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Presenting a live 90-minute webinar with interactive Q&A
Construction Contract Waivers of
Subrogation, Indemnity and Contribution Navigating the Complexities and Pitfalls of Waiver Provisions for Contractors, Owners and Insurers
Todays faculty features:
1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific
THURSDAY, JULY 6, 2017
William E. Kelley, Jr., Partner, Drewry Simmons Vornehm, Carmel, Ind.
Peter Martin, Partner, Martin & Martin Law, Dallas
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SUBROGATION Presented by: William E. Kelly and Peter Martin
Prepared by: Stephen Palley
Palley Law, PLLC
Waivers of Subrogation
Common feature in commercial contracts.
Often ignored until after all a claim arises.
Scope can be broader than anyone realizes.
They are WAIVERS (of subrogation)
State law varies widely
Different rules may apply where litigated between
insurers, as opposed to insured v. insured.
Language varies widely, but some common features issues can be identified.
Heres an example from the AIA A201 general conditions (emphasis added): 11.3.1 Unless otherwise provided the Owner shall purchase and maintain, in
a company or companies lawfully authorized to do business in the jurisdiction in which the Project is located, property insurance written on a builders risk all-risk or equivalent policy form in the amount of the initial Contract Sum, plus value of subsequent Contract Modifications and cost of materials supplied or installed by others, comprising total value for the entire Project at the site on a replacement cost basis without optional deductibles. Such property insurance shall be maintained, unless otherwise provided in the Contract Documents or otherwise agreed in writing by all persons and entities who are beneficiaries of such insurance, until final payment has been made as provided in Section 9.10 or until no person or entity other than the Owner has an insurable interest in the property required by this Section 11.3 to be covered, whichever is later. This insurance shall include interests of the Owner, the Contractor, Subcontractors and Sub-subcontractors in the Project.
What Is Being Waived?
The right of the parties to sue to the extent of available
A third party insurance companys rights?
Is a waiver of a third partys rights really enforceable?
Why is it called a waiver of subrogation
When Is The Waiver Triggered?
Upon execution of the contract, before a claim even
When a claim arises but before it is paid?
After insurance is procured?
After a claim arises and an insurance company has paid?
Is Insurer Consent Required?
Policies may permit pre-loss waiver
On a blanket-basis (where required by written contract)
Or on a scheduled basis?
A best practice to coordinate between contract requirements and
What if the policy doesnt include a waiver?
Generally, insurer stands in insureds shoes and the waiver is
See e.g., North American Specialty Insurance Company vs. Payton
Construction Corp., 80 Mass. App. Ct. 367 (2011)
Does the insurer have a claim back against their own insured?
In Insurer Consent Required? (cont. . .)
If youre an insured, does it matter?
Impact of anti-subrogation rules
See e.g., Allstate Ins. Co. v. Palumbo, 994 A.2d 174 (Conn. 2010).
An agreement to provide insurance company may be
deemed an implied waiver.
See e.g., Walker v. Vanderpool, 225 Va. 266, 271 (1983) (Va. 1983)
Third party beneficiaries?
If youre not named in a contract that contains a a waiver
of subrogation, can it still protect you?
Best practice is to get the waiver if you can, of course, but
see cases like:
Gulf Ins. Co. v. Quality Bldg. Contractor, Inc., 58 A.D.3d 595 (N.Y.
App. Div. 2009) (subcontractor protected by waiver of subrogation
in prime contract where subcontract incorporated prime contract)
Best Friends Pet Care. Inc. v. Design Learned, Inc., 823 A.2d 329
(Conn. App. Ct. 2003) (subcontractor covered by waiver of
subrogation in prime contract even where subcontract did not
contain a waiver of subrogation provision).
How Much Is Waived?
Claims arising from ongoing operations?
Does the waiver apply to over/under liability?
Does the waiver apply to claims between insurers
(equitable contribution, for example).
How Much Is Waived (cont)
Work v. non-work?
On the one hand . . . see, Copper Mountain. Inc. v. Industrial
Systems, Inc., 208 P.3d 692, 696 (Colo. 2009).
On the other hand . . . See, Lexington Insurance Co. v. Entrex
Communication Services, Inc., 749 N.W.2d 124 (Neb. 2008)
Are All Waivers Enforceable?
Waiver that extends to claims arising from sole
On the one hand . . . See Lexington Ins. Co. v. Entrex Commcn
Servs., Inc., 749 N.W.2d 124, 130 (Neb. 2008).
On the other hand . . . See St. Paul Fire & Marine Ins. Co. v. Turner
Constr. Co., No. 082292, 2009 WL 738768, at *1 (3d Cir. 2009)
Workers compensation claims?
State Law Nuances
As always with insurance, there are many state law nuances.
Heres an example from Kansas:
K.S.A. 16-1803. . . .
(b) The following provisions in a contract for private construction
shall be against public policy and shall be void and unenforceable:
. . .
(3) a provision that purports to waive, release or extinguish rights of
subrogation for losses or claims covered or paid by liability or workers
compensation insurance except that a contract may require waiver of
subrogation for losses or claims paid by a consolidated or wrap-up
insurance program, owners and contractors protective liability insurance,
or project management protective liability insurance, unless otherwise
prohibited under subsection (b)(5) of K.S.A. 2012 Supp. 40-5403, and
If you are drafting a waiver of subrogation clause, think of
it as a WAIVER.
Focus on scope of waiver:
The same holds true in litigation.
Construction Contract Waivers of Subrogation, Indemnity and Contribution
WILLIAM E. KELLEY, JR. DREWRY SIMMONS VORNEHM, LLP
C A R M E L / I N D I A N A P O L I S / C R O W N P O I N T , I N D I A N A
E - M A I L : W K E L L E Y @ D S V L A W . C O M
T W I T T E R : @ W I L L K E L L E Y J R
J U L Y 6 , 2 0 1 7
WAIVER OF SUBROGATION CLAUSE
OTHER CONTRACTUAL RISK TRANSFER PROVISIONS
Risk Transfer Strategies
Shift the risk to:
the responsible partie