In QBE Insurance Corporation v. Jorda Enterprises, Judge Alan Gold of the U.S. District Court for the Southern District of Florida granted summary judgment to HVAC subcontractor Jorda Enterprises Inc., who was insured by The Hartford Insurance Company, in an equitable subrogation action. Insurer QBE sought from Jorda and the Hartford more than $3 million in damages relating to a pipe burst at a luxury condominium building located in Miami, Fla., which coincided with Hurricane Katrina in 2005. (The Hartford and Jorda Enterprises are being represented in the case by Duane Morris Trial Practice Group attorneys Steven Ginsburg and Antony Sanacory of the firm's Atlanta office and Warren Zaffuto of the firm's Miami office.)
The district court found for Jorda on each of three alternative theories: that there was no valid release from the condominium association which permitted the subrogation claim to be brought, the condominium association previously released Jorda in earlier construction litigation when the subrogation claim had not been perfected by payment, and the subrogation claim was barred by res judicata.
The court noted a complete absence of evidence to support several of the factual claims and arguments brought by the plaintiff. It found that the Florida law was clear and that an equitable subrogation claim would work an injustice on Jorda, which made repairs to the property and agreed to forego attorneys' fees and costs in the earlier construction action. The court also found that Jorda raised sufficient grounds to warrant further investigation on whether Rule 11 and § 1927 sanctions are appropriate.
This recent decision appears to provide valuable guidance for insurance companies that are involved in disputes with their insured during the investigation and claims adjustment and payment processes and who therefore must preserve their rights to subrogation, which rights will not be perfected until the claim is fully and finally settled.
Among the lessons to be learned from this case are that insurance companies may want to take early control of evidence and its preservation and later secure all additional evidence at the time of final payment to the insured; properly educate and prepare a representative who can later provide binding testimony for the insurer or secure the cooperation of the insured to do so before paying the claim to insure continued cooperation after final payment has been made; and consider, if not rule out, all potentially contributing causes and responsible parties, so that limitations periods do not later bar sources of recovery. This case also highlights the potential perils of an insured who seeks remedies against third parties and its insurer not participating or controlling parallel litigation so as to prevent later preclusion of recovery opportunities.