NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-5395-16T4

ACE AMERICAN INSURANCE

COMPANY,

Plaintiff-Appellant,

v.

AMERICAN MEDICAL 

PLUMBING, INC.,

Defendant-Respondent.

_____________________________

Argued September 26, 2018 – Decided April 4, 2019

Before Judges Koblitz, Ostrer and Currier.

On appeal from Superior Court of New Jersey, Law 

Division, Union County, Docket No. L-0299-17.

Daniel Q. Harrington argued the cause for appellant 

(Cozen O'Connor, PC, attorneys; Daniel Q. 

Harrington, on the briefs).

Fredric P. Gallin argued the cause for respondent 

(Methfessel & Werbel, PC, attorneys; Fredric P. 

Gallin, of counsel and on the brief).

The opinion of the court was delivered by

OSTRER, J.A.D.

APPROVED FOR PUBLICATION

April 4, 2019

APPELLATE DIVISION
A-5395-16T4 2

This appeal requires us to interpret the waiver-of-subrogation provisions 

of a widely used form construction contract – the American Institute of 

Architects (AIA) form A201 – 2007 General Conditions of the Contract for 

Construction (A201).1 Contending the trial court misread the contract, 

plaintiff ACE American Insurance Company (ACE) appeals from summary 

judgment dismissing its subrogation action against defendant American 

Medical Plumbing, Inc. (American). We affirm, based on A201's plain 

language, its evident goal to transfer the risk of construction-related losses to 

insurers and preclude lawsuits among contracting parties, and persuasive outof-state authority. 

I.

For purposes of ACE's motion, the following facts are undisputed. 

ACE's insured, Equinox Development Corporation (Equinox Development), 

contracted in March 2012 with Grace Construction Management Company, 

LLC (Grace Construction), to build the "core and shell" of a new health club in 

 

1

 The AIA revises the A201 contract every ten years. See Am. Inst. of 

Architects, AIA Document Commentary to A201 – 2007 General Conditions 

of the Contract for Construction 1 (2007) (AIA Commentary to A201). For 

convenience, "A201" will refer to the 2007 version. We will include the year 

when referring to previous versions. 
A-5395-16T4 3

Summit.2 American was a plumbing subcontractor. Sometime in April 2013, 

after the work under the contract was completed, a water main failed and 

flooded the health club. 

When the flood occurred, ACE provided Equinox Holdings and its 

subsidiaries, including Equinox Development, with blanket all-risk insurance 

including multiple forms of coverage for its operations in the United States. 

The policy term was September 2012 to September 2013, with coverage of $32 

million per occurrence. Among other coverages, the policy insured Equinox's 

interest in its real and personal property, including "[p]roperty while in the 

course of construction and/or during erection, assembly and/or installation." It 

also included any interests of contractors and sub-contractors for which 

Equinox would assume liability by contract. Regarding subrogation, the 

policy stated, "In the event of any payment under this policy, except where 

subrogation rights have been waived, the Insurer shall be subrogated to the 

extent of such payment to all the Insured's rights of recovery therefore." ACE 

had provided Equinox with similar coverage, with a limit of $30 million, the 

preceding annual period.

 

2

 Equinox Development is described as a subsidiary of Equinox Holdings, Inc. 

(Equinox Holdings). Where the record does not clearly distinguish between 

the two, we will simply use "Equinox." 
A-5395-16T4 4

ACE paid Equinox almost $1.2 million for the net damages to its real 

and personal property. Less than $8,000 was for repairs to the "core and shell" 

construction covered by the A201 contract. The rest was apparently for 

damage to internal construction, furnishings and equipment.

ACE eventually filed suit against American, claiming it was at fault for 

the water-main break and seeking recovery of its payments to Equinox. 

American promptly answered, invoking A201's subrogation-waiver provisions. 

Soon thereafter, American filed its motion for summary judgment, which the 

trial court granted, relying mainly on an unpublished federal district court 

opinion. 

II.

We review the trial court's order de novo, applying the same standard as 

the trial court. Henry v. N.J. Dep't of Human Servs., 204 N.J. 320, 330 (2010). 

