Waiver of Subrogation Clause in Contract Upheld

Many construction contracts contain waiver of subrogation clauses.  Where a property owner agrees to such a clause, that owner's insurer cannot seek reimbursement from the contractor for any payment made to the property owner, even if the claim was caused by the fault of the contractor.  This was the situation in an unpublished Appellate Division case entitled National Fire Ins. Co. of Hartford, et. al. v. Cintas Fire Protection Inc.   There, the sprinkler contractor's faulty work resulted in National Fire having to pay a claim for $1,500,000 in damages to the property, and National Fire sought to be reimbursed from Cintas Fire Protection for such payments.  However, Cintas was victorious at both the trial and appellate levels in arguing that the waiver of subrogation clause in its contract was enforceable and insulated them from any subrogation claims.

Although Ohio law governed in this New Jersey court case, the court found that that both New Jersey and Ohio law were in agreement on the issue.  In so doing, the court held that waiver-of-subrogation provisions were, in fact, valid under New Jersey law.  Further, even if the contract in question could be characterized as one of adhesion, the contract was not unconscionable and the waiver of subgrogation provision was enforceable.  Consequently, despite performing faulty work, the fire sprinkler contractor was not responsible for paying for any of the damages caused by its negligence.  (Nation Fire Ins. Co. of Hartford, et. al. v. Cintas Fire Protection, Inc.)