Chapter 17 - § 17.11 • INSURANCE ISSUES

• Jurisdiction: Colorado

§ 17.11 • INSURANCE ISSUES

§ 17.11.1-Subrogation

Town of Silverton v. Phoenix Heat Source Systems, Inc.⁷³ is instructive as to some of the complex issues regarding subrogation. The Town of Silverton hired Phoenix Heat Source System to install a new roof with a snow-melting system on the town hall. The dispute arose out of a fire at the town hall 18 months after completion of the roof. Silverton blamed Phoenix for all damages relating to the fire. Silverton's insurer, the Colorado Intergovernmental Risk Sharing Agency, compensated Silverton and reserved from Silverton its right of subrogation for benefits paid due to the fire. The issue was whether Silverton contractually waived its right to subrogate the claim.

AIA Document A201-1987, § 11.3.5 states,

[I]f after final payment property insurance is to be provided on the completed Project through a policy or policies other than those insuring the Project during the construction period, the Owner shall waive all rights in accordance with the terms of Subparagraph 11.3.7 for damages caused by fire or other perils covered by this separate property insurance. . . .

Section 11.3.7 states,

The Owner and Contractor waive all rights against (1) each other and any of their subcontractors, sub-subcontractors, agents and employees, each of the other, and (2) the Architect, Architect's consultants . . . for damages caused by fire or other perils to the extent covered by property insurance obtained pursuant to this Paragraph 11.3 or other property insurance applicable to the Work . . . . A waiver of subrogation shall be effective . . . whether or not the person or entity had an insurable interest in the property damaged.

It was determined in Town of Silverton that the subrogation clause applied not only to negligence and breach of contract claims, but also to products liability and breach of warranty claims.⁷⁴ Further, "the phrase, 'other property insurance applicable to the Work,' referred to any property insurance applicable to the work other than that procured under paragraph 11.3.1" and not just builders risk insurance.⁷⁵ Under those provisions, the waiver of subrogation in § 11.3.7 had been limited to the value of "the work" (a new roof)...