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Skulskie v. Ceponis

404 N.J. Super. 510, 962 A.2d 589 (App. Div. 2009)

CONDOMINIUMS; INSURANCE; SUBROGATION — A scheme created by a condominium’s master deed where a master insurance policy exists to safeguard common elements and where each unit owner has the right to obtain insurance for its own unit, contemplates no litigation between unit owners or between units owners and the association and therefore an insurer who issues a policy with a subrogation waiver to a condominium unit owner does so with the understanding that it has no recourse against a negligent, neighboring unit owner, even if that neighboring unit owner did not purchase its own insurance.

A condominium association’s by-laws required that the association obtain and maintain a policy of property and public liability insurance covering all the common elements. The by-laws also required that all property and liability insurance policies purchased by the association or any unit owner contain a provision that the insurer waive its rights of subrogation as to any claims against unit owners or the association. A condominium unit owner suffered water damage to his unit. He alleged that the damage was caused by a leak from the shower of the unit located on the floor above his unit. His homeowners insurance policy included the subrogation waiver provision. He submitted a claim to his insurer.

The insurer paid to repair the damage and then sued to recover from the upstairs owner (who had no insurance) and from the condominium association. The uninsured owner and the association filed separate motions for summary judgment to dismiss the complaint. Each argued that the subrogation waiver provision barred the action. The suing insurer responded that the failure of the upstairs owner to purchase insurance permitted the action. The lower court granted both motions for summary judgment, finding no legal authority to support the insurer’s position. The insurer appealed.

The Appellate Division affirmed, finding no basis to allow an insurance carrier that issues a policy containing a waiver of subrogation clause to a condominium unit owner to sue another unit owner, even if uninsured. It ruled that the scheme created by a residential condominium community, where a master policy exists to safeguard common elements and where each unit owner has the right to obtain insurance for its own unit, contemplates no litigation between unit owners or between unit owners and the association. Additionally, the Court held that an insurer who issues a policy with a subrogation waiver to a condominium unit owner does so with the understanding that it has no recourse against a negligent, neighboring unit owner.


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