The dispositive issue before us is one of contract interpretation. Absent an 

ambiguity arising from disputed facts, interpretation of A201, like of any 

contract, involves a question of law, which we review de novo. Kieffer v. Best 

Buy, 205 N.J. 213, 222-23 & n.5 (2011). 

To fulfill our interpretative mission, we determine "the reasonably 

certain meaning of the language used, taken as an entirety, considering the 

situation of the parties, the attendant circumstances, the operative usages and 
A-5395-16T4 5

practices, and the objects the parties were striving to achieve." George M. 

Brewster & Son, Inc. v. Catalytic Constr. Co., 17 N.J. 20, 32 (1954); see also

Hardy ex rel. Dowdell v. Abdul-Matin, 198 N.J. 95, 103 (2009) (stating that 

"[a] basic principle of contract interpretation is to read the document as a 

whole in a fair and common sense manner"). In so doing, we strive to give 

effect to "all parts of the writing and every word of it," to the extent possible. 

Washington Constr. Co. v. Spinella, 8 N.J. 212, 217 (1951) (quoting 9 

Williston on Contracts § 46, at 64 (rev. ed. 1936)). Our objective is to 

determine the parties' intent. Kieffer, 205 N.J. at 223. But "[i]t is not the real 

intent but the intent expressed or apparent in the writing that controls." 

Friedman v. Tappan Dev. Corp., 22 N.J. 523, 531 (1956).

III.

We describe first A201's overall scheme. In broad terms, A201 requires 

the owner and contractor to procure, respectively, property and liability 

insurance; and requires the owner and contractor and its subcontractors (and 

sub-subcontractors, agents and employees) to waive all rights against each 

other for damages covered by the required property insurance policy. A201 
A-5395-16T4 6

also extends the subrogation waiver to certain other forms of insurance that the 

owner may procure at its own option for losses during and after construction. 3 

Specifically, the contract requires an owner to procure "builder's risk 

'all-risk'" insurance for the benefit of itself and its contractors. 4 A201 § 11.3.1. 

The policy must cover not only the amount the owner owes for the "Work" –

that is, the construction and services covered by the contract – but the value of 

the entire "Project," which may include construction by other contractors. 

Ibid. See also id. §§ 1.1.3, 1.1.4 (defining "Work" and "Project"). In this case, 

the Work – which consisted of the health club's "core and shell" – was 

evidently only a part of the total Project, which included furnishings and 

 

3

 We note that the parties do not dispute the enforceability of a subrogation 

waiver in principle, which is well-settled. See George M. Brewster & Son, 17 

N.J. at 28 (stating that "parties may by agreement waive or limit the right" of 

subrogation); see also Sch. Alliance Ins. Fund v. Fama Constr. Co., 353 N.J. 

Super. 131, 140 (Law Div. 2001), aff'd o.b., 353 N.J. Super. 1 (App. Div. 

2002). 

4

 See Bryan Constr. Co. v. Emp'rs Surplus Lines Ins. Co., 116 N.J. Super. 88, 

97 (App. Div. 1971) (stating that a builder's risk policy "is ordinarily issued to 

a contractor or a property owner in order to insure him against loss occurring 

during the construction, repair or alteration of a building"), aff'd in part and 

rev'd in part, 60 N.J. 375 (1972); see generally 11 Couch on Insurance §§ 

155:42 - :49 (3d ed. 2017) (describing builder's risk insurance). Section 

11.3.1.1 of A201 states that the "all-risk" policy must insure "against the perils 

of fire . . . and physical loss or damage including . . . flood." 
A-5395-16T4 7

interiors, as well.5 The insurance must cover the "interests of the Owner, the 

Contractor, Subcontractors, and Sub-subcontractors in the Project." A201 § 

11.3.1. The owner's insurance obligation subsists as long as contractors are 

unpaid or have an insurable interest in the Project.6 Ibid. As we discuss 

below, Equinox satisfied the mandate of section 11.3.1 through its pre-existing 

blanket all-risk policy from ACE, which included builder's risk coverage for 

all Equinox construction sites across the United States. 

 

5

 ACE insists without citing competent evidence in the record that the Work 

and Project were "coextensive." However, it acknowledges that, in addition to 

the Work, Equinox hired other contractors for interior construction, or "fit-up." 

