Insurance law attorney Jared Stolz comments on ACE American Ins. Co. v American Medical Plumbing

FLEMINGTON, N.J. - April 17, 2019 - PRLog -- In a new article, Attorney Jared Stolz comments on a case dealing with waiver of subrogation provisions in a widely used form construction contract. The complete article will be available on Mr. Stolz' blog at https://jaredstolz.law.blog/

"ACE's insured, Equinox Development Corporation (Equinox Development), contracted in March 2012 with Grace Construction Management Company, LLC (Grace Construction), to build the 'core and shell' of a new health club in Summit. American was a plumbing subcontractor. Sometime in April 2013, after the work under the contract was completed, a water main failed and flooded the health club."

At the time of the water main failure, Equinox and its subsidiaries were covered by ACE's insurance policy.  Thus, ACE paid out almost $1.2 million for the damages covered by the policy. "ACE eventually filed suit against American, claiming it was at fault for the water-main break and seeking recovery of its payments to Equinox. American promptly answered, invoking [the form construction contract] A201's subrogation-waiver provisions.  Soon thereafter, American filed its motion for summary judgment, which the trial court granted, relying mainly on an unpublished federal district court opinion."

The court first noted that "in broad terms, A201 requires the owner and contractor to procure, respectively, property and liability insurance; and requires the owner and contractor and its subcontractors (and sub-subcontractors, agents and employees) to waive all rights against each other for damages covered by the required property insurance policy."

On appeal, ACE laid out several arguments for why its claim was not barred by the subrogation waiver.  First, "ACE contends that the subrogation waiver under section 11.3.7 has a spatial limit, applying only to claims for damage to the Work itself but not adjacent property, as well as a temporal limit, applying only to claims arising before construction is complete. Since the bulk of the water damage affected not the health club's 'core and shell' but its internal construction and furnishings, and since the claim here arose after the Work was completed, ACE concludes that section 11.3.7 does not restrict it from suing American."  Second, even with respect to subrogation waiver that applies to post-completion insurance, "ACE contends that its insurance policy was not 'other than' a policy that insured the Project during construction."

The court rejected ACE's argument, explaining that "the waiver applies 'f during the Project construction period the Owner insures properties, real or personal or both, at or adjacent to the site by property insurance under policies separate from those insuring the Project.' The waiver also applies 'if after final payment, property insurance is to be provided on the completed Project through a policy or policies other than those insuring the Project during the construction period.'"  Thus, the court concluded, that ACE's policy was subject to the subrogation waiver in the form contract.  The case is ACE American Insurance Co. v. American Medical Plumbing, Inc., Docket No. A-5395-16T4.

*** Jared Elliott Stolz is an attorney in New Jersey, focusing on insurance law and litigation. He is the managing partner of Stolz and Associates.

Blog: https://jaredstolz.law.blog/
News: https://hype.news/jared-stolz-esq