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Travelers Property Casualty CO of America insured a school building in Westchester, NY for fire hazard insurance. A fire caused substantial damage and the alarm installer and central station monitoring company were sued for gross negligence, strict product liability, breach of contract and breach of implied warranty. The central station moved to dismiss the complaint relying upon its contractual provisions, including a waiver of subrogation clause. The trial court denied the motion because gross negligence was alleged [the reported decision does not have any facts].
The appellate court reversed and dismissed the complaint, Here is what the appellate court had to say:
"In support of the motion, the alarm monitoring company submitted, among other things, the alarm monitoring service agreement (hereinafter the agreement) between it and the school. Pursuant to paragraph 3 thereof, the school acknowledged and agreed that the alarm monitoring company was not an insurer and that the school was required to obtain insurance covering personal injury, including death, and real or personal property loss or damage in, about or to the premises. Further, pursuant to paragraph 5 thereof, the school released and discharged the alarm monitoring company from and against all hazards covered by insurance. Moreover, the parties to the agreement agreed "THAT NO INSURANCE COMPANY . . . SHALL HAVE . . . ANY RIGHT OF SUBROGATION AGAINST [THE MONITORING] COMPANY" (hereinafter the waiver of subrogation clause). "
The decision continues:
"Contrary to the plaintiff's contention, the waiver of subrogation clause expressly released and discharged the alarm monitoring company from and against all hazards covered by the school's insurance, and barred the plaintiff from seeking, from the monitoring company, the return of any proceeds paid to the school under the subject policy....
In addition, contrary to the plaintiff's contention, "[a] distinction must be drawn between contractual provisions which seek to exempt a party from liability to persons . . . whose property has been damaged and contractual provisions . . . which in effect simply require one of the parties to the contract to provide insurance for all of the parties" ... Thus, while an exculpatory clause in an agreement will not protect a defendant from liability for gross negligence ...a waiver of subrogation clause which releases and discharges an alarm company from and against all hazards covered by insurance clearly precludes an insurer, as subrogee, from seeking return of any proceeds covered by insurance notwithstanding any claim of gross negligence ..."
The appellate court concluded:
"Accordingly, the waiver of subrogation clause at bar conclusively established a defense to the plaintiff insurer's claims against the alarm monitoring company ..."
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Needless to say, the waiver of subrogation clause is one of the more potent provisions in the alarm contract for your protection. Every Standard Form Contract has the waiver of subrogation clause. Be careful about signing your subscriber's contract, or an AIA contract, or one supplied by a general contactor - it won't have the waiver of subrogation in it.