the extent of the express terms of the waiver provision.

This proposition also involves the application of case-specific facts and circumstances to

well-settled law, focusing on the question of whether the damaged property was "on the site," or

"adjacent to the site." Once again, such a dispute does not provide an adequate or sufficient

reason for this Court's jurisdiction. Republic is asking this Court for a ruling as to whether a

particular construction project occurred "on the site" or adjacent to it. Such a ruling would not

be useful precedent to anyone else in Ohio, as it would hinge on the unique circumstances of this

case.

Moreover, while Republic chastises the First District for its handling of the factual issue,

as noted above, it neglects to mention that it never raised this argument before the First District

below. This Court should not undertake review of matters not briefed or argued below. See

State ex ret. Royal v. City of Columbus (1965), 3 Ohio St. 2d 154, 158.

D. Proposition of Law No. 4: The Court of Appeals ignored the plain languageof the CMA.

This final suggested proposition of law is not even a proposition of law. Because

Republic does not specify what legal rule it would urge this Court to adopt, that failing alone

justifies denial of review. Even if the proposition had been properly framed, Republic has

merely raised a technical differentiation between two legal terms in the CMA, asserting

(incorrectly) that the court below misused the terminology. Not only does this argument (even if

correct) have no bearing on the outcome of the decision, it is once again the type of narrow, case-

9

specific question that falls well short of implicating a general, public interest. Because the

resolution of this issue is only of interest to the parties in this case, it does not warrant this

Court's jurisdiction.

CONCLUSION

Because Republic has offered no arguments that any issue in this case rises to the level of

a general or public interest, Turner respectfully requests that this Court deny Republic's

discretionary appeal of the First District's decision below.

Respectfully submitted,?VQ`k`,b"LO(7

Pierre H. Bergeron (0071402)(Counsel of Record)

David A. Pepper (0071739)Squire, Sanders & Dempsey L.L.P.221 East Fourth Street, Suite 2900Cincinnati, Ohio 45202Telephone: (513) 361-1200Facsimile: (513) 361-1201

10

CERTIFICATE OF SERVICE

This is to certify that a copy of the foregoing Memorandum in Response to Appellant's

Memorandum in Support of Jurisdiction has been sent this 9th day of June, 2008 by United

States mail, postage prepaid to:

Mark A. Vander LaanTimothy S. ManganDINSMORE & SHOHL LLP1900 Chemed Center255 East Fifth StreetCincinnati, Ohio 45202

Lon BerkMichael S. LevineHUNTON & WILLIAMS, LLP1751 Pinnacle DriveMcLean, Virginia 22102

CINCINNATV70163.5Pierre H. Bergeron