589 F. App'x 828
9th Cir.2014Background
- Travelers (insurer) sued Crown Corr., alleging contract and tort claims arising from damage to the completed University of Phoenix Stadium (the "Facility").
- The district court granted Crown Corr.'s motion to dismiss Travelers' two contract claims and one negligence claim, relying on a subrogation waiver in the Design/Build Agreement (§ 11.4.6).
- Section 11.4.6 waives subrogation among the parties, Design/Builder, consultants, subcontractors, et al., "under property and consequential loss policies purchased for the Facility."
- Travelers argued "Facility" should be read to exclude post-completion insurers and that the waiver did not bar tort claims absent explicit language constraining negligence liability.
- The Ninth Circuit reviewed de novo and affirmed: (1) the waiver language is reasonably read to cover the stadium both pre- and post-completion and thus applies to Travelers; (2) the Authority could waive an insurer’s subrogation rights; and (3) the waiver bars tort claims as well as contract claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §11.4.6's subrogation waiver applies to post-completion insurers like Travelers | “Facility” should be read to exclude post-completion insurers; waiver intended only for construction-phase insurance | "Facility" means the stadium at any time; §11.4.6 is broad and not limited to the Work or construction-phase policies | Waiver applies to the Facility at any time and thus covers Travelers |
| Whether parol evidence should be admitted to narrow "Facility" | Parol evidence shows parties intended waiver to apply only pre-completion | Contract language is not reasonably susceptible to that narrow reading; parol evidence inadmissible | Court properly rejected parol evidence; textual reading controls |
| Whether the Authority could waive the subrogation rights of an insurer hired after completion | An insured cannot waive an insurer's subrogation rights for post-completion loss | Insureds may waive their own rights, which bars insurer subrogation; agreement and related releases effectuate waiver | Authority could waive insurer subrogation; Travelers is bound or had notice/options when negotiating policy |
| Whether the subrogation waiver bars tort/negligence claims | Waiver does not extinguish tort liability; Arizona requires clear language to waive negligence liability | Subrogation waivers differ from exculpatory clauses; they do not leave injured parties uncompensated and commonly encompass tort claims | Waiver applies to tort claims here; Arizona would not depart from treating subrogation waivers as covering tort claims |
Key Cases Cited
- Taylor v. State Farm Mut. Auto. Ins. Co., 854 P.2d 1134 (Ariz. 1993) (contract interpretation; parol evidence admissibility test)
- Monterey Homes Ariz., Inc. v. Federated Mut. Ins. Co., 212 P.3d 43 (Ariz. Ct. App. 2009) (insurer subrogation derives from insured's right; insured's release bars insurer)
- Atel Fin. Corp. v. Quaker Coal Co., 321 F.3d 924 (9th Cir. 2003) (appellate principle: may affirm on any ground supported by record)
- United States Fid. & Guar. Co. v. Farrar’s Plumbing & Heating Co., 762 P.2d 641 (Ariz. Ct. App. 1988) (supporting that valid subrogation waivers can encompass tort claims)
- Fire Ins. Exch. v. Thunderbird Masonry, Inc., 868 P.2d 948 (Ariz. Ct. App. 1993) (similar support that subrogation waivers may reach tort claims)