Ladies and Gentlemen:
I wanted to make you aware of a recent Pennsylvania Superior Court decision regarding waiver of subrogation clauses in contracts.
In the case of New Universal Underwriters Insurance Co. v. A. Richard Kacin Inc., et al. (Pa. Super. 1/11/07) the Pennsylvania Superior Court upheld a waiver of subrogation clause in a contract between a building owner and contractors, who had been contracted to construct a building. The construction contract had a provision that both sides and their insurance carriers would waive subrogation against one another.
A wall of the building owned by the insured, which had been constructed by the defendantcontractors, collapsed during a rain storm. It was alleged that the collapse was caused due to the faulty construction by the defendant contractors.
When the owners' insurer filed a subrogation suit, the defendant contractors brought a Motion for Partial Summary Judgment based on the waiver of subrogation clause. The trial court then dismissed the subrogation action.
On appeal the subrogated insurer argued that a waiver of subrogation clause is equivalent to an exculpatory clause in a contract. The insurer asserted that a party responsible for causing the loss cannot claim the benefit of an indemnity or exculpatory provision of a contract, and that Pennsylvania law does not favor indemnifying a tortfeasor for his own negligence.
Rejecting the subrogated insurer's argument and upholding the decision of the trial court, the Superior Court referred to its prior decision in Penn Avenue Place Associates v. Century Steel Erectors, 798 A.2d 256 (Pa. Super. 2002) (reported to you in our newsletter of June 12,2002) and held that the waiver of subrogation clause was enforceable despite the fact that the insurer had no prior knowledge of the clause.
Should you have any questions about the above, please do not hesitate to give me a call.
Very truly yours,
David E. Prewitt
DEP/dp
