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 THURSDAY, JULY 6, 2017 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: William E. Kelley, Jr., Partner, Drewry Simmons Vornehm , Carmel, Ind. Peter Martin, Partner, Martin & Martin Law , Dallas The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
Tips for Optimal Quality FOR LIVE EVENT ONLY Sound Quality If you are listening via your computer speakers, please note that the quality of your sound will vary depending on the speed and quality of your internet connection. If the sound quality is not satisfactory, you may listen via the phone: dial 1-866-871-8924 and enter your PIN when prompted. Otherwise, please send us a chat or e-mail sound@straffordpub.com immediately so we can address the problem. If you dialed in and have any difficulties during the call, press *0 for assistance. Viewing Quality To maximize your screen, press the F11 key on your keyboard. To exit full screen, press the F11 key again.
Continuing Education Credits FOR LIVE EVENT ONLY In order for us to process your continuing education credit, you must confirm your participation in this webinar by completing and submitting the Attendance Affirmation/Evaluation after the webinar. A link to the Attendance Affirmation/Evaluation will be in the thank you email that you will receive immediately following the program. For additional information about continuing education, call us at 1-800-926-7926 ext. 35.
Program Materials FOR LIVE EVENT ONLY If you have not printed the conference materials for this program, please complete the following steps: Click on the ^ symbol next to “Conference Materials” in the middle of the left - • hand column on your screen. • Click on the tab labeled “Handouts” that appears, and there you will see a PDF of the slides for today's program. • Double click on the PDF and a separate page will open. Print the slides by clicking on the printer icon. •
WAIVERS OF SUBROGATION Presented by: William E. Kelly and Peter Martin Prepared by: Stephen Palley Palley Law, PLLC
Waivers of Subrogation • Basic principles: • 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. 6
Boilerplate • Language varies widely, but some common features issues can be identified. • Here’s 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 builder’s 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. 7
What Is Being Waived? • The right of the parties to sue to the extent of “available” insurance coverage? • A third party insurance company’s rights? • Is a waiver of a third party’s rights really enforceable? • Why is it called a “waiver of subrogation” 8
When Is The Waiver Triggered? • Upon execution of the contract, before a claim even arises? • When a claim arises but before it is paid? • After insurance is procured? • After a claim arises and an insurance company has paid? 9
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 policy contents? • What if the policy doesn’t include a waiver? • Generally, insurer stands in insured’s shoes and the waiver is enforceable. • 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? 10
In Insurer Consent Required? (cont. . .) • If you’re 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) 11
Third party beneficiaries? • If you’re 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). 12
How Much Is Waived? • Construction project: • Claims arising from ongoing operations? • Completed operations? • Does the waiver apply to “over/under” liability? • Does the waiver apply to claims between insurers (equitable contribution, for example). 13
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) 14
Are All Waivers Enforceable? • Waiver that extends to claims arising from “sole negligence” • On the one hand . . . See Lexington Ins. Co. v. Entrex Commc’n 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. 08•2292, 2009 WL 738768, at *1 (3d Cir. 2009) • Workers compensation claims? 15
State Law Nuances As always with insurance, there are many state law nuances. Here’s 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 amendments thereto. 16
Take-aways • If you are drafting a waiver of subrogation clause, think of it as a WAIVER. • Focus on scope of waiver: • Time • Property • Claims • Excess/under liability • The same holds true in litigation. 17
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 VS. OTHER CONTRACTUAL RISK TRANSFER PROVISIONS 19
Risk Transfer Strategies Goals: Shift the risk to: the responsible parties; the parties with the most control over the risk; and/or the parties best positioned to cover the risk. Shift the risk to insurance providers Implement contractual risk-shifting strategies Protect company assets 20
Allocation of Risk to Insurance Commercial Builder’s Risk General Liability (CGL) Professional Property Liability Insurance (E&O) Worker’s Compensation 21
Contractual Allocation of Risk and Responsibility Written agreement defines the rights, obligations, and remedies of the parties Language of contract is superior to industry standards, course of conduct, and fairness First Key to Contractual Risk Allocation: Practice within the contract terms 22
Recommend
More recommend
