Judge Dismisses Subrogation Lawsuit Against Sprinkler and Alarm Companies

Loehmann’s is the anchor store in a strip mall in Brooklyn.  A restaurant owned and operated by AGG was next door to Loehmann’s.   On November 21, 1999, fire broke out at AGG. The strip mall had a sprinkler system, but it did not activate.  The fire spread to Loehmann’s and caused extensive damage and loss of business.  Travelers paid Loehmann’s over $1.1 million under its policy.  A post-fire inspection revealed that a valve in AGG’s part of the sprinkler system had been turned off.  That valve had been covered by a drop ceiling and, therefore, was not visible.  Travelers brought a subrogation action naming: (a) the manager of the strip mall; (b) AGG; (c) the company (“Chief Fire”) that was supposed to inspect AGG’s sprinkler system; and (d) the company (“High Rise”) that was supposed to monitor valves and other aspects of the sprinkler system through an electronic alarm system.  The owner of the strip mall was originally named in the complaint but was dropped by plaintiff due to “waiver of subrogation” language contained in Loehmann’s lease.

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Judge Rejects Defense’s Daubert Challenge to Subrogating Carrier’s Experts

Most of you have heard about the US Supreme Court’s 1993 Daubert decision[1] , in which the court set forth the criteria witnesses must meet before being allowed to testify as “experts” in federal court. [2]  Daubert is a new favorite of the defense bar in property subrogation litigation as it allows the defense to try to “win” a subrogation claim by getting the subrogating carrier’s expert barred from testifying – which oftentimes leads to the entire case getting dismissed and preventing a jury from considering the case.  Most courts have rejected Daubert challenges in fire subrogation matters, so long as plaintiff’s counsel submits sufficient proof that the expert is well-qualified in the field and used sound methodology (i.e., NFPA 921 or other relevant guidance).  It is incumbent upon Plaintiff’s counsel to fight such challenges vigorously, including drafting – in consultation with the expert – a detailed affidavit for the witness to lay out in detail his/her qualifications and the methodology used in performing the fire investigation or evidence exam.  In the few cases I’ve seen where courts have granted Daubert motions, it appears from the record that Plaintiff’s counsel did not submit sufficient proof to fight off the motion.   Usually, where the defense faults the subrogating carrier expert’s investigation, the court normally will deny the motion and allow the defense to raise their objections through cross-examination at trial.

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Judge Joins Subrogation Action with the Separate Action Filed by the Insured

Often, the insured will claim to have suffered damages above and beyond what they were paid by their insurance company (I call these “uninsured losses”). In some instances, so long as there is consent, one attorney will represent both the subrogating carrier and the insured. In other instances, the insured will retain separate counsel. If separate counsel is retained, the subrogating carrier will file one lawsuit and the insured will file a separate lawsuit against the same defendant(s).

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