The Subrogation Strategist

In Jewels by Iroff, Inc. v. Securitas Tech. Corp., No. 1:23-CV-556-TWT, 2023 U.S. Dist. LEXIS 172391, a Georgia federal court addressed a suit against a security/alarm company arising from a break-in at a jewelry store where the thieves stole over $1 million in jewelry. The court addressed numerous provisions in the alarm company’s contract – such as a waiver of subrogation, exculpatory and limitation of liability provision – and concluded that the provisions were enforceable. Thus, the court dismissed the plaintiff’s complaint (although it gave the plaintiff the opportunity to try and amend its complaint to state a cause of action).

In February 2022, a break-in occurred in Alpharetta, Georgia at Jewels by Iroff, Inc. (Iroff). Iroff’s insurer, Jewelry Mutual Insurance Company (Insurer), reimbursed Iroff for more than $1.2 million in losses following the incident. Insurer then filed a subrogation action against Iroff’s alarm security contractor, Securitas Tech. Corp. (Securitas), alleging gross negligence, breach of contract and fraudulent misrepresentation.Continue Reading

In Commercial Painting Co. v. Weitz Co. LLC, No. W2019-02089-SC-R11-CV, 2023 Tenn. LEXIS 39 (Weitz), the Supreme Court of Tennessee (Supreme Court) considered whether the economic loss doctrine barred the plaintiff’s claims for fraud, negligent misrepresentation and punitive damages arising out of a contract with the defendant for construction services. The court held that the economic loss doctrine only applies to product liability cases and does not apply to claims arising from contracts for services. This case establishes that, in Tennessee, the economic loss doctrine does not bar tort claims in disputes arising from service contracts.

In Weitz, defendant, Weitz Co. LLC (Weitz), was the general contractor for a construction project and hired plaintiff Commercial Painting Co. (Commercial) as a drywall subcontractor.  Weitz refused to pay Commercial for several of its payment applications, claiming that the applications were submitted untimely and contained improper change order requests.  Commercial filed a lawsuit against Weitz seeking over $1.9 million in damages, alleging breach of contract, unjust enrichment, enforcement of a mechanic’s lien, and interest and attorney’s fees under the Prompt Pay Act of 1991. Weitz filed a counterclaim for $500,000 for costs allegedly incurred due to Commercial’s delay and defective workmanship. In response, Commercial amended its complaint to add claims for fraud, intentional and negligent misrepresentation, rescission of the contract and $10 million in punitive damages. Commercial alleged that Weitz received an extension of the construction schedule but fraudulently withheld this information from Commercial and continued to impose unrealistic deadlines.Continue Reading

Gus Sara, Partner, and Joe Kuffler, Counsel, reunite to host another episode of Subro Sessions, entitled, “Reading the Small Print: A Discussion of Contractual Impediments to Subrogation” to discuss common issues with contractual provisions.

Subrogation professionals run into various contractual provisions, including subrogation waivers, limitation to liability and damages caps, accelerated statute of limitations, indemnification/hold harmless clauses, notices and pre-suit requirements and venue/forum clauses. Gus and Joe present relevant case scenarios and ... Continue Reading

In HDI Glob. SE v. Magnesium Prods. of Am., Inc., No. 360385, 2023 Mich. App. LEXIS 2602 (Magnesium Prods.), the Court of Appeals of Michigan (Court of Appeals) considered whether the lower court erred in dismissing the plaintiffs’ claim for loss of income based on the economic loss doctrine. The court found that while the defendant manufacturer owed a duty to the general public to exercise reasonable care in its manufacturing process, that duty did not apply to the economic damages alleged by the plaintiffs.Continue Reading

The economic loss doctrine is a legal principle that has confused and frustrated subrogation practitioners since its inception. Unfortunately, once practitioners understand the basic theory, they realize how frustrating it can be. If there was any doubt about the doctrine’s effect in New York, the Appellate Division put that to rest in a recent ruling on a subrogation case in which it bolstered the economic loss doctrine defense.

In Chubb Lloyds Inc. Co. of Tex. v. Buster & Cogdell Builders, LLC, No. 01-21-00503-CV, 2023 Tex. App. LEXIS 676, the Court of Appeals of Texas, First District (Court of Appeals) considered whether the lower court properly dismissed the plaintiff’s subrogation case by enforcing a subrogation waiver in a construction contract which was not fully executed.  The contract was signed by only one of the two subrogors and was not signed by the defendant general contractor.  The Court of Appeals affirmed the trial court’s decision, holding that despite the lack of signatures, the evidence established mutual assent to the contractual terms by all parties.

The plaintiff’s subrogors, Jeffrey and Mary Meyer (collectively, the Meyers), retained defendant Buster & Codgell Builders (BCB) to expand their residence.  BCB drafted a contract using the American Institute of Architects (AIA) standard form contract for residential construction.  The AIA contract included, by reference, a subrogation waiver that applied to BCB and its subcontractors.  Prior to beginning the work, BCB emailed Jeffrey Meyer a version of the contract that only had one signature block for both Jeffrey and Mary Meyer.  Minutes later, BCB sent a second version of the contract which had a signature line for each of the Meyers.  However, Jeffrey Meyer signed the first version of the contract and emailed it back to BCB.  In the subject line of his email, Mr. Meyers asked that BCB countersign and return the contract.  BCB did not sign and return the contract.Continue Reading

In University of Massachusetts Building Authority v. Adams Plumbing & Heating, Inc., 2023 Mass. App. Unpub. LEXIS 28, 102 Mass. App. Ct. 1107, the Appeals Court of Massachusetts (Appeals Court) considered whether the lower court properly held that the plaintiff’s breach of contract and indemnification claims were time-barred by the statute of repose because they sounded in tort.  The Appeals Court held that while the six-year statute of repose only applies to tort claims, they can also bar claims for breach of contract and indemnification if they sound in tort.  The Appeals Court affirmed the lower court’s ruling, finding that the plaintiff’s breach of contract and indemnification claims were just negligence claims disguised as non-tort claims.

In 2013 and 2014, the University of Massachusetts (UMass) retained various contractors to renovate the dining hall for one of its campus buildings, which included the installation of new ductwork for the kitchen’s exhaust system.  The dining hall opened for service in September 2014.  In the Spring of 2018, it was discovered that the ductwork for the kitchen had collapsed.  Further investigation revealed other deficiencies with the exhaust system.  On December 1, 2020, UMass filed a lawsuit against various contractors, asserting negligence, breach of contract, and indemnification. The breach of contract claims alleged breach of express warranties.Continue Reading