Opinion ID: 790378
Heading Depth: 2
Heading Rank: 2

Heading: The Scaffolding Collapse and the Present Action

Text: 8 In 1998, the 49-story temporary scaffolding in use for construction of the building collapsed, resulting in one fatality and causing extensive damage to the site and surrounding area. As a result, Durst and FTSA had some $20 million in property losses, including physical damage to real and personal property, emergency and stabilization costs, loss of rental income, and the costs of construction delay, work stoppages, and extra interest. Durst and FTSA filed claims with St. Paul under the builder's risk policy. St. Paul paid them approximately $19 million. 9 St. Paul, Durst, and FTSA commenced the present diversity action in 2000, describing St. Paul as subrogee of Durst and FTSA, and asserting claims against UBS for damages resulting from the scaffolding collapse. (Claims against a second named defendant were later voluntarily dismissed.) The complaint alleged that UBS was liable on theories of, inter alia, negligence, gross negligence, breach of contract, breach of warranty, and strict liability in connection with the design, construction, installation, inspection, and maintenance of the scaffolding; plaintiffs sought damages in the amount of $20 million, plus interest. 10 UBS filed an answer denying most of the allegations of the complaint and asserting as an affirmative defense, inter alia, that the claims asserted in the complaint were barred by the waiver-of-subrogation provisions of the Construction Contract. UBS also filed a third-party complaint against TIG, AIU, and Royal, requesting a declaratory judgment that those insurers were required to defend and indemnify UBS against St. Paul's claims. 11 TIG moved pursuant to Fed.R.Civ.P. 12(b)(6) to dismiss both the UBS third-party complaint and plaintiffs' underlying complaint; AIU and Royal, after answering the UBS third-party complaint, moved pursuant to Fed.R.Civ.P. 12(c) to dismiss that complaint, as well as plaintiffs' underlying complaint. UBS joined these motions to dismiss plaintiffs' complaint. The ground of the motions to dismiss the underlying complaint was that Durst and FTSA had waived their rights to recover for losses covered by the builder's risk policy and that St. Paul had waived any subrogation rights. Plaintiffs opposed the motions to dismiss the complaint, contending principally that the waiver-of-subrogation clause was unenforceable on the grounds (a) that UBS had breached the Construction Contract by entering into insurance contracts with AIU and Royal that did not permit waivers of subrogation, and (b) that New York law, as a matter of public policy, prohibits a contractual waiver of subrogation with respect to a claim of gross negligence.