Michigan Court of Appeal – Waiver of Subrogation Clause Does Not Preclude Gross Negligence Claims

waiver.1In a Per Curium unpublished opinion dated August 9, 2016, an intermediate appellate court in Michigan overruled a trial judge’s grant of summary judgment based on a waiver of subrogation but affirmed the ruling that the plaintiff had not plead sufficient facts of gross negligence to state a claim. The subrogated claim involved an alleged failure of a dry pipe sprinkler system. The general contractor and a subcontractor moved for summary judgement based on a standard waiver of subrogation provision in the form contract. The plaintiff agreed the ordinary negligence claims were barred but public policy precluded exculpating oneself from gross negligence and opposed the motion. The trial court granted summary judgement on the grounds that it failed to state a claim for gross negligence and the claim for gross negligence was barred by the statute of limitations. The trial court specifically did not address whether the waiver of subrogation clause barred the claim for gross negligence.

On reconsideration, the court reversed its ruling on the statute of limitations issue and also held that the waiver did bar claims for gross negligence. The plaintiff appealed.

The court of appeals held that the trial court erred in dismissing the claim for gross negligence based upon the waiver of subrogation clause citing Michigan law that a party cannot by contract protect oneself from gross negligence or willful and wanton misconduct. In a footnote the court recognized an argument advanced by the defendants that the public policy concerns regarding gross negligence may be weaker or non-existent in a sophisticated commercial setting involving the allocation of the risk of property damage. “Nonetheless, the language of the cited cases is broad, and is not limited to non-commercial settings.” The court concluded by stating it was unnecessary to consider the issue further in light of its affirmance on the ground that plaintiff had failed to state a claim of gross negligence under the facts.

The reasoning in Lexington Ins. Co. v. The Alan Group, No.326921, Mich. App.; 2016 Mich. App. LEXIS 1486 can be helpful for subrogating carriers in cases in Michigan involving waivers of subrogation if the facts support a claim for gross negligence or willful and wanton conduct. Since the decision is unpublished, court rules may limit its precedential value.

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