A recent Oregon Supreme Court decision has lessened the load on subrogation attorneys fighting against restrictive subrogation waivers. In Certain Underwriters v. TNA NA Manufacturing, an insured buyer of food processing equipment brought claims against the seller of equipment after facing significant losses due to a product recall. See Certain Underwriters at Lloyd’s London v. TNA NA Mfg., Inc., 372 Or. 64, 66 (2024). The Supreme Court determined both the trial court and Court of Appeals erred in granting summary judgment based on a waiver in the $32,000 purchase contract that waived all tort liability (including the subject $20 million subrogation claim).
In reaching its decision, the Oregon Supreme Court emphasized waivers should only be enforced if clear and unequivocal language is used to avoid the inequitable result of immunizing another party from the consequences of their own negligence. Id. at 73. This heavy burden is intentionally restrictive to make it “crystal clear” the releasing party has absolved the other of any negligent actions or product defects. Id. The Court emphasized the public policy importance of deterring negligent conduct. Id. at 72. This deterrence outweighs the general freedom to contract. Id. Moving forward, arguments that seek to infer an express waiver through interpretation or implication will be unlikely to succeed. Id. at 77.
While most would view this landmark decision as a cautionary tale, subrogation lawyers nationwide will be delighted to see this high bar for enforcement of tort liability waivers. The goal of a subrogation waiver is to preserve the relationship between two contracting parties and avoid costly litigation. However, this protection comes at the expense of an insurance company who has drafted the policy. A subrogation waiver essentially alters the rights of a third party who has an interest in the outcome of a potential dispute. While this decision does not prohibit waivers per se, it is a move in the right direction. The subrogation community can only hope this powerful language is adopted by more states moving forward.
