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Construction contract subrogation waiver enforceable


A construction contract’s subrogation waiver is enforceable, said a federal appeals court, in affirming a lower court ruling against an insurer.

An Ocean City, Maryland, condominium association hired an engineering firm to develop specifications for a new roof, prepare a bid package and draw up a contract for the job, which culminated in a contract between the association and Newport News, Virginia-based Peninsula Roofing Co. Inc., according to Wednesday’s ruling by the 4th U.S. Circuit Court of Appeals in Richmond, Virginia, in United National Insurance Co. v. Peninsula Roofing Co. Inc.

At some point, the roofers parked their truck in the condo’s parking garage, even though the contract told them not to, said the ruling. They ran extension cords from their tools on the roof down to a generator sitting in their truck. The generator caught fire, which spread, causing about $3 million in property damage, according to the ruling.

The condo association’s property insurer, Bala Cynwyd, Pennsylvania-based United National, sued Peninsula in U.S. District Court in Baltimore to recover the amount it had paid to the condo association, alleging negligence and breach of contract claims. 

The district court ruled in the roofing company’s favor, holding its contract’s subrogation waiver was “both applicable and enforceable.”  Its ruling was upheld by a unanimous three-court panel. 

“To accept United National’s reading of the subrogation waiver – that it applies only to damage that is both covered by property insurance and caused by activity falling within the scope of Work – we would need to insert new language into the waiver’s test,” said the ruling.

“United National has given us no persuasive reason to engage in this editorial exercise,” the ruling said, in affirming the lower court ruling.

Peninsula’s attorney, Sean P. Edwards, a partner with the Law Offices of Frank F. Daily P.A. in Hunt Valley, Maryland, said, “I’m obviously happy that the 4th Circuit affirmed in our favor. I think the 4th Circuit got it right, based upon the law.”

United National’s attorney, Will Sylianteng III, managing partner with the Wes Litigation Group LLC in Doylestown, Pennsylvania, said in a statement, “I’m disappointed by the outcome. However, this was a very specific situation which we thought merited an exception to the general rule.”

A Travelers Cos. Inc. unit prevailed in a case decided by the Wisconsin Supreme Court earlier this week that upheld the enforceability of a subrogation waiver in a dispute over a damaged barn, in a divided ruling.



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