6

 Section 11.3.1, under the heading, "PROPERTY INSURANCE," states:

11.3.1 Unless otherwise provided, the Owner shall 

purchase and maintain . . . property insurance written 

on a builder's risk "all-risk" or equivalent policy form 

in the amount of the initial Contract Sum, plus value 

of subsequent Contract Modifications and cost of 

materials supplied or installed by others, comprising 

total value for the entire Project at the site on a 

replacement cost basis without optional deductibles. 

Such property insurance shall be maintained . . . until 

final payment has been made as provided in Section 

9.10 or until no person or entity other than the Owner 

has an insurable interest in the property required by 

this Section 11.3 to be covered, whichever is later. 

This insurance shall include interests of the Owner, 

the Contractor, Subcontractors and Sub-subcontractors 

in the Project. 
A-5395-16T4 8

A201 also requires an owner to purchase insurance for boilers and 

machinery during installation and until final acceptance. A201 § 11.3.2. At its 

option, the owner may purchase loss-of-use insurance. A201 § 11.3.3. The 

owner must also maintain its "usual liability insurance." A201 § 11.2. 

A201 imposes an insurance requirement on the contractor, too. The 

contractor must obtain insurance to protect itself from claims arising out of its 

operations or those of its subcontractors, agents or employees. A201 § 

11.1.1.5. The contractor's policy must cover "[c]laims for damages, other than 

to the Work itself, because of injury to or destruction of tangible property, 

including loss of use resulting therefrom." Ibid. The contractor's coverage 

must name the owner as an additional insured for claims arising out of the 

contractor's negligence. A201 § 11.1.4.

The waiver-of-subrogation clause bars recovery of damages from the 

owner, contractor, and subcontractors "to the extent" the damages are covered 

by two forms of property insurance. The first is property insurance an owner 

obtains "pursuant to" section 11.3, which includes the builder's risk insurance 

that section 11.3.1 references.7 The second is any "other property insurance 

 

7

 The phrase "insurance obtained pursuant to this Section 11.3" plainly refers 

to insurance that section 11.3 requires the owner to obtain, including builder's 

risk, see § 11.3.1, and boiler and machinery insurance, see § 11.3.2. The 

parties do not present the issue whether the phrase also encompasses insurance 

(continued)
A-5395-16T4 9

applicable to the Work" that the contract does not require. Section 11.3.7 

states:

11.3.7 WAIVERS OF SUBROGATION

The Owner and Contractor waive all rights against . . . 

each other and any of their subcontractors, subsubcontractors, agents and employees, each of the 

other . . . for damages caused by fire or other causes of 

loss to the extent covered by property insurance 

obtained pursuant to this Section 11.3 or other 

property insurance applicable to the Work, except 

such rights as they have to proceeds of such insurance 

held by the Owner as fiduciary. 

[(Emphasis added).]

The contractor must obtain similar waivers from its subcontractors. The 

insurance policy "shall provide such waivers of subrogation by endorsement or 

otherwise." Ibid. The "waiver of subrogation shall be effective as to a person 

or entity . . . whether or not the person or entity had an insurable interest in the 

property damaged." Ibid.

Section 11.3.5 extends the waiver of subrogation to damages that 

additional, optional insurance policies may cover. The waiver extension 

applies to two forms of insurance policies, which section 11.3.5 describes in 

 

(continued)

that section 11.3 does not require but which it addresses – such as loss-of-use 

insurance, see § 11.3.3, and insurance described in section 11.3.5, which we 

discuss below. 
A-5395-16T4 10

terms of when they are procured, what they cover, and their relation to other 

policies. The first is an insurance policy procured "during the Project 

construction period," which covers real or personal property at or adjacent to 

the Project site, and is "separate" from the policy insuring the Project. A201 § 

11.3.5. The second is an insurance policy provided "after final payment," 

which covers the completed Project, and is "other than" the policy that insured 

the project during construction. Ibid. Section 11.3.5 states: 

If during the Project construction period the Owner 

insures properties, real or personal or both, at or 

adjacent to the site by property insurance under 

policies separate from those insuring the Project, or if 

after final payment, property insurance is to be 

provided on the completed Project through a policy or 

policies other than those insuring the Project during 

the construction period, the Owner shall waive all 

rights in accordance with the terms of Section 11.3.7 

for damages caused by fire or other causes of loss 

covered by this separate property insurance. All 

separate policies shall provide this waiver of 

subrogation by endorsement or otherwise.

