December 31, 2007 – Construction Law

“Waiver of Subrogation” Clauses Do Not Bar Actions Arising Out of Gross Negligence or Violation of Statute or Regulation

Dec 31 2007

Am. Ins. Co. v. Siena Constr. Co., 2007 WL 4711517 (Mass. Super. Ct. Dec. 24, 2007)

In this case, the Superior Court considered two consolidated cases that both arose out of an explosion of a newly constructed building. In both cases the plaintiffs were insurance companies acting as subrogees. Defendants (general contractors and subcontractors) moved for summary judgment on the ground that recovery was barred by “Waiver of Subrogation” clauses found in the contracts. The plaintiffs argued that the waiver of subrogation clause did not extend to damages caused by a defendant’s gross negligence or its violation of a statute or regulation. In addition, they argued that the subcontractors were not protected by the waiver of subrogation clause.

The original judge in the case held that analogous case law concerning exculpatory clauses supported a denial of defendants’ summary judgment motion. The judge also held that, by its terms, the waiver of subrogation clause did not include subcontractors. In the consolidated case, the new judge accepted the rulings of prior judge and the motions for summary judgment were allowed in part and denied in part. Plaintiffs’ claims were allowed to proceed but as to defendants with valid waiver of subrogation clauses (contractors not subcontractors) recovery was limited to damages arising from defendant’s gross negligence, or negligence premised on a violation of statute or regulation.

Washington Supreme Court Re-Affirms Mike M. Johnson Rules Regarding Waiver of Contractual Claims Provisions

Dec 31 2007

Am. Safety Cas. Ins. Co. v. Olympia, 162 Wash.2d 762, 174 P.3d 54 (2007)

The Washington Supreme Court affirmed summary judgment for the City of Olympia against American Safety Casualty Insurance Company where the contractor (whose rights the surety was pursuing) failed to comply with contractual notice procedures. During construction, the contractor had written letters purporting to reserve its right to bring a claim at a later date. The contractor defaulted, and the surety completed the job. After completion, the surety presented Olympia with a Request for Equitable Adjustment. Though Olympia expressed a willingness to enter into negotiations if the surety provided sufficient supporting documentation, Olympia ultimately rejected the surety’s claim for failing to comply with the contract’s claims provisions. When the surety filed suit, the Thurston County Superior Court granted Olympia summary judgment, which was then overturned by Division Two. Read More

No Need for “Base of Operations” Within Municipality in Order for Contractor to be Subject to Business Privilege Tax

Dec 31 2007

V.L. Rendina, Inc. v. City of Harrisburg, 938 A.2d 988 (Pa. 2007)

In this case, a plurality of the Pennsylvania Supreme Court held that a municipality may apply its business privilege tax to the gross receipts from construction work performed within its borders regardless of whether the contractor maintained a “base of operations” within the municipality. Reversing a Commonwealth Court decision in favor of the construction company, the majority focused on whether the company’s activities in Harrisburg fell within the definitive of “business” contained in the City’s tax ordinance. Read More

Archive:December 31, 2007