Twenty-One Floors of Wet -- New York Supreme Dismisses Subrogation Action Based on Anti-Subrogation Rule

BUILDER'S RISK – SUBROGATION – ANTISUBROGATION RULE – INSURABLE INTEREST
St. Paul Fire & Mar. Ins. Co. v. FD Sprinkler, Inc.
(Sup. Ct., New York Co., decided 8/31/2009)

St. Paul issued a builders risk policy to Chelsea 27th Streets Apartments, LLC for construction at 800 Sixth Avenue, New York, New York.  Subcontractors FD Sprinkler, Inc. and Woodworks Construction Company were named as additional insureds on that policy by the following provision:

All subcontractors as Additional Insureds, ATIMA. St. Paul does not waive its rights of subrogation. The insured is not permitted to release from liability any such subcontractor after a loss.

ATIMA is an underwriting acronym meaning "as their interests may appear". 

On December 24, 2003, a sprinkler head on the 21st floor accidently discharged, causing extensive water damage all all the way down to the lobby.  The door to a temporary bathroom had swung open and struck the sprinkler head, causing it to discharge.  FD Sprinkler has installed the sprinkler head, and Woodworks had framed and constructed the temporary bathroom.  St. Paul paid Chelsea $714,438 for the damages and commenced this subrogation action against FD Sprinkler, Woodworks and others to recover its payment.

FD Sprinkler and Woodworks moved for summary judgment dismissing the complaint on the ground that the antisubrogation rule barred St. Paul's action against them.   St. Paul opposed the motion by arguing that although FD Sprinkler and Woodworks were additional insureds on the policy, they were not insureds for the damages at issue, and therefore, were not protected by the antisubrogation rule. St. Paul asserted that these subcontractors enjoyed only limited property insurance protection under the policy, in that they were only covered for property damage "ATIMA", or to the extent of their respective financial interests in the insured property.

In GRANTING FD Sprinkler's and Woodworks' motions, New York County Supreme Court Justice Doris Ling-Cohan ruled that each had an insurable interest in the damaged property, and thus were insured under Chelsea's builder's risk policy with St. Paul because their trade subcontracts provided that “[a]ny Work performed by others that is damaged by this Subcontractor or its employees or agents shall be the sole responsibility of this Subcontractor to replace at no additional cost[.]”  Based on this finding, the court held that the antisubrogation rule applied to preclude this action against FD Sprinkler and Woodworks.