Waiver of Subrogation, and responsibility for damage to other units

Started by JenniferG11 • 3 replies • 1095 views

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JenniferG11 (Texas)
Posts: 667

Posted:

My by-laws (COA, Texas) say that we waive our rights to subrogation in favor of all other unit owners and tenants.

So, what this seems to mean to me is that I was 'scared' into paying for my downstairs neighbor's ceiling when there was water damage from up here.

Without the waiver, I think from what I have read that the issue would come down to was I liable? But the waiver seems not to be concerned even with liability.

(liability in terms of potential negligance, not an overt action or omission)

JenniferG11 (Texas)
Posts: 667

Posted:

I think this might be moot. If the person's actual insurance policy doesn't contain the waiver, courts have ruled in favor of the person seeking damages.

This learning curve seems never-ending!

I could find out if my policy waives it, but that wouldn't tell me if my downstairs unit's policy does. And hers would be the controlling one, I think.

I'm not trying to shaft my neighbor, I am just endeavoring to learn all that I can in general and using us as an example.

JenniferG11 (Texas)
Posts: 667

Posted:

Back on the fence! The SCOTUS decision I am reading centers around three facts that are not applicable here.

1) That tenants were not included in the waiver and 2) that the policy of the plaintiff allowed for the insured the option to waive, but the insured did not do so. 3) that the governing documents requiring insurance with waivers in and of itself is not a waiver.

The language in ours says that when we signed on the line to these docs, and became members, at that time we effected a waiver of subrogation in favor of all other unit owners and occupants.

It's counter-intuitive, that if my neighbor's pipe bursts that my insurance would pay for damage to my unit, and I am not saying I wish it to be that way, I am just ascertaining what IS.

My insurance agent says that they do not even have an option for waiver. If that is true (she is not really familiar with condo stuff, and I didn't ask to be 'escalated' to someone who knows more) it certainly renders the entire idea moot, but that doesn't make sense to me when apparently it's not uncommon for governing docs to include this requirement.

JeffT2 (Iowa)
Posts: 880

Posted:

I think many are wrongly scared into paying for damage when they are not actually liable.

Can you quote the passage on subrogation from your documents here?

Subrogation means the insurance company can sue a person to recover what they paid for a claim.

A waiver of subrogation would mean your neighbor's insurance company gives up its right to sue you.

Just to be clear, the owners ("we") do not waive the right, the insurance company waives the right. The insurance company cannot sue you for damages (or if they do, you have a defense, because they waived their right).

The owners can still sue each other directly. The other owner can sue you if they have no insurance, or if the damage is less than the deductible, or for the amount of the deductible, or if they want to sue you instead of putting in a claim (just to be nasty).

We had a case where the insurance company supplied a lawyer for an owner to sue another owner, even though there was a waiver of subrogation. The insurance company got around it by helping the owner sue directly instead of the insurance company suing for the same thing. Crazy.

Without a waiver of subrogation, yes, it comes down to liability. In many cases of water damage, the pipe fails by itself and the upstairs owners is not liable and does not have to pay for the water damage, even if the leak started in the upstairs unit.

I'm pretty sure that insurance policies are supposed to conform to your documents, so if your documents (usually your declaration, not bylaws) require a waiver of subrogation, then I think you are all right. Either the policy will have a waiver or a statement that it conforms. If not, you may have other remedies against your neighbor, like counterclaiming for not having the right policy.

By the way, state law may override any of this. I did not check Texas law.

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