Insurance Subrogation Waiver Upheld Despite Gross Negligence Claim

The plaintiff, Materials Innovation and Recycling Authority (“MIRA”), successor to the Connecticut Resources Recovery Authority, brought an action against NAES Corporation in state court seeking compensation for losses allegedly sustained as a result of NAES’ gross negligence in operating a waste-to-energy facility owned by MIRA. MIRA’s insurers joined MIRA as plaintiffs. Each insurance company sued as a subrogee of MIRA seeking to recover the money paid under insurance policies covering the waste-to-energy facility. MIRA settled with NAES, but the insurer’s claims remain pending.

Insurance Subrogation Waiver Enforced by District Court

The insurers seek to recover a total of $8,016,250.00. NAES has moved for summary judgment on the basis of a waiver subrogation provision in the underlying contract between the Connecticut Resources Recovery Authority and NAES. The insurers contend that the subrogation waiver does not extend to losses caused by NAES’ gross negligence. The contract between the Connecticut Resources Recovery Authority and NAES contains the following provision: “[Connecticut Resources Recovery Authority] shall provide and maintain reasonable and customary property insurance covering the Facility. [Connecticut Resources Recovery Authority] shall waive and shall require its insurers to waive all subrogation rights against NAES and its directors, employees, representatives, agents, successors, assigns, and subcontractors for losses and damages incurred and paid under such policies.” NAES argues that the phrase “all subrogation rights” means just that, including the subrogation rights at issue in this case. The insurers, however, argue that the subrogation waiver, read in the context of the contract as a whole, does not apply to subrogation rights arising from losses caused by gross negligence. In particular, the insurers argue that because the provisions of the contract make NAES liable to MIRA for damages caused by gross negligence, the subrogation waiver should be construed to exclude losses and damages caused by gross negligence. The court reasons that a provision of a contract must be enforced in accordance with its plain terms unless other provisions require a different interpretation.

Impact of Gross Negligence on Subrogation Waivers

The insurers appear to assume that there exists a conflict between the Connecticut Resources Recovery Authority’s contractual waiver of all subrogation rights against NAES and the provisions of the contract entitling the Connecticut Resources Recovery Authority to seek reimbursement from NAES, creating an ambiguity regarding the scope of the waiver. However, no conflict exists. The court construes the subrogation waiver in light of the contract as a whole and finds that it serves to protect NAES against liability for damage to the waste-to-energy facility covered by property insurance policies without regard to whether NAES might have been negligent or even grossly negligent in causing the damage. Moreover, the provisions of the contract strongly suggest that the parties intended to avoid costly disputes regarding damage to the waste-to-energy facility by using insurance and waivers of subrogation. Permitting the insurers to proceed against NAES would frustrate this intention. Accordingly, the court grants NAES’ motion for summary judgment, enforcing the subrogation waiver. Zurich Am. Ins. Co. v. NAES Corp., No. 3:20-CV-1779(RNC), 2025 WL 969552 (D. Conn. Mar. 31, 2025)