[(Emphasis added).]

IV.

We turn now to ACE's claim on appeal. At bottom, ACE argues that its 

claim against American is not the kind that A201 subjects to a subrogation 

waiver. ACE contends that the subrogation waiver under section 11.3.7 has a 

spatial limit, applying only to claims for damage to the Work itself but not 
A-5395-16T4 11

adjacent property, as well as a temporal limit, applying only to claims arising 

before construction is complete. Since the bulk of the water damage affected 

not the health club's "core and shell" but its internal construction and 

furnishings, and since the claim here arose after the Work was completed, 

ACE concludes that section 11.3.7 does not restrict it from suing American. 

Regarding section 11.3.5, which expressly applies the subrogation 

waiver to certain post-completion insurance, ACE contends that its insurance 

policy was not "other than" a policy that insured the Project during 

construction.8 Noting that the record does not disclose the exact date 

construction began and ended, ACE contends that its 2012-2013 policy simply 

extended its 2011-2012 policy and was thus not a policy "other than" the one 

 

8

 We reject ACE's contention that American conceded this point in responding 

to ACE's statement of material facts. ACE asserted, "The property damage 

giving rise to this claim was not insured under a policy or policies 'separate 

from' or 'other than' that which insured the Project during the construction 

period within the meaning of Section 11.3.5." Recognizing that ACE's 

assertion was really a legal conclusion – contrary to Rule 4:46-2, which 

requires a statement of material facts – American responded, "[W]e disagree 

with the implied legal conclusion that the nature of Ace's insurance policy 

removes it from the waiver of subrogation." Furthermore, only undisputed 

factual assertions that are "sufficiently supported" are deemed admitted. 

Claypotch v. Heller, Inc., 360 N.J. Super. 472, 488 (App. Div. 2003) (quoting 

Rule 4:46-2(b)). The meaning of "a policy . . . other than those insuring the 

Project during the construction period" is a legal issue for the court. 
A-5395-16T4 12

that insured the construction project.9 Alternatively, ACE contends that even 

if its policy qualified as post-completion coverage governed by section 11.3.5, 

that section refers back to section 11.3.7 – "the Owner shall waive all rights in 

accordance with the terms of Section 11.3.7" – and section 11.3.7 does not 

apply to claims for damage to non-Work property. 

We are unpersuaded by these arguments. ACE misconstrues the basic 

structure of the two subrogation-waiver provisions. Section 11.3.7 applies the 

waiver to any insured damage, whether occurring during or after construction, 

whether to the Work, to the Project, or to other insured property – so long as 

the policy covering the damage falls within one of the two categories 

identified: "property insurance obtained pursuant to this Section 11.3" or 

"other property insurance applicable to the Work." Augmenting section 

11.3.7, section 11.3.5 extends the waiver even to damage insured by a discrete 

policy. Thus, the waiver applies "[i]f during the Project construction period 

the Owner insures properties, real or personal or both, at or adjacent to the site 

by property insurance under policies separate from those insuring the Project." 

 

9

 In light of the analysis that follows, we need not decide whether a policy 

extension qualifies as "other than" a prior policy. However, a strong argument 

can be made that a policy extension that covers a different time period, 

includes different coverage limits, and presumably has a different premium, is 

"other than" its predecessor-policy, even if its terms were otherwise 

unchanged. 
A-5395-16T4 13

(Emphasis added). The waiver also applies "if after final payment, property 

insurance is to be provided on the completed Project through a policy or 

policies other than those insuring the Project during the construction period." 

(Emphasis added). 

