A legal out

Property damage claims against contractors may be barred by a waiver of subrogation provision in AIA contracts

Clearly, mistakes happen. But did you know you may not always be on the line for them? For example, if your negligence caused damage to an owner's building, carefully review the insurance provisions in the contract documents to ascertain whether you or the owner, through its property insurer, must pay for the property damage. The American Institute of Architects (AIA) construction contract documents frequently have been interpreted to shield contractors from liability and require payment by owners' property insurers.

In May 2015, the Indiana Supreme Court joined a growing number of courts ruling the property insurance and waiver of subrogation provisions in standard AIA contract documents bar a claim against a contractor whose alleged negligence caused property damage to the owner's building.

In the case Board of Commissioners of County of Jefferson v. Teton Corporation, Innovative Roofing Solutions, Gutapfel Roofing, Inc. and Daniel L. Gutapfel, the Indiana Supreme Court ruled the AIA A201 General Conditions precluded the owner's property insurer, who had paid for damage to an existing building caused by the roofing contractor, from seeking recovery from the roofing contractor.

In this case, the owner, Jefferson County, entered into a construction contract in October 2008 with Teton Corp., Madison, Ind., in the amount of $87,280 to perform roof repairs on the Jefferson County courthouse in Madison. Teton subcontracted the work to Innovative Roofing Solutions, Batesville, Ind., who then sub-subcontracted the work to Gutapfel Roofing Inc., Batesville. The contract between the owner and Teton was Standard Form of Agreement between Owner and Contractor, AIA Document A101-1987, and General Conditions of the Contract for Construction, AIA Document A201-1987.