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J. Kent Holland, J.D.
ConstructionRisk, LLC

A tire company entered into a lease of land on which to construct a distribution facility. The lease agreement provided that the Owner would lease the land, and would construct the building, with a requirement that the tenant (Tire Rack) obtain property insurance as well as insurance covering the tenant’s work, furniture, fixtures, furniture, machinery, equipment and stock and other personal property used in its business. A waiver of subrogation clause required waiver of rights against the contractors for damage to property. Two years after construction was completed, the roof of the distribution center collapsed, causing substantial damage to Tire Rack. After paying $2.5 million on Tires Rack’s insurance claim, its insurance carrier filed suit against the contractor to recover that amount. In granting the contractor’s motion for summary judgment to enforce the waiver of subrogation, the court found that the lease agreement clearly defined the rights and responsibilities of the parties and that the contractor was an intended beneficiary of the subrogation waiver. In reaching that decision, the court rejected the carrier’s argument that the waiver was unenforceable because it had not consented to the waiver. Affiliated FM Insurance Co. v. Slack, et al., 2015 WL 5023089 (Louisiana 2015).

 

About the author: Article written by J. Kent Holland, Jr., a construction lawyer located in Tysons Corner, Virginia,  with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners.  He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects.  He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk.com Report, Vol. 18, No. 4 (April 2016).

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