In Universal North American Ins. Co. v. Bridgepointe Condominium Ass’n, the Law Division of the New Jersey Superior Court for Middlesex County examined a subrogation action brought by an insurer arising from a fire at a condominium unit. After paying a claim for damage to the unit, the insurer commenced a subrogation action against the condominium association and other entities for the failure to maintain the property. The condominium association filed a motion for summary judgment, contending that its by-laws precluded insurers of condominium residents from pursuing subrogation claims against the association.
The Court began its analysis of the motion by addressing the association by-laws, which provided that the condominium association would insure the buildings. In the event of a loss, the association would make insurance proceeds available to unit owners for the reconstruction and repair of the unit. The by-laws further provided that the unit owners could obtain additional insurance for their own benefit, “provided that all such policies shall contain waivers of subrogation.”
The Court noted that under New Jersey’s Condominium Act, condominium associations are required to purchase insurance for the condominium’s common elements, but are otherwise free to make other provisions in the by-laws regarding insurance for the development. The Court further observed that the plaintiff insurer knew or should have known that the condominium association precluded the unit owner from obtaining insurance authorizing subrogation actions against the association. The Court noted that the waiver-of-subrogation provision is a logical way of preventing litigation among the unit owners that comprise the association. The Court determined that as the policyholder was precluded from obtaining insurance authorizing insurers to pursue subrogation claims, the insurer was precluded from pursuing such claims.
The plaintiff contended that the by-laws conflicted with the master deed, which references the ability of residents to obtain their own insurance but does not expressly mandate that such insurance must contain a waiver-of-subrogation provision. The Court found that there was no conflict between the language of the by-laws and master deed. The plaintiff also argued that the by-laws constituted an unenforceable adhesion contract. The Court rejected this argument, noting that the policyholder freely chose to purchase a unit in the community and to be bound by its by-laws.
The Court therefore granted the condominium association’s motion for summary judgment.