An apartment developer/owner contracted with a builder for the construction of an apartment complex. The contract provided for waiver of "....all rights against....each other....for damages caused by fire....to the extent covered by property insurance obtained pursuant to the (agreement)...." There was a specific provision that the owner would purchase "....an all risk policy and would insure against the perils of fire."

Each of the parties bought a builders risk policy, in its own name, covering the complex during the course of construction. Neither was named an additional insured nor loss payee in the other's policy. Fire destroyed part of the complex and the builder withdrew a claim against its insurer when the owner was paid in full for damages to the property, and undertook necessary reconstruction.

Unsuccessful in a subrogation action against the builder, by virtue of the release agreement in the construction contract, the owner's insurer sued the builder's insurer seeking indemnification for the full amount paid or, alternatively, for contribution. It appealed trial court judgment relieving the builder's insurer from reimbursing any part of the settlement.

The appeal court said that, though the property and the risks were the same in both policies, the interests were different. The one covered an ownership interest; the other, "....contractual interests in completing and delivering the complex."

The court could find no case in Michigan or any other state that required insurers to contribute in like circumstances. The construction contract had the effect of transferring fire risk to insurers and mandated that the owner obtain coverage for it. Its insurer could not recover from the other, which insured different interests and did not name the owner as additional insured or loss payee.

The judgment of the trial court was affirmed in favor of the builder's insurer and against the owner's insurer.

(RELIANCE INS. CO., Plaintiff-Appellant v. LIBERTY MUTUAL FIRE INS. CO., Defendant-Appellant. United States Court of Appeals for the Sixth Circuit. No. 93-125. January 14, 1994. CCH 1994 Fire and Casualty Cases, Paragraph 4653.)