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

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.

A separate motion for summary judgment was brought by a subcontractor premised on the fact that its scope of work on the project did not include the room in which the explosion occurred and so it could not be held liable for those damages.  The court found that, while there was some ambiguity in the plans, it was a “stretch” to find that this defendant was negligent when its work did not include the room in question, and therefore allowed summary judgment on those claims.

Finally the plaintiffs brought a separate motion for summary judgment on claims against two defendants based on the fact that the failure of those defendants to properly cap gas turrets into the room in which the explosion occurred in violation of the National Fuel Gas Code (as adopted by the Massachusetts Board of State Examiners of Gas Fitters and Plumbers).  The court denied summary judgment because it there was an exception within the code which may have applied to the installation process, and therefore there was a disputed issue as to the violation of the code.