Condominium Carrier's Negligence Claims, Owner's Subro Rights Waiver No Bar.

    Waverly Woods owned a plot of land it wanted developed for condominiums.  Waverly Woods retained Rhodes Development Group as the general contractor for the project.  The owner-contractor construction contract contained a waiver of subrogation against the contractor and all subcontractors for damages caused by fire.

    Waverly Woods formed a condominium association, Park View, sometime after the construction contract was reached.  Waverly Woods turned the condominiums over to Park View, which purchased an unspecified "insurance policy" from Community Association Underwriters of America or "CAUA".

    Then a fire broke out while a drywall contractor was putting up drywall.  Park View made a claim for fire damage to the condominium units.  CAUA paid the claim.  CAUA filed suit, as Park View's subrogee, against the drywall contractor and others it claimed were negligent and caused the fire which caused the damage which caused CAUA to pay Park View's insurance claim.  Community Ass'n Underwriters of Am. v. Rhodes Dev. Grp., 2012 WL 2861272 *1 (3d Cir. July 12, 2012)(Pennsylvania substantive law), Download Community Assn Underwriters of Am. v. Rhodes Dev. Grp. (3d Cir. July 12, 2012) PUBLIC ACCESS.

    The Defendants raised the waiver of subrogation as a defense to CAUA's negligence claim against them.  The District Judge granted their Motion for Summary Judgment on that ground.  On appeal, the Third Circuit reversed.  Under Pennsylvania law, the Third Circuit held, if Park View was an intended third party beneficiary of the construction contract (and two judges were pretty clearly convinced that it was), still Park View and thus its subrogee, CAUA, were not barred from pursuing negligence claims, only claims under the construction contract:

It is established law in this Circuit that “a third party beneficiary will only be bound by the terms of the underlying contract where the claims asserted by that beneficiary arise from its third party beneficiary status.” E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S., 269 F.3d 187, 197 (3d Cir.2001). As a consequence, the waiver of subrogation clause only applies to CAUA (a non-party to the contract) to the extent that it asserts claims arising under that contract.

 

Id. at *2.

 

The decision drew a strong concurrence from Judge Rendell, based on the Restatement of Contracts (Third)'s treatment of intended third party beneficiaries.  The Restatement has been adopted in Pennsylvania.

 

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