The Safran Law Blog serves its function perfectly. If you work in the North Carolina construction industry (or have construction business in that state), you’ll want to bookmark this blog because it combines general legal coverage with a specific focus on the construction industry. In other words, the blog combines a generalist’s perspective — lien laws, contracts, other legal issues, framed within general industry insights — with focus and speed: The blog is obviously relevant if you are doing business in North Carolina, and developing changes — such as the state’s new lien agent legislation — are covered with immediacy, so you can be well aware of changes that could impact your business, maybe early enough to lobby for revisions.
Most of the posts are written by Brian Schoolman. Here’s one about waiver of subrogation clauses. Note how Schoolman researches and cites third-party resources, clearly providing links that allow you to delve further into the topic if it is relevant to you:
A few weeks ago, I posted about the topic of waiver of subrogation clauses in construction contracts. Especially as they relate to workers’ compensation insurance claims, these clauses can have a substantial impact on the costs for construction firms — especially smaller firms — if an employee is injured on the job by the negligence of another company’s worker.
In researching the issue further, I found an article posted in October 2012 by David Hattery with Stoel Rives LLP in Seattle, WA. This article discusses Ace American Ins. Co. v. Keystone Construction & Maintenance Services, Inc., a case out of Connecticut, where an accident on the job at a power plant caused a natural gas explosion, resulting in over $200 million dollars in damage. The owner’s insurance policy paid for the damage, and then attempted to recovery via subrogation against the contractor and subcontractors on alleged claims of strict liability (for an ultrahazardous activity) and recklessness. Ultimately, the federal court dismissed the claims by the insurer, in large part because the owner/GC contract included the following language:
Owner, and Contractor waive all rights against each other and any of their subcontractors, sub-subcontractors, agents and employees, each of the other, for damages caused by fire or other causes of loss to the extent covered by Builder’s Risk Property insurance obtained pursuant to Section 12.3 or other property insurance applicable to the Work, except such rights as they have to proceeds of such insurance held by Owner as fiduciary. . . . A waiver of such rights shall be effective as to a person or entity even though that person or entity would otherwise have a duty of indemnification, contractual or otherwise, did not pay the insurance premium directly or indirectly, and whether or not the person or entity had an insurable interest in the property damaged.
The court, following Connecticut law, found that the waiver of subrogation was not against public policy, and held it fully enforceable against the insurance company. Moreover, the court stated that the insurer “knowingly agreed to insure the construction of the Kleen Plant and neither the construction contract nor the insurance policy provided an exception or exclusion for reckless or ultrahazardous conduct.”
For a construction company who places a strong importance upon worker training and safety, going onto the job where a waiver of subrogation is in place can be like a game of Russian roulette. The impact could be damaged work, damaged equipment, or injured workers, along with no avenue for recovering against the truly responsible party. In the Ace American case, the party left holding the bag was the owner’s insurance company. But any company could be the one damaged, and left without a remedy.
To read the Ace American Ins. Co. v. Keystone Construction & Maintenance Services, Inc. opinion, click here.
My perception is that Schoolman and the other Safran Law Offices lawyers practice law with respect for their clients and the community-at-large. In this industry, we need to be aware of the law and its various ramifications, and know when and how to seek professional advice. Safran Law Blog provides an effective, resourceful and responsive introduction and update for anyone who has reason to follow the North Carolina construction industry.