532 F.Supp.3d 1
D.D.C.2021Background
- Plaintiffs are seven insurers who paid $766,616.34 under an all-risk property policy covering LaSalle and its affiliates after water damage to a D.C. hotel during rooftop-pool renovations.
- DC I&G (the Owner) contracted with Paddock (the Contractor) on an AIA-form Renovation Contract that included Article 17 insurance provisions and a waiver-of-subrogation clause (Section 17.6).
- During the renovation (April 2018) a drain in the exposed pool structural box was left uncapped and heavy rains caused water damage to the Hotel.
- Plaintiffs sued Paddock as subrogees of the LaSalle entities for breach of contract and negligence; Plaintiffs moved for partial summary judgment on breach; Paddock moved for summary judgment.
- The district court concluded Section 17.6 waived claims covered by the Owner’s property insurance and that the anti-subrogation rule barred Plaintiffs’ claims because Paddock was an intended/coinsured under the policy.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of the Renovation Contract’s subrogation waiver (Section 17.6): whether it is limited to damage to the defined "Work" | Waiver applies only to damage to Work; non-Work damage remains actionable | Waiver applies to any damage covered by the Owner's property insurance procured/"applicable to the Work" | Waiver is governed by the source/extent of insurance coverage and applies to all damage covered by the Owner's property insurance, not limited to Work |
| Whether Section 17.6 bars Plaintiffs (as subrogees of DC I&G) from suing Paddock on the breach claim | Plaintiffs (as subrogees) retained a contract claim because waiver was limited to Work | Contract barred claims covered by property insurance; subrogee stands in insured’s shoes and gets no greater rights | Plaintiffs’ breach-of-contract claim is barred by the waiver because the loss was covered by the Owner’s property insurance |
| Whether the anti-subrogation rule prevents Plaintiffs from pursuing subrogation because Paddock was covered by the same policy | Plaintiffs contend Paddock was not an insured under Plaintiffs’ policy as to other LaSalle entities, or rule applies narrowly | Paddock was an intended/coinsured under the Owner’s policy; public-policy anti-subrogation bars insurer recovery against its own insured | The anti-subrogation rule bars both breach and negligence claims by Plaintiffs against Paddock (Paddock was an intended insured/coinsured) |
| Disposition of summary judgment motions | Plaintiffs sought partial summary judgment on breach | Paddock sought summary judgment dismissing both claims | Court denied Plaintiffs’ motion and granted Paddock’s motion; all claims against Paddock dismissed |
Key Cases Cited
- Bd. of Comm’rs of Jefferson Cnty. v. Teton Corp., 30 N.E.3d 711 (Ind. 2015) (waiver scope determined by source/extent of property insurance, not by whether damaged property is the "Work")
- Lexington Ins. Co. v. Entrex Commc’ns Servs., Inc., 749 N.W.2d 124 (Neb. 2008) (majority approach: waiver covers losses paid by owner’s policy regardless of Work/non-Work distinction)
- ASIC II Ltd. v. Stonhard, Inc., 63 F. Supp. 2d 85 (D. Me. 1999) (waiver coextensive with property insurance actually procured or otherwise applicable)
- Com. Union Ins. Co. v. Bituminous Cas. Corp., 851 F.2d 98 (3d Cir. 1988) (AIA-form contracts shift ultimate risk to owner/insurer and abrogate insurer subrogation against subcontractors)
- Baugh-Belarde Constr. Co. v. College Utils. Corp., 561 P.2d 1211 (Alaska 1977) (insurer that accepted premium covering subcontractor assumed risk; anti-subrogation bars recovery from subcontractor)
- S. Tippecanoe Sch. Bldg. Corp. v. Shambaugh & Son, Inc., 395 N.E.2d 320 (Ind. Ct. App. 1979) (where contract required owner to insure contractors’ interests and included waiver, insurer cannot subrogate against contractors)