{"id":894707,"date":"2018-08-22T16:09:01","date_gmt":"2018-08-22T22:09:01","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=894707"},"modified":"2018-08-08T16:22:53","modified_gmt":"2018-08-08T22:22:53","slug":"court-finds-aia-subrogation-waiver-inapplicable-appeal-pending","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/court-finds-aia-subrogation-waiver-inapplicable-appeal-pending\/","title":{"rendered":"Court Finds AIA Subrogation Waiver Inapplicable; Appeal Pending"},"content":{"rendered":"

Geoffrey M. Waguespack | Butler Weihmuller Katz Craig<\/a><\/p>\n

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In\u00a0Liberty Mutual Fire Insurance Co. v. Fowlkes Plumbing LLC<\/em>, 17-cv-010-GHD-DAS, 2018 WL 842169 (N.D. Miss. Feb. 12, 2018), the District Court for the Northern District of Mississippi held that the subrogation waiver of Section 11.3.7 of AIA Document A201-2007 bars recovery for damages to property associated with a window restoration project that compromises the \u201cWork\u201d only.\u00a0 The Court granted in part and denied in part the defendant\u2019s motion for summary judgment.<\/p>\n

In May 2015, Chickasaw County School District contracted with Sullivan Enterprises to perform window restoration work at a school district building.\u00a0 While construction work was being performed, a fire consumed the entire building.\u00a0 The School District made a claim against its insurance policy held by Liberty Mutual, under which Liberty Mutual paid $4.3 million dollars for damages caused to the building.\u00a0 Liberty Mutual then brought a subrogation action against the contractors alleging that their negligence started the fire.<\/p>\n<\/div>\n<\/div>\n

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The relevant agreement between the school district and its contractors incorporated by reference AIA Document A201-2007, General Conditions of the Construction Contract, which contained a subrogation waiver. \u00a0The waiver stated that the \u201cOwner\u201d and the \u201cContractor\u201d waived:<\/p>\n

[A]ll rights against each other \u2026 and any of their subcontractors \u2026 for damages caused by fire \u2026 to the extent covered by property insurance obtained pursuant to this Section 11.3 or any other property insurance applicable to the [window restoration work].<\/p>\n

Section 11.3 mandated that the \u201cOwner\u201d purchase and maintain \u201cproperty insurance written on a builder\u2019s risk all-risk or equivalent policy form,\u201d and that the \u201cinsurance shall include interest of the Owner, the Contractor, Subcontractors and Sub-subcontractors in the Project.\u201d<\/p>\n<\/div>\n<\/div>\n

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The issue before the Court was the scope of the subrogation waiver in Document A201-2007.\u00a0 In particular, the parties presented two questions to the Court.\u00a0 First, whether the phrase \u201cto the extent covered by property insurance obtained pursuant to this Section 11.3\u201d means any insurance used to satisfy the owner\u2019s obligation under Section 11.3.1.\u00a0 Second, whether \u201cany other property insurance applicable to the [window restoration work]\u201d means any claims paid out on a policy that covered the Work or only claims for the Work itself.<\/p>\n

The Court recognized that two approaches have been taken across the country in determining the scope of the waiver.\u00a0 One approach makes a distinction between \u201cWork\u201d and \u201cnon-Work\u201d property limiting the scope of the waiver to damages to the \u201cWork.\u201d\u00a0A second approach does not focus on that distinction but rather limits the waiver\u2019s scope to the proceeds of the insurance provided under the contract.\u00a0In other words, the first approach defines the scope of the waiver by the type of property that was damaged, while the second approach defines the scope of the waiver by the insurance source of the proceeds.\u00a0Under the second approach, if the proceeds were paid from the policy provided by the owner pursuant to Section 11.2.1, then they would be covered by the waiver.<\/p>\n<\/div>\n<\/div>\n

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The Court noted that the Fifth Circuit has followed the first approach, but noted that the second approach was more appropriate for this case.\u00a0The Court stated that the insurance policy at issue was most appropriately compared to the second approach because there was no evidence that it was purchased specifically to cover the Work or that it includes any interests of the contractors and subcontractors.\u00a0The Court, therefore, found that the waiver of subrogation provision found in Document A201-2007 applies only to claims for damages to the Work itself and not to non-work property.\u00a0 The Court, therefore, denied the motion for summary judgment and allow Liberty Mutual\u2019s claim to continue as to the non-Work property only.<\/p>\n

The case was certified for interlocutory appeal to the 5th Circuit Court of Appeals.\u00a0 We will continue to monitor this issue.\u00a0Stay tuned.<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Geoffrey M. Waguespack | Butler Weihmuller Katz Craig In\u00a0Liberty Mutual Fire Insurance Co. v. Fowlkes Plumbing LLC, 17-cv-010-GHD-DAS, 2018 WL 842169 (N.D. Miss. Feb. 12, 2018), the District Court for the Northern District of Mississippi held that the subrogation waiver of Section 11.3.7 of AIA Document A201-2007 bars recovery for damages to property associated with… Continue reading Court Finds AIA Subrogation Waiver Inapplicable; Appeal Pending<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[4],"tags":[],"class_list":["post-894707","post","type-post","status-publish","format-standard","hentry","category-construction-defects","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nCourt Finds AIA Subrogation Waiver Inapplicable; 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