ACE's blanket all-risk policy fell within both categories of coverage 

subject to section 11.3.7. Its builder's risk coverage constituted "property 

insurance obtained pursuant to this section 11.3" because it met the builder's 

risk insurance requirement. See Bd. of Comm'rs v. Teton Corp., 30 N.E.3d 

711, 716 (Ind. 2015) (holding, with respect to identical provisions of A201-

1987, that pre-existing all-risk property insurance policy "that covers both the 

entire existing property and the work" constitutes "property insurance obtained 

pursuant to this Paragraph 11.3"); Haemonetics Corp. v. Brophy & Phillips 

Co., 501 N.E.2d 524, 526 (Mass. App. Ct. 1986) (stating that "[t]he preexisting 

insurance policy the owner had . . . was the insurance the owner chose to 

provide to comply with § 11.3 even though that policy may have been more 

extensive than what was required"). Moreover, inasmuch as the ACE policy 

exceeded the coverage required by section 11.3.1, it was also "other property 

insurance applicable to the Work." See Lloyd's Underwriters v. Craig & Rush, 

Inc., 32 Cal. Rptr. 2d 144, 146 & n.4 (Ct. App. 1994) (stating that an existing 

all-risk property insurance qualified as "insurance applicable to the Work"); 
A-5395-16T4 14

Emp'rs Mut. Cas. Co. v. A.C.C.T., Inc., 580 N.W.2d 490, 493 (Minn. 1998) 

(stating that "[t]he owner has the option of purchasing an all-risk policy 

specifically to cover the 'work' or can rely on any existing property insurance 

which would cover the 'work'"). 

Since the all-risk coverage both satisfied A201's insurance requirement 

and was "applicable to the Work," section 11.3.7 waived all claims for 

damages "to the extent covered" by the policy. As the Indiana Supreme Court 

persuasively observed in reviewing the identical language from A201-1987, 

"The positioning and plain meaning of the word "covered" restricts the scope 

of the subrogation waiver based on the source and extent of the property 

insurance coverage, not the nature of the damages or the damaged property." 

Bd. of Comm'rs, 30 N.E.3d at 716. Therefore, if one of the two identified 

policies provides coverage for the loss, then subrogation is waived, even if the 

policy provides broader coverage than required. See also Emp'rs Mut. Cas. 

Co., 580 N.W.2d at 493 (stating, "[I]f the owner relies on an existing policy 

which is so broad that it covers both 'work' and 'nonwork' property, it waives 

the right to sue for all damages done as long as that damage is covered by the 

policy."). Thus, even where the damages are almost entirely non-Workrelated, as they were here, the subrogation waiver applies, because the policy 

also covered the Work-related damages. 
A-5395-16T4 15

Reading sections 11.3.5 and 11.3.7 together supports our interpretation. 

Section 11.3.5 extends the subrogation waiver to damage covered by a policy 

"separate from those insuring the Project" that covers "properties, real or 

personal or both, at or adjacent to the site." It would be absurd to extend the 

waiver to damage to non-Project property only if the policy covering it were 

completely "separate from" the policy that the owner is required to obtain. As 

the Nebraska Supreme Court observed, considering the identical provisions of 

A201-1997, "We see no reason why the parties would intend a different result 

when, instead of purchasing two separate policies, the owner relied on one 

policy covering both the Work and the non-Work property." Lexington Ins. 

Co. v. Entrex Commc'n Servs., Inc., 749 N.W.2d 124, 135 (Neb. 2008).

Rather, section 11.3.5 "shows that the contracting parties were not opposed to 

waiving damages to non-Work property." Ibid. In other words, section 11.3.5 

is designed to extend the waiver related to non-Work property even when 

covered by separate policies. Cabining these sections as ACE proposes would 

leave a dead zone where the waiver, inexplicably, would not apply – where 

damage occurred to non-Work property covered not by a "separate" policy but 

by the same policy that covered the Work. 

Our interpretation is also consistent with the majority view of other 

courts that have rejected the argument, pressed here by ACE, that the section 
A-5395-16T4 16

11.3.7 subrogation waiver is limited to damage to the Work. See, e.g., Lloyd's 

Underwriters, 32 Cal. Rptr. 2d at 148 (stating that "[t]he waived claims are not

defined by what property is harmed (i.e. 'any injury to the Work'); instead, the 

scope of waived claims is delimited by the source of any insurance proceeds 

paying for the loss (i.e. whether the loss was paid by a policy 'applicable to the 

Work'")); Bd. of Comm'rs, 30 N.E.3d at 712-13 (adopting, along with "the 

majority of jurisdictions," the "'any insurance' approach," under which the 

Owner waives subrogation "based on the extent and source of the coverage, 

not the nature of the property damaged") (citing cases); Emp'rs Mut. Cas., 580 

N.W.2d at 493 (stating its interpretation followed "the majority of 

jurisdictions" and citing cases); Lexington Ins. Co., 749 N.W.2d at 133-35 & 

n.30 (adopting the "majority interpretation" applying the waiver "to all 

damages – including Work and non-Work damages," and citing cases); 

Westfield Ins. Grp. v. Affinia Dev., LLC, 982 N.E.2d 132, 140, 144 (Ohio Ct. 

