Waiver of Subrogation: Ace American Ins. v. American Medical Plumbing Inc.

Appellate Court determines that waiver-of-subrogation extends to damage outside a project area. ACE American’s insured contracted for improvements to a Health Club. After the work was completed a water main flooded the building. ACE provided the insured with blanket all-risk insurance with the right to subrogate to the extent of such payments made under the policy.

ACE filed suit against American Medical Plumbing, a subcontractor, to recoup the $1.2M in insurance payments. Only some of the payments were for repairs to the structure for which the plumber had been responsible in the contract; the rest was for damage to internal construction, furnishings, and equipment. ACE argued the waiver applied only to the damage relating to the work itself and not to any adjacent property. The court disagreed citing to a section of the contract which specifically extended the subrogation waiver to insurance policies covering adjacent property. This provision was interpreted with another that waived all rights against subcontractors for damage covered by the insurance. The all-risk policy at issue was interpreted to fall within both categories of coverage.