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A monthly publication from the Wisconsin Society of Professional Engineers
August 2008 Edition
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| 3. | Waivers of Subrogation By Attorney Robert J. Kay |
| 4. | Welcome New WSPE Members |
| 5. | WSPE Job Board Update |
WSPE's President's Corner |
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Fellow P.E.s, August is upon us. Where did the summer go? I think as one gains in experience (it used to be called aging, but referring to one’s age is no longer acceptable), the time seems to fly by faster. When you read this message, the 2009 NSPE Conference will have come and gone. I hope some of you were able to attend the Conference. In Wisconsin, we are already in the initial planning stages for the 2009 Discovery Conference and Governor’s New Product Award Dinner. The conference will be hosted by the Fox River Valley Chapter in Green Bay. While the location of the Discovery Conference has not yet been tied down, the GNPA dinner is expected to be held in Lambeau Field. If you have not had the chance to attend an event (other than a football game) at Lambeau Field, it is first class and will be worth your time and effort to attend. Dale Swenson, P.E., will be providing additional information on the event as the year goes on. The Discovery Conference is expected to begin late in the afternoon on April 22, 2009 with the WSPE State Board Meeting and a Past President’s Reception and will conclude on April 23, 2009 with the GNPA Dinner. While the theme for the Discovery Conference has not yet been developed, the Conference Committee is currently looking at a theme that is “energy” related. I guess there is no surprise there with the constant reminder of fuel prices. While we haven’t ruled out any related subject, we hope to find speakers in the area of alternative fuels, energy impacts, global warming, and energy exploration to name a few. If you have any ideas/suggestions or know of any speakers who would fit the theme, give me a call to discuss (920-592-9440). We hope to have selected a final theme by mid-September. The Executive Committee (EC) of the WSPE State Board met on July 16. There are a few items of note to report. First, the EC discussed a proposed 2008-2009 budget. John Parisi, P.E., Board Treasurer, presented a preliminary annual WSPE budget. It is no surprise that the proposed revenue is primarily dependent on member dues and corporate sponsorships. The proposed budget will again exceed $100K. As with many budgets, the anticipated expenses always seem to exceed the available revenue. Second, the EC is currently looking for an individual to fill the position of the Young Engineer Representative on the WSPE State Board. Angela Hanz, P.E., previously filled that role and has since moved to State Board Secretary. If you would like to nominate an individual to fill this position, feel free to contact any member of the WSPE State Board. And one final note, the EC has set the EC and State Board Meetings schedule for the entire year. The meeting dates and times can be found on the WSPE Web site. If you have an item you would like discussed or may even wish to attend any of the meetings, give myself or one of the other Board members a call. The next EC meeting will be held in conjunction with the WSPE annual Leadership Conference on Wednesday, August 20 in Fond du Lac. As usual, feel free to call with questions, concerns, and suggestions. Michael J. Lefebvre, P.E. |
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WSPE Committees: Commit to Serving WSPE Today! |
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| Do you have talents you wish to share with fellow WSPE members? If so, WSPE would like to encourage you to consider joining a committee. You’ll also get a chance to brush up on valuable leadership skills and network with your peers. There are several committees you could join, including: Administration To express interest in joining a committee, contact WSPE Executive Director Nancy Short at (414) 908-4950, x135 or wspe@wspe.org. |
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Waivers of Subrogation |
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| Professional engineers should remember that many standard contracts contain waiver of subrogation clauses. Owners, professional engineers, contractors and subcontractors often pay little attention to such clauses when standard AIA or EJCDC contracts are entered into. Often, they ignore the waiver provisions and do not discuss them with their insurance carriers. However, when a construction site is damaged through fire or explosion, or other calamity, it is not unusual for subrogation issues to arise after insurance carriers pay insureds (whether the insureds be owners, professional engineers, contractors or subcontractors) and wish to pursue subrogation claims against principal wrongdoers. Such waiver of subrogation clauses have long been found in AIA
and EJCDC documents and continue to appear in the latest editions.
