Waiver Of Subrogation Defense Not Waived Even If Not Pled By Defendants
In State Farm Insurance Company as subrogee of James & Joan Reiher v. J.P. Spano Construction, Inc., 865 N.Y.S.2d 678 (2d Dep’t 2008), Defendants moved for Summary Judgment seeking to enforce a waiver-of-subrogation provision contained within the pertinent contract and dismiss Plaintiff’s subrogation action. Plaintiff argued that Defendants were not entitled to enforce the waiver-of-subrogation provision because they did not raise it as an affirmative defense in their Answers.
CPLR 3018(b) stated that: “A party shall plead all matters which if not pleaded would be likely to take the adverse party by surprise or would raise issues of fact not appearing on the face of the prior pleading….” An affirmative defense which is not pled may be deemed waived. See Lefkowitz v. Kaye, Scholer, Fierman, Hays & Handler, 271 A.D.2d 576 (2d Dep’t 2000).The trial court granted Defendants’ Motion. On appeal, the Second Department affirmed the trial court’s decision and held that Defendants did not waive the defense of “waiver-of-subrogation.” The Second Department further held that Defendants need not plead the defense since Plaintiff’s Complaint was based, in part, on the very contract in which the waiver-of-subrogation provision appeared. Additionally, the Court stated “the policy of insurance issued by the plaintiff to its insureds ‘acknowledged the right of the insured[s] to waive the insurer’s subrogation rights’.” Id. at 679. Thus, the Court reasoned that “plaintiff cannot claim to be surprised that the defendants would use it as a defense.” Id. at 679.
New York Courts continue to restrict subrogation actions by enforcing waiver-of-subrogation provisions, even where the defendant has not properly pled the defense. Thus, it remains imperative that insurers seek the opinion of a skilled subrogation attorney to analyze whether a waiver-of-subrogation provision will be enforceable, since Courts are likely to reject procedural arguments pertaining to waiver-of-subrogation provisions.