App. 2012) (adopting the "majority approach" that A201 "define[s] the waived 

claims by the source of the insurance proceeds, not by the property damaged," 

whether "Work or non-Work property," and citing cases). 

ACE's attempt to place a temporal limit on the waiver fails, as well. By 

its terms, the subrogation waiver under section 11.3.7 also continues after 

completion of construction if the policy that satisfied section 11.3.7 remains in 
A-5395-16T4 17

force. The plain language of section 11.3.7 includes no temporal limitation. 

Thus, ACE's argument that the section 11.3.7 waiver is limited to damages 

incurred while construction was underway lacks textual support. 

Nor does section 11.3.7 imply a temporal limitation. Where an owner 

chooses to continue a policy that both satisfied and exceeded the coverage 

required by section 11.3, the subrogation waiver continues, too. In Town of 

Silverton v. Phoenix Heat Source Sys., 948 P.2d 9, 13 (Colo. Ct. App. 1997), 

the town maintained insurance during and after installation of a new roof on 

the town hall. A post-completion fire triggered a claim against a 

subcontractor. Id. at 10. The court held that to the extent the town's insurance 

exceeded what section 11.3.1 required – meaning that it constituted "other 

property insurance applicable to the Work" – the subrogation waiver subsisted 

as long as the insurance remained in force. Id. at 13. "[T]he fact that a 

contractor had finished its work and had no remaining insurable interest in the 

property did not terminate the waiver of subrogation rights." Ibid. "Because 

property insurance applicable to the work, other than that obtained pursuant to 

paragraph 11.3.1, may remain in effect after the final completion date, so too 

may a waiver of subrogation rights under paragraph 11.3.7 remain in effect." 
A-5395-16T4 18

Ibid.10 The court noted that the "Work" that an owner insures means "the 

construction and services required by the Contract Documents, whether 

completed or partially completed." Ibid. (citing A201-1987 § 1.1.3) (emphasis 

added). 

That section 11.3.7 waives subrogation for post-completion damages is 

also evident from its relationship with section 11.3.5. Section 11.3.5 extends 

the waiver to separate policies an owner may procure post-completion to 

insure the Project. See A201 § 11.3.5 (waiving subrogation where "after final 

payment property insurance is to be provided on the completed Project through 

a policy or policies other than those insuring the Project during the 

construction period."); see also, e.g., Colonial Props. Realty Ltd. P'ship v. 

Lowder Constr. Co., 567 S.E.2d 389, 391-92 (Ga. Ct. App. 2002) (applying the 

subrogation waiver where the owner obtained "a separate policy covering the 

completed project after final payment was made"); Middleoak Ins. v. Tri-State 

Sprinkler Corp., 931 N.E.2d 470, 471 n.2, 472 (Mass. App. Ct. 2010) (holding, 

where the owner procured insurance policy two years after construction was 

complete, "the contractual provision for waiver of subrogation applies to 

 

10

 We recognize that the Colorado court adopted the minority view as to 

whether the subrogation waiver extends to damages to non-Work. Town of 

Silverton, 948 P.2d at 12; see also Copper Mountain, Inc. v. Indus. Sys., Inc., 

208 P.3d 692, 697 (Colo. 2009) (approving Silverton approach to non-Work 

damages). As to that aspect of the court's decision, we respectfully disagree.
A-5395-16T4 19

postconstruction losses as well as to losses during construction"); TX. CC., 

Inc. v. Wilson/Barnes Gen. Contractors, Inc., 233 S.W.3d 562, 571 (Tex. Ct. 

App. 2007) (stating that "as long as property insurance covered the damages to 

the structure, whether completed or not, the waiver applies"). 

