Property Damage, Property Insurance and Reinforcing the Waiver of Subrogation

{"version":"0.3.0","atoms":[],"cards":[],"markups":[["i"],["strong"]],"sections":[[1,"p",[[0,[],0,"August 30, 2022"]]],[1,"p",[[0,[],0,"Waiver\nof subrogation clauses have long been a part of construction contracts\u2014and, as\na result, the subject of case law. "]]],[1,"p",[[0,[],0,"A\nwaiver of subrogation is a provision that often prevents one party\u2019s insurance\ncarrier from pursuing a claim against another party to recover for losses paid\non a covered claim. The purpose and value of a waiver of subrogation has been\nspotlighted in recent case law. "]]],[1,"p",[[0,[],0,"The\n2022 case of 2700 Bohn Motor, LLC v. F.H. Myers Construction Corp. (La. App. 4\nCir. 4\/20\/2022) is a recent case that considers the interplay of key provisions,\nsuch as key insurance requirements and waivers of subrogation, found in the AIA\nContract Documents\u2019 flagship A201, and related general conditions documents."]]],[1,"p",[[0,[],0,"In\nthe case of Bohn Motor, a fire occurred during the restoration of the old Bohn\nMotor Company automobile dealership in New Orleans. The building owner and its\nproperty insurers brought an action against the general contractor and\nsubcontractors to recover for damages from the fire covered by the builder\u2019s\nrisk insurance."]]],[1,"p",[[0,[],0,"However,\nthe building owner and general contractor had agreed to a mutual waiver of\nsubrogation found in the standard-form AIA Contract Document. Under this\ncontract, the contracting parties waived \u201call rights\u201d against \u201ceach other and\nany of their subcontractors, sub-subcontractors, agents and employees.\u201d "]]],[1,"p",[[0,[],0,"The\nappellate court affirmed the trial court\u2019s grant of summary judgment to the contractor\nand subcontractors, concluding that the claims of the owner and insurer were\nbarred by the waiver of subrogation clause in the construction contract between\nowner and general contractor. "]]],[1,"p",[[0,[],0,"Waivers\nof subrogation have long been a part of AIA Contract Documents with good\nreason. These waiver of subrogation clauses shift the ultimate risk of loss\nresulting from perils such as fire to the insurer. The AIA Contract Documents\u2019 waiver\nof subrogation clause is designed to avoid disruption during construction, and\neliminate litigation among the project participant, by having the contracting\nparties look only to the property insurance for protection for an insured loss.\nOften, the expense of litigation and resulting award of damages would have a\ncatastrophic financial impact on the project participants. On the other hand,\nthe insurance carrier can spread the burden of the risk across thousands of construction\nprojects and the policy premiums."]]],[1,"p",[[0,[],0,"The\nconcept of including an express waiver of subrogation as part of the property\ninsurance provisions was first introduced in the 1958 edition of A201. Since\nthat time, the express Waiver of Subrogation has been included in every edition\nof the AIA Contract Documents\u2019 General Conditions. In fact, the AIA Contract\nDocuments have a long history of using existing insurance products to address\nproject risks, and to utilize established contract provisions, like the waiver\nof subrogation, to minimize claims among the parties that might impede progress\nof the work."]]],[1,"p",[[0,[],0,"It\u0027s\nworth noting that the ConsensusDocs documents and EJCDC documents include\nsimilar waiver of subrogation frameworks. The trade associations all agree that\nthe property insurance and waiver of subrogation approach, first adopted by\nAIA, is the best mechanism for fairly allocating the risks addressed."]]],[1,"p",[[0,[0,1],2,"AIA Contract Documents has provided this article for general informational purposes only. The information provided is not legal opinion or legal advice and does not create an attorney-client relationship of any kind. This article is also not intended to provide guidance as to how project parties should interpret their specific contracts or resolve contract disputes, as those decisions will need to be made in consultation with legal counsel, insurance counsel, and other professionals, and based upon a multitude of factors."]]]]}