Waiver of Subrogation Only Applies to Those Insured

Creative Argument Against Negligence Action Fails

On February 1, 2014, a seven alarm fire caused catastrophic damage to a seven story condominium complex with thirty-one commercial and residential units at 31 Massachusetts Avenue in Boston. The plaintiffs, who own apartments within the complex, allege that defendant Anthony Siracusa started that fire. A Boston Fire Department investigation allegedly determined that the fire originated in Mr. Siragusa’s condo after he left a smoldering marijuana glass pipe next to an open window, newspaper clippings and a cloth couch.

Siragusa defended the negligence action claiming that by agreeing to obtain insurance on their own units and promising to cause their insurers to waive the right of subrogation against other unit owners. The plaintiffs, however, sued Siragusa in their individual capacities since they failed to purchase unit owner insurance. Basically Siragusa sought summary judgment because the stupidity of the plaintiffs for not buying insurance caused them to waive their right to sue him.

DISCUSSION

Plaintiffs, as individual unit owners, were either required or strongly encouraged to buy insurance against personal property damage and other losses and that such insurance, had it been obtained, would have waived subrogation rights against co-tenants of the condominium complex. Specifically, he points to the Insurance Resolution (paragraph 6), which states: “Each Unit Owner is solely responsible to obtain his or her own insurance coverage in appropriate kinds and amounts to insure his or her unit, personal effects and contents, unit improvements and coverage for the Condominim Trust’s deductible as well as insuring for liability and all such other coverages which said Unit Owner desires.”

The defendant interprets this passage to indicate that each unit owner was required to individually insure their unit. He reads it in combination with section 5.13 of the condominium trust agreement, which provides that any insurance obtained by unit owners must waive the right of subrogation against “[u]nit [o]wners.”

Massachusetts courts interpret unambiguous contracts according to their plain meaning, with terms construed in their usual and ordinary sense. Mr. Siracusa is correct to the extent that that a plain reading of the Insurance Resolution is a message to all unit owners that if they do not insure their personal property and other potential individual losses related to their own unit, they do so at their own peril. The Plaintiffs failure to follow the recommendation and buy insurance – although unwise – does not deprive them of the right to sue a tortfeasor who they claimed caused them property damage.

Siragusa’s interpretation does not foreclose the plaintiffs’ claims as a matter of law. Though they took a risk in not obtaining insurance, they are nonetheless still able to pursue compensation from the defendant for their financial losses caused by his alleged negligence.

There is no basis to conclude that the requirement to waive subrogation if insurance is procured necessarily precludes unit owners from suing each other if individual losses are incurred, but not covered by insurance. No language in the Insurance Resolution, the condominium trust agreement, or in the Massachusetts law governing condominium arrangements indicates otherwise. The defendant likewise cannot point to any Massachusetts appellate decision that disallows condominium unit owners from suing each other in the particular circumstances presented here.

Subrogation is only available to a person, or insurance company, that pays the debt or obligation of another. It is a right often waived by insurance companies who receive sufficient premium to cover the additional risks. An agreement to waive subrogation, however, is not an agreement to waive the negligence of third parties who cause damage.

The Defendant’s Motion for Summary Judgment—Emotional Distress and Related Claims

One purpose of summary judgment is to avoid the expense and delay of further proceedings by the filing of claims that lack supporting evidence to an early conclusion. Mr. Siracusa argues that the plaintiffs have put forth no evidence supporting their claims as to emotional distress. In the face of such assertions, the plaintiffs cannot rest on mere allegations in their pleadings.

After reviewing the summary judgment record, the Court found no evidentiary bases supporting the plaintiffs’ claims to emotional damages.

The Plaintiffs’ Cross–Motion for Costs

The plaintiffs argue that the defendant’s motion for summary judgment was frivolous and triggers their right to attorney’s fees and costs. The Court disagreed since it granted par of the motion there was no question that Mr. Siracusa’s motion was not unsubstantiated, frivolous, or demonstrative of bad faith to the level requiring discipline.

For the foregoing reasons, the Court ordered:

The defendant Anthony Siracusa’s motion for summary judgment on Count I of plaintiffs Dan Koch and Christina Montalvo’s Fifth Amended Complaint be DENIED, except as to any claim for damages relating to emotional distress;

The defendant Anthony Siracusa’s motion for summary judgment on Count I of plaintiffs David Romano et al’s First Amended Complaint be DENIED;

The defendant Anthony Siracusa’s motion for summary judgment on Count II of plaintiff David Romano et al’s First Amended Complaint be ALLOWED; and

The plaintiffs’ cross-motion for attorney’s fees and costs be DENIED.

ZALMA OPINION

Since this motion was made against the plaintiffs’ Fifth Amended Complaint it is obvious that they had difficulty asserting a viable claim against Siragusa. His negligence, if proved, will result in an award for the plaintiffs property damages and their alleged emotional distress will not be tried. The contract, as written was enforced.The insurers who paid for the insured unit owners do not have the right to sue Siragusa because they waived subrogation.

ZALMA-INS-CONSULT                      © 2016 – Barry Zalma

Barry Zalma, Esq., CFE, practiced law in California for more than 43 years as an insurance coverage and claims handling lawyer.  He now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes.

He founded Zalma Insurance Consultants in 2001 and serves as its only consultant.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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