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Mintzer Sarowitz Zeris Ledva & Meyers, LLP Property Damage Group Secures Dismissal of Ten Million Dollar Claim on Waiver of Subrogation

Recently, our property damage group was retained to represent a roofing contractor for a fire that caused ten million dollars to a warehouse under construction.  The fire had its inception on the roof during the application of the roofing membrane.  The contractor had subcontracted all the work, but retained control of selling all materials for the project as is their standard operating procedure.  Unfortunately, the subcontractor had a substandard insurance policy with multiple exclusions. 

Within two weeks of inspecting the property, we prepared a Complaint to be filed in Federal Court to seek a declaratory judgment that the waiver of subrogation was valid and there were no claims that could be presented against the client.  Subrogation counsel was arguing that gross negligence would negate the defense of waiver of subrogation, which is, unfortunately for them, not the law in Pennsylvania.  The purpose of this aggressive approach was two fold:

  1. Avoid a liberal state court jurisdiction; and
  2. Limit the issue to the contractual defense rather than litigate the negligence claim and be forced, as is typical, to mediation.

We presented our Complaint to subrogation counsel who had refused to waive the claim.  We presented them with the case law on gross negligence and waiver of subrogation, as well as the Complaint and requested a release from their client.  Counsel balked and we filed our declaratory judgment complaint the following day.

Within a week, counsel returned offering a full release in exchange for dismissal of our declaratory judgment action.  This allowed them to proceed against the subcontractor but provided a full resolution for any subrogation claim that could be brought against our client.

While the insurance carrier was initially concerned and skeptical of such an aggressive move, the logic of putting our best arguments forward immediately before any substantive issues from a negligence action can be addressed is good strategy.  From picking the jurisdiction to framing the issues, we immediately took the upper hand and pushed subrogation counsel to address the biggest weakness in their case.  Too many times, Defendants will sit back and raise these issues in the inevitable subrogation case, only to find a judge who will deny their Motions to Dismiss and/or Summary Judgment hoping to secure a bigger pot of funds to resolve the case.

Waiver of subrogation is a strong tool when used properly and strategically.  Knowing how best to frame the issue and the timeliness of raising the issue leads to winning results.

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