Continental Insurance v. Faron Engraving Co.

This is a subrogation action brought by plaintiff-respondent Continental Insurance Company to recover for water damages sustained by its insured, plaintiff-respondent Buda Graphics, Ltd., a subtenant in a building owned and managed by appellants. The sublease incorporated by reference the provisions of the lease. Paragraph 9 thereof contains a subrogation waiver provision which covers contingencies associated with the partial or total destruction of the demised premises. Paragraph 8 holds the owner responsible for its own negligence resulting in damage to a tenant’s property and contains no waiver of subrogation clause. Appellants moved to dismiss the complaint based upon the waiver of subrogation clause contained in paragraph 9 of the lease. Noting that the complaint alleged that the goods were damaged as a result of appellants’ negligence, the court found that the action was not governed by the provisions of paragraph 9, but rather by paragraph 8.

While parties to an agreement may waive their insurer’s right of subrogation (Board of Educ. v Valden Assocs., 46 NY2d 653, 656), a waiver of a subrogation clause cannot be enforced beyond the scope of the specified context in which it appears (see, S.S.D. W. Co. v Brisk Waterproofing Co., 76 NY2d 228). Here, the paragraph containing the waiver of subrogation applied only to destruction of the demised premises which rendered the premises unusable, and no such claim was here made. In construing the terms of the written contract, the court must accord a fair and reasonable meaning to its words (Sutton v East Riv. Sav. Bank, 55 NY2d 550, 555). Here, it is plain that the waiver of subrogation did not apply to this action involving damage to the authorized tenant’s property caused by negligence of the owner. Concur — Ellerin, J. P., Kupferman, Ross and Smith, JJ.