A recent federal case provided an excellent example that not all supposed waivers of subrogation are, in fact, waivers. In National Surety Corp., et al. v. Bozeman, 2022 WL 953053, No. 1:20-cv-01187-WJM-GPG (D. Colo. March 30, 2022), National Surety filed a subrogation action alleging the defendant – the owner of the unit where the fire originated – was liable for damages caused by the fire’s spread to the common elements of the condominium building. National Surety insured the condominium association (the “Association”). The parties agreed that an Association declaration providing that the Association’s board of directors would obtain insurance for the condominium building and common improvements applied to the Association and the individual unit owners. The declaration additionally stated, “[t]he Board of Directors shall make every reasonable effort to obtain policies…containing the following…the insurer waives its right of subrogation as to any claim against each unit owner.” (emphasis added). The board of directors for the Association obtained insurance from National Security that actually affirmed the carrier’s right of subrogation and did not include any waiver against the Association’s unit owners.
The defendant moved for summary judgment, arguing the declaration’s language – requiring the board of directors to “make every reasonable effort” to obtain waivers of subrogation against unit owners – constituted a waiver of subrogation. It relied on a prior case, Universal North Amer. Ins. Co. v. Bridgepointe Condominium Association, Inc., 195 A.3d 543 (N.J. Super. Ct. 2018), in which a court found the carrier’s right of subrogation was effectively waived by the condominium association’s by-laws, which stated its insurance policies “shall contain waivers of subrogation.”
The National Indemnity court denied the defendant’s motion. The court distinguished the declaration’s language from the by-laws in the Universal case because the former only required to board of directors to make reasonable efforts rather than mandating it to obtain a waiver of subrogation. The court held that the declaration’s language did not constitute a waiver under Colorado law because it did not clearly manifest the intention to relinquish a right.
In summary, agreements to provide for waivers of subrogation must clearly manifest the intention to relinquish the right. Simply agreeing to make reasonable efforts to do so is insufficient. This case highlights the importance of closely analyzing the language of a purported waiver of subrogation to determine if it is an enforceable waiver. Failure to do so may result in failing to pursue an otherwise recoverable subrogation claim.
