Tuesday, August 2, 2011

Oregon Statute Limits Contractual Waiver of Subrogation

New law in Oregon would void any provision in a construction contract that waives a party or an insurer's right of subrogation.  The prohibition only applies where subrogation is waived for death, bodily injury, or property damage, and it must be caused in whole, or in part, by the negligence of another person.  Notably, public contracts and proceeds of property policies are excluded from this prohibition.

The waiver of subrogation can be a valuable tool for all parties involved in a construction contract, and it remains to be seen how this provision will affect those parties.  Among other things, waivers of subrogation frequently help parties settle disputes by bringing finality to a settlement, ensuring that no third parties or their insurers will come back to seek further reimbursement for the same loss in the future.  The waiver of subrogation occurs where parties to a contract waive claims against each other, but only to the extent those claims are covered by insurance.  Frequently, a party to a construction contract will also waive claims against an architect, owner, or general contractor, even where those entities are not a party to the agreement.

The benefits of the law are not entirely clear.  Although the bill was initially introduced in a dramatically different form and touted as an equalizer for subcontractors bargaining with powerful general contractors, the final bill underwent numerous revisions and appears to benefit insurance companies most of all.

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