For example, AIA Document A201, 2007 edition, contains a waiver
of subrogation provision in paragraph 11.3.7. EJCDC Document C-700,
2007 edition, contains a waiver of subrogation provision in paragraph
5.07. Both of these standard “General Conditions” apply
to contracts between owner and contractor, owner and professional
designer, contractor and subcontractor, and professional designer
and subconsultant. While parties often strike or change standard
provisions, these waiver of subrogation provisions often go unnoticed. In a case decided by the Court of Appeals in February, 2008, Wisconsin State Local Government Property Insurance Fund v. Thomas A. Mason Company, the Court of Appeals held that the state agency created to provide property insurance for local governments had waived its right to subrogation recovery from a subcontractor. The owner of the project, Milwaukee County, hired J.F. Cook Company to renovate the County’s Villa Terrace Museum. The contract adopted an edition of the AIA A201 form, “General Conditions of the Contract for Construction.” Cook hired Mason as a subcontractor to do painting work and the subcontract was also an edition of AIA “Standard Form of Agreement Between Contractor and Subcontractor.” Each of these standard AIA contracts contained a waiver of subrogation provision. Under its agreement with Cook, the County was required to get a builder’s all-risk policy and the County obtained its insurance from the state agency created to provide property insurance to local governments, the Wisconsin State Local Government Property Insurance Fund. The Fund paid Milwaukee County for the fire loss and asserted a subrogation claim against the subcontractor and its insurer for the fire damage caused by the subcontractor employee. The circuit court dismissed the subrogation claim and on appeal the Fund contended that the circuit court had erred in determining that the Fund’s subrogation claims against the subcontractor were effectively waived by the Fund’s insured, Milwaukee County, and that the County’s waiver was co-extensive with the insured loss. The subcontract between Cook and Mason required Mason to get insurance
in connection with the project and had a waiver of rights and waiver
of subrogation clause almost identical to the one in the contract
between the County and Cook. The Fund’s insurance contract
with the County specifically recognized the County’s right
to waive the Fund’s subrogation right for any loss it paid.
The Fund contended, however, that under the statutes the Fund had
a right to recover by subrogation and could not lose such a right
because its insured waived any right of recovery it would otherwise
have, citing § 605.24(3) of the Wisconsin Statutes. The Court of Appeals recognized that under ordinary subrogation principles, an insurer is subrogated to the rights of its insured against third parties when the insurer pays its insured for damages inflicted on the insured by third parties. However, the Court observed that there is nothing in the statutes that would prohibit the Fund from voluntarily contracting away its right to pursue third parties for recovery of its insurance benefits paid to its insured. The Court concluded that the Fund must have been aware of the statutes and presumably set its premiums charged to the County based on the risk that it was assuming, including the clause in the standard construction contracts granting the authority to extinguish the Fund’s subrogation rights. The Court found no reason why the Fund could not make the informed decision to waive its rights of subrogation. Whether using standard agreements of AIA or EJCDC, or in-house or third-party contracts, professional engineers should continually review the insurance provisions with their insurance carriers. The absence of a waiver of subrogation clause could subject a professional engineering firm to damages which otherwise could have been avoided when the complex issues surrounding a significant property loss on a construction site occurs. If waiver of subrogation clauses are found in construction contracts between contractor and subcontractor, but not in the design contract between owner and professional designer, it substantially increases the exposure of the professional designer to a subrogation claim, even when there is adequate insurance to cover the entire loss. Insurers are expected to pursue subrogation claims when their rights to do so have not been limited or extinguished by contract. Attorney Robert J. Kay is the senior partner in the law firm of Kay & Andersen, S.C. and devotes his time to representing professional engineers, architects, contractors, material suppliers and owners of construction projects. Please feel free to contact him at (608) 833-0077 or visit www.kayandandersen.com. |
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Welcome New WSPE Members |
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The WSPE board of directors would like to extend a heartfelt welcome to the following new WSPE members:
New members contribute to the growth, strength and leadership of the WSPE in enhancing its recognition as a leading voice for Professional Engineers throughout Wisconsin and promoting excellence in engineering. |
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WSPE Job Board Update |
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The following positions have recently been added
to the WSPE Job Board: |
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