If the section 11.3.7 waiver did not apply to post-completion damages 

insured by the same policy insuring the Project, yet extended under section 

11.3.5 to such damages when covered by discrete policies, the waiver 

provisions would leave a temporal gap as implausible as the spatial gap we 

noted above. The evident purpose of section 11.3.5 is to preserve the 

subrogation waiver for post-completion damages, even if the owner happens to 

shift policies or insurers after construction is complete. 

Reading section 11.3.7 as waiving subrogation for non-Work damage is 

also consistent with the waiver's general purpose, to avoid post-insuranceclaim litigation. As the AIA's commentary to section 11.3.7 explains: "The 

purpose of the required property insurance is to transfer the risk of insured 

losses from the owner and contractor to the insurance company. It would 

defeat this purpose if the insurance company were allowed to sue either party 

to recover such losses." AIA Commentary to A201, at 46. See also Bd. of 

Comm'rs, 30 N.E.3d at 714 (stating that A201's waiver and insurance 

provisions are designed to "ensure that the parties resolve damages disputes 
A-5395-16T4 20

through insurance claims, not lawsuits"); cf. Sch. Alliance Ins. Fund, 353 N.J. 

Super. at 140 (stating generally that "[t]he purpose behind a mutual waiver of 

subrogation is to assure that, to the extent any loss is covered by a policy, the 

insurer should bear the risk of loss, regardless of any fault on the part of one or 

both of the parties"). Our interpretation, as the court in Haemonetics pointed 

out, "has the potential for avoiding litigation not only over liability issues 

related to the . . . cause of damage to the owner's property, but also over the 

issue whether the claimed loss is to the 'Work' or not." 501 N.E.2d at 526. 

The commentary to section 11.3.5 also rejects the spatial and temporal 

gaps ACE advocates. The commentary states, "[Section 11.3.5] extends the 

provisions for waiver of subrogation to other property insurance the owner 

may purchase. Such policies may cover property at or adjacent to the project, 

or they may replace the property insurance that was in effect on the work 

during construction." Ibid. (emphasis added). Describing section 11.3.5 as an 

extension implies that its purpose is to fill the gaps left by section 11.3.7 by 

continuing the waiver for any property and for any period that the owner’s required 

or Work-related insurance may not cover but that it nonetheless insures through a 

separate policy. Together, the two provisions ensure a seamless waiver that shields 

the contracting parties from suit by subrogees. 
A-5395-16T4 21

We reject ACE's argument that applying the subrogation waiver here is 

inconsistent with the contractor's obligation to obtain liability insurance. ACE 

contends the liability insurance requirement would be unnecessary if the 

subrogation waiver shields the contractor from suit by the owner's insurer. We are 

unpersuaded. The contract expressly recognizes that the subrogation waiver takes 

precedence over the contractor's insurance obligation. Section 11.3.7 states that 

the "waiver of subrogation shall be effective as to a person or entity even though 

that person or entity would otherwise have a duty of indemnification, contractual 

or otherwise . . . ." Accord Lexington Ins., 749 N.W.2d at 136 (noting the identical 

provision in A201-1997 in rejecting a similar argument); Chadwick v. CSI, Ltd., 

629 A.2d 820, 826 (N.H. 1993) (noting that this language in Section 11.3.7 

"reconciles any inconsistency" between the contractor's duty to indemnify and the 

subrogation waiver).11 

The contractor's liability insurance serves an important purpose by providing 

an additional layer of coverage for damage that the owner's property insurance may 

not reach. For example, if the owner's losses exceed its policy limit, the 

 

11

 Section 10.2.5 requires the Contractor to "promptly remedy damage and 

loss . . . to property referred to in Sections 10.2.1.2 and 10.2.1.3" – including 

"the Work and materials and equipment" and "other property at the time or 

adjacent thereto" – that the contractor or subcontractor causes "in whole or in 

part." However, the same section carves out "damage or loss insured under 

property insurance required by the Contract Documents." A201 § 10.2.5. 
A-5395-16T4 22

contractor's liability insurance could cover at least part of the balance. The liability 

insurance would also provide a source of compensation to injured third parties, 

who might otherwise seek remedies from the owner. 

In sum, notwithstanding that most of the damage affected non-Work 

property and occurred after construction was completed, the subrogation waiver 

bars ACE's action against American, since its blanket all-risk insurance satisfied 

A201's requirements and covered the Work. 

Affirmed.