The Subrogation Strategist

In Zurich Am. Ins. Co. v. Infrastructure Eng’g. Inc., 2023 Ill. App. LEXIS 383, the insurer, Zurich American Insurance Company (Insurer) proceeded as subrogee of Community College District No. 508 d/b/a City Colleges of Chicago and CMO, a Joint Venture. The Appellate Court of Illinois, First District (Appellate Court) addressed whether Insurer - who issued a builder’s risk policy to insure a building during construction - could subrogate on behalf of the building owner, City Colleges of Chicago (City Colleges), who was part of the joint venture and an additional named insured, but who had not been directly paid for the underlying loss. The Appellate Court determined that the policy language established that the carrier was contractually permitted to subrogate on behalf of all additional named insureds on the policy, including the building owner.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

In subrogation cases where the insured’s damages were caused by a defective product, the fact that the product at issue is or was subject to a recall announced by the Consumer Product Safety Commission (CPSC) may help to establish that the product was defective when it left the manufacturer’s possession and control. On October 26, 2023, the CPSC announced the following recall related to a product that presents a fire hazard:

Kawasaki Motors USA Recalls Engines Used in Lawn and Garden Equipment Due to Fire and Burn Hazards (Recall Alert)

According to the CPSC’s website, “[t]he ... Continue Reading

The discovery rule applies to latent injuries, such that the statute of limitations does not begin to run until the plaintiff knows of or should have known of the injury. In Western World Ins. Group v. KC Welding, LLC, No. 2022-CA-00527-SCT, 2023 Miss. LEXIS 278 (KC Welding), a majority of the justices on the Supreme Court of Mississippi (Supreme Court) affirmed the trial court’s ruling that Western World Insurance Group (Insurer) filed its lawsuit one day late. Thus, the statute of limitations barred Insurer’s lawsuit.

In KC Welding, on July 12, 2018, KC Welding, LLC (KC Welding) sent an employee to Sunbelt Shavings, LLC (Sunbelt) to repair the door of a box containing wood chips. Sunbelt’s employees discovered that KC Welding employees were welding a storage bin that had not been emptied of wood chips and Sunbelt’s employees asked KC Welding’s employees to leave. After that, Sunbelt’s employees attempted to soak the area with water. Later than night, a fire started on Sunbelt’s property, apparently as the result of smoldering wood shavings, a fire that was extinguished on July 13, 2018.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 subrogation cases where the insured’s damages were caused by a defective product, the fact that the product at issue is or was subject to a recall announced by the Consumer Product Safety Commission (CPSC) may help to establish that the product was defective when it left the manufacturer’s possession and control. On October 5, 2023, the CPSC announced the following recall related to a product that presents a fire hazard:

Russound Recalls MCA-88 Multizone Controller Amplifiers Due to Fire Hazard.

According to the CPSC’s website, “[t]he internal circuit board components ... Continue Reading

In April, the Supreme Court sent a list of proposed amendments to Congress that amend the Federal Rules of Evidence. Absent action by Congress, the rules go into effect December 1, 2023.  The proposed amendments affect Rules 106, 615 and, relevant to this article, 702.

Rule 702 addresses testimony by an expert witness. The proposed rule reads as follows (new material is underlined; matters omitted are lined through):

A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if the proponent demonstrates to the court that it is more likely than not that:

(a) the expert’s scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;

(b) the testimony is based on sufficient facts or data;

(c) the testimony is the product of reliable principles and methods; and

(d) the expert has reliably applied expert’s opinion reflects a reliable application of the principles and methods to the facts of the case.Continue Reading

In subrogation cases where the insured’s damages were caused by a defective product, the fact that the product at issue is or was subject to a recall announced by the Consumer Product Safety Commission (CPSC) may help to establish that the product was defective when it left the manufacturer’s possession and control. On September 28, 2023, the CPSC announced the following recall related to a product that presents a fire hazard:

Secura Recalls Air Fryers Due to Fire and Burn Hazards (Recall Alert)

According to the CPSC’s website, “[a] wire connection in the air fryer can ... Continue Reading

In State Farm Fire & Cas. Co. v. Tamagawa, Index No. 510977/2021, 2023 N.Y. Misc. Lexis 5434, the Supreme Court of New York considered whether an insurance carrier can settle its property subrogation lawsuit with the defendant, and discontinue the lawsuit, while the carrier’s insured still had pending claims with the carrier and claims for uninsured losses against the defendant. The court held that the carrier’s claims for the amount paid are divisible and independent of the insured’s claims and that the carrier’s settlement did not affect the insured’s right to sue for any unreimbursed losses. The court’s decision reminds us that, in New York, a carrier can resolve its subrogation claim before the insured is made whole.Continue Reading

The newest episode of the Subro Sessions podcast is out now. This episode is hosted by Katherine Dempsey and Melissa Kenney who are joined by Rachael Klein, Senior Fire Investigator at EFI Global. Rachael discusses what the procedures are for fire investigators when they arrive at a loss site, detailing how she finds the area of origin by identifying fire effects and patterns, preserving the scene and if there is potential for subrogation.

If you want to hear more about relevant subrogation topics, tune in on the third Tuesday of every month for the newest episode of Subro Sessions.

Check ... Continue Reading