206 A.3d 437
N.J. Super. Ct. App. Div.2019Background
- Equinox (owner) contracted with Grace Construction for the core-and-shell work of a health-club; American Medical Plumbing was a subcontractor. A water-main failure after completion flooded the premises.
- ACE, Equinox's insurer under a blanket all-risk policy (Sept. 2012–Sept. 2013), paid ~ $1.2 million for property damage (only ~$8,000 for the core-and-shell Work covered by the A201 contract) and sued American in subrogation for recovery.
- The construction contract used AIA A201–2007 General Conditions, which requires owner builder's-risk/all-risk coverage and contains mutual waivers of subrogation (A201 §§ 11.3.1, 11.3.5, 11.3.7).
- Key contract clauses: (1) owner must obtain property insurance covering the Project and interests of contractors/subcontractors; (2) §11.3.7 waives rights among owner, contractor, subcontractors “to the extent covered by property insurance obtained pursuant to this Section 11.3 or other property insurance applicable to the Work;” (3) §11.3.5 extends waivers to separate or post‑completion policies.
- Trial court granted summary judgment for the subcontractor based on the waiver clauses; ACE appealed, arguing spatial and temporal limits to the waiver and that its policy was not an "other" or post‑completion policy within §11.3.5.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of §11.3.7 waiver (does it apply only to damage to the Work?) | ACE: waiver applies only to damage to the Work; non‑Work damage (interiors/furnishings) is outside waiver. | American: waiver applies when the loss is covered by owner’s property insurance applicable to the Work, regardless of which property was damaged. | Waiver covers losses paid by the owner’s policy; source/extent of coverage, not the physical identity of damaged property, governs. |
| Temporal scope (does waiver end at project completion?) | ACE: waiver limited to losses during construction; post‑completion losses are not barred unless §11.3.5 applies. | American: §11.3.7 contains no temporal limit; waiver continues so long as the qualifying insurance remains in force; §11.3.5 fills any post‑completion gaps. | No temporal limit in §11.3.7; waiver can extend post‑completion where insurance remains or via §11.3.5. |
| Whether ACE’s blanket all‑risk policy qualifies under A201 (as insurance "obtained pursuant to" §11.3 or "other property insurance applicable to the Work") | ACE: its policy was not sufficiently "other than" a construction policy or otherwise outside §11.3.5/§11.3.7. | American: blanket all‑risk satisfied §11.3.1 builder’s‑risk requirement and also constituted "other property insurance applicable to the Work." | ACE’s blanket all‑risk policy both satisfied §11.3.1 and was "other property insurance applicable to the Work," so waiver applies. |
| Interaction of waiver with contractor liability insurance/indemnity duties | ACE: waiver would render contractor liability insurance or indemnity obligations pointless. | American: A201 expressly preserves waiver even if it overrides indemnity duties; contractor insurance still serves to cover excess or third‑party claims. | Contract expressly reconciles waiver and insurance obligations; waiver can supersede indemnity duties while liability insurance remains a separate protective measure. |
Key Cases Cited
- George M. Brewster & Son, Inc. v. Catalytic Constr. Co., 17 N.J. 20 (N.J. 1954) (principles for contract interpretation)
- Bd. of Comm'rs v. Teton Corp., 30 N.E.3d 711 (Ind. 2015) (preexisting all‑risk policy can satisfy A201 builder's‑risk requirement; waiver based on source/extent of coverage)
- Emp'rs Mut. Cas. Co. v. A.C.C.T., Inc., 580 N.W.2d 490 (Minn. 1998) (owner’s broad existing policy waives subrogation for both Work and non‑Work losses covered)
- Lexington Ins. Co. v. Entrex Commc'n Servs., Inc., 749 N.W.2d 124 (Neb. 2008) (A201 waiver applies to Work and non‑Work damages where covered by owner’s policy)
- Haemonetics Corp. v. Brophy & Phillips Co., 501 N.E.2d 524 (Mass. App. Ct. 1986) (preexisting owner policy may be the insurance relied on to comply with §11.3)
- Lloyd's Underwriters v. Craig & Rush, Inc., 32 Cal. Rptr. 2d 144 (Cal. Ct. App.) (waiver determined by source of insurance proceeds, not which property was damaged)
- Town of Silverton v. Phoenix Heat Source Sys., 948 P.2d 9 (Colo. Ct. App. 1997) (waiver can continue post‑completion when qualifying insurance remains in force)