The law firm of Cornell Grace, P.C. often represents owners, developers and prime/general contractors on large construction projects. Such projects are increasingly covered by comprehensive, project specific insurance programs, known as Contractor or Owner Controlled Insurance Programs (“CCIPs” and “OCIPS”). The point of these programs is to consolidate risk and ensure that most if not all incidents at the project are fully covered, regardless of which subcontractor is involved.
Certain subcontractors (e.g. electricians) tend to “opt out” of such programs for various reasons, meaning they decline the CCIP/OCIP coverage and agree to get their own insurance. In such cases, the non-enrolled subcontractor is normally required to add the upstream parties (Owner/Prime Contractor/GC) as additional insureds, and to provide contractual liability coverage to these upstream parties as indemnitees.
In recent years, insurance carriers for non-enrolled contractors have developed a tactic whereby they agree to “take over” the defense of the upstream party as an additional insured or contractual indemnitee, but then, implead other CCIP/OCIP enrolled subcontractors as the purported subrogee of the upstream GC or Owner. The obvious, improper purpose of this tactic is for the carrier to come back against CCIP/OCIP proceeds, thereby sidestepping its own coverage obligations. This is directly against the interest of the Owner/GC, which generally has a large Self Insured Retention/Deductible that it funds in its coverage of all enrolled subcontractors.
Cornell Grace has recently won the dismissal of two such improper subrogation actions against its clients. The Courts in both cases found that the carriers for the non-enrolled subs did not have subrogation rights. The carriers had not paid losses on behalf of the supposed subrogors, and the Courts also noted that subrogation is improper where it is in conflict with the interests of the putative subrogor.
In sum, the Courts in both cases refused to allow the subs’ insurance carriers to misapply the law of subrogation in order to misuse rights of the prime contractor/developer against their own financial interests. The decisions can be found here:
In 2016, Cornell Grace was retained to defend two of its construction clients, an owner and construction manager/general contractor, in a personal injury action brought by the employee of a subcontractor who claimed to have been seriously injured. The worker claimed to have tripped on a piece of electrical wire that appeared to have been […]Learn more
In a case filed in 2011, Plaintiff, a union elevator installation mechanic, claimed he was severely injured when he slipped on oil while unloading a thousand-pound jack from a delivery truck. Among other defendants, Plaintiff sued the elevator company that had loaded the heavy components onto the truck. After fighting for its client for ten […]Learn more
In mid-2021, Cornell Grace, P.C. was retained by a New Jersey-based developer (“Developer”) that had just received a coverage disclaimer from its insurer, a large, well-known general liability carrier. The carrier had been defending Developer for more than two years in a high-value personal injury action arising out of a worksite injury to a subcontractor’s […]Learn more
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Cornell Grace, P.C. is committed to providing clients with the highest quality legal representation while maintaining the hands-on personal service of a boutique law firm. We handle cases vigorously, with painstaking attention to detail at every phase, always working in pursuit of the best resolution for our clients.