Saturday, May 17, 2008

Nebraska Supreme Court upholds subrogation waiver clause between owner and contractor when a television tower under construction collapsed, also the contractor was liable for damage the construction work and other property to the subrogated insurance company, even when the subrogated insurance company complained that gross negligence caused the accident. Lexington Ins. Co. v. Entrex Comm. Servs., S-06-1452, 275 Neb. 702 "the danger with exculpatory clauses is that a party injured by another’s gross negligence will be unable to recover its losses. But such danger is not present in cases involving waivers of subrogation because the waiver only applies to losses covered by insurance, so “there is no risk that an injured party will be left uncompensated.”..Waivers of subrogation serve in avoiding disruption of construction projects and reducing litigation among parties to complicated construction contracts. Concluding that waivers of subrogation cannot be enforced against gross negligence claims would undermine this underlying policy by encouraging costly litigation to contest whether a party’s conduct was grossly negligent. Therefore, we conclude that “public policy favors enforcement of waivers of subrogation even in the face of gross negligence [claims]..the majority approach furthers the policy underlying the use of waiver of subrogation clauses in construction contracts. That court explained that a waiver of subrogation is useful in construction contracts because it avoids disrupting the project and eliminates the need for lawsuits.37 The majority approach furthers this purpose. Applying the waiver to all losses covered by the owner’s property insurance policy eliminates litigation over liability issues and whether the claimed loss was damage to the Work or non-Work property."

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