On May 26, 2020, the Court of Appeals of Maryland (Maryland’s highest court) held that where one of the two parties to an AIA contract sues or settles with a third party, the AIA contract’s mutual waiver of subrogation precludes that third party from claiming a right of contribution against the other contracting party. See Gables Construction, Inc. v. Red Coats, Inc. et al., No. 397964-V, 2020 WL 2731087 (Court of Appeals (Md.) May 26, 2020). The appellate court reversed the lower court’s decision, on which we previously reported last year. See our blog post here.
In the case, construction project owner Upper Rock II, LLC (“Upper Rock”) entered into a 2007 AIA standard construction contract, consisting of the AIA A102 and A201 forms, with general contractor Gables Construction, Inc. (“GCI”). The contract contained the AIA’s waiver of subrogation clauses, resulting in the waiver of all fire-related claims between the two parties.
After a fire damaged a near-completed apartment building, Upper Rock sued the firm that had provided security and fire watch services, Red Coats, Inc. (“Red Coats"), alleging gross negligence. Upper Rock and Red Coats subsequently settled, and Red Coats filed a third-party claim against GCI, alleging negligence and seeking contribution under Maryland Uniform Contribution Among Joint Tort-Feasors Act (the “UCATA”).
The UCATA provides for the right of contribution among “joint tortfeasors,” defined as two or more persons jointly or severally “liable in tort” for the same injury to person or property. Here, Red Coats argued that it was entitled to contribution from GCI because Red Coats and GCI were both liable to Upper Rock for the fire damages. The Court of Appeals held the claims against GCI should be dismissed because GCI only could be liable for contribution as a joint tortfeasor under the UCATA if it could be liable to Upper Rock, and the waiver of subrogation provision prevented GCI from being liable to Upper Rock. This case serves as a reminder to contractors, owners, and third parties negotiating construction contracts to carefully consider the implications of its insurance provisions, including waiver of subrogation clauses.
