The Subrogation Strategist

In United States Automatic Sprinkler Corporation v. Erie Insurance Exchange, et al., No. 2SS-CT-264, 2023 Ind. LEXIS 105, the Supreme Court of Indiana (Supreme Court) reversed an order of the trial court that denied a motion for summary judgment filed by a sprinkler contractor. At issue was whether commercial tenants – one who contracted with the sprinkler contractor and others who did not – could recover for their respective property damages. The court held that under the contract’s subrogation waiver and agreement to insure, the contracting tenant waived its insurer’s rights to recover through subrogation. With respect to the non-contracting tenants, who sought to recover only property damages, the court held that the absence of contractual privity barred their recovery.

The case centered around a sprinkler system that malfunctioned and flooded the Sycamore Springs Office Complex (Landlord), causing extensive property damage to four commercial tenants. Surgery Center, one of the four tenants, requested permission from the Landlord to install a sprinkler system inside the building. Landlord agreed, in exchange for Surgery Center agreeing to be solely responsible for maintaining the sprinkler system. Surgery Center hired United States Automatic Sprinkler (Automatic Sprinkler) to both install and conduct periodic inspection and testing of the sprinkler system. The contract terms outlined the scope of work to be performed by Automatic Sprinkler and the work was limited to the inspection and testing of the sprinkler system. Although repairs and emergency services were excluded from the contract, each could be performed upon the request and authorization of Surgery Center for an additional cost. The contract also contained certain risk allocation provisions including a waiver of subrogation and an agreement to insure.Continue Reading

Many courts enforce forum selection clauses in contracts between parties. In W. Bay Plaza Condo. Ass’n v. Sika Corp., No. 3D21-1834, 2022 Fla. App. LEXIS 1637 (W. Bay Plaza), the Court of Appeal of Florida, Third District (Court of Appeal) answered the question of whether a mandatory forum selection clause in a manufacturer’s warranty was enforceable as to a condominium association, who was a non-signatory. The trial court enforced the forum selection clause – calling for litigation in New Jersey rather than Florida – and the Court of Appeal affirmed the ruling.Continue Reading

In United States Automatic Sprinkler Corp. v. Erie Ins. Exch., et al., No. 21A-CT-580, 2022 Ind. App. LEXIS 87 (Automatic Sprinkler), the Court of Appeals of Indiana (Court of Appeals) considered whether there is a privity requirement for property damage claims against contractors. The court imposed a privity requirement. The court also addressed whether a subrogation waiver in a contract with a tenant applied to damage caused by work done outside the contract, at the landlord’s request. The court held that the waiver did not apply.Continue Reading

The Supreme Court of Utah recently found that an incorrect pre-construction geotechnical engineering report is a “defective design.” Thus, actions arising from an incorrect geotechnical report are appropriately governed by Utah’s Economic Loss Statute (Statute), Utah Code Ann. § 78B-4-513(1).Continue Reading

The implied warranty of habitability allows a homeowner to recover damages for latent defects that interfere with the intended use of a home. In Sienna Court Condo. Ass’n v. Champion Aluminum Corp., 2018 IL 122022, 2018 Ill. LEXIS 1244 (2018), the Supreme Court of Illinois held that buyers of new homes cannot assert claims for breach of the implied warranty of habitability against subcontractors involved in the construction of the homes because the subcontractors have no contractual relationship with the homeowners and the damages are purely economic. As the court explained, the implied warranty of habitability is a creature of contract (not tort) and, therefore, only exists when there is contractual privity between the defendants and the homeowners.Continue Reading

In Forest City Stapleton, Inc. v. Rodgers, 393 P.3d 487 (Colo. 2017), the Supreme Court of Colorado considered whether a home buyer needed privity of contract to pursue an implied warranty of suitability claim against a developer who sold a vacant lot to a professional builder. Finding that that warranty of suitability claims are contractual claims, the court held that the home buyer needed to be in privity of contract with the developer.Continue Reading

In Beaufort Builders, Inc. v. White Plains Church Ministries, Inc., 783 S.E.2d 35 (N.C. Ct. App. 2016), the Court of Appeals of North Carolina addressed whether the economic loss rule barred the negligence claim of White Plains Church Ministries, Inc. (White Plains) against Charles F. Cherry (Cherry), the owner of Beaufort Builders, Inc. (Beaufort Builders). The court held that, because the economic loss rule would bar White Plains’ negligence claims against Beaufort Builders, White Plains could not pursue a third-party negligence claim against Cherry, individually.Continue Reading

In Adams v. Hellings Builders, Inc., 2016 Pa. Super. 192, 2016 Pa. Super. LEXIS 487, Christopher Adams and his wife, Margaret Adams (Plaintiffs), filed suit against Defendant Hellings Builders, Inc. (Hellings) to recover for moisture-related damage to their home caused by Hellings’ allegedly defective installation of stucco. Hellings filed Preliminary Objections, arguing that Plaintiffs failed to state a claim because they were not in privity with Hellings and they had no direct business dealings with Hellings.Continue Reading

In Zbranek Custom Homes, Ltd. v. Joe Allbaugh, et al., No. 03-14-00131-CV, 2015 WL 9436630 (Tex.App.-Austin Dec. 23, 2015), the Court of Appeals of Texas, Austin, considered the circumstances under which a general contractor can be held liable for injuries to a non-contracting party’s property. The court held that, because the general contractor, Zbranek Custom Homes, Ltd. (Zbranek), exercised control over the construction of the fireplace at issue, Zbranek owed a duty of care to the first lessees of the home that Zbranek built.Continue Reading