      TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN


                                      NO. 03-07-00228-CV



                        Austin Independent School District, Appellant

                                                 v.

                              H. C. Beck Partners, Ltd., Appellee


    FROM THE DISTRICT COURT OF TRAVIS COUNTY, 353RD JUDICIAL DISTRICT
    NO. D-1-GV-07-000452, HONORABLE SUZANNE COVINGTON, JUDGE PRESIDING



                               DISSENTING OPINION


               Because I would affirm the summary judgment on the basis that AISD waived

subrogation rights under its contract with H. C. Beck, I respectfully dissent.

               An insurer’s right to subrogation derives from and is limited to the rights of the

insured. Trinity Universal Ins. Co. v. Bill Cox Constr., Inc., 75 S.W.3d 6, 8 (Tex. App.—San Antonio

2001, no pet.); see also National Union Fire Ins. Co. v. John Zink Co., 972 S.W.2d 839, 844

(Tex. App.—Corpus Christi 1998, pet denied) (“The subrogees stand in the shoes of the one whose

rights they claim, and the extent of the subrogees’ remedy and the measure of their rights are

controlled by those possessed by the subrogor.”). A release between the insured and the offending

party prior to the loss destroys the insurer’s rights by way of subrogation. Trinity Universal,

75 S.W.3d at 10. Therefore, if AISD effectively waived subrogation rights in its contract with

H. C. Beck, then Travelers, as subrogee, has no right of subrogation.1

       1
          AISD acknowledges in its brief that an insured has the power to terminate the subrogation
rights of its insurer, stating, “AISD does not disagree that subrogation rights may be waived or
altered by contract and that such a waiver between the insured and the offending party prior to the
loss generally destroys the insurance company’s rights by way of subrogation.”
               I agree with the majority’s holding that the contract between AISD and H. C. Beck

unambiguously required AISD to purchase an insurance policy that waived subrogation rights against

H. C. Beck for liability covered by the policy. The contract provision setting forth this requirement

states, “During both phases of the Project, [AISD] shall purchase and maintain liability and property

insurance, including waivers of subrogation.” However, the majority holds that this requirement, by

itself, is insufficient to waive AISD’s subrogation rights. In light of the intent of the parties as

expressed in the plain meaning of the agreement, I would hold that this language is sufficient to

constitute a waiver of subrogation by AISD.

               The purpose of a waiver-of-subrogation provision in a construction contract “is to

eliminate the need for lawsuits by protecting all contracting parties from property loss under the

owner’s property insurance.” Walker Eng’g, Inc. v. Bracebridge Corp., 102 S.W.3d 837, 841

(Tex. App.—Dallas 2003, pet. denied). To further illustrate the purpose of a waiver-of-subrogation

provision, the court in Walker Engineering quoted the following language:


       The only reasonably conceivable purpose of a construction contract provision placing
       an obligation on the owner to carry insurance is to benefit the contractor by providing
       him protection and exculpation from risk of liability for the insured loss . . . . The
       contract insurance provision is valuable to the contractor for the very purpose . . . [of]
       limiting the owner to insurance proceeds even though the loss was caused by the
       negligence of the contractor.


Id. at 841-42 (quoting Tokio Marine & Fire Ins. Co. v. Employers Ins. of Wausau, 786 F.2d 101, 105

(2d Cir. 1986)).

               Similarly, the only reasonably conceivable purpose of the provision in the contract

requiring AISD to obtain waivers of subrogation is to actually provide H. C. Beck with the benefit

of a waiver of subrogation rights. In construing the contract between AISD and H. C. Beck, our

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primary concern is to “ascertain the true intentions of the parties as expressed in the instrument.”

J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003). “To achieve this objective, we

must examine and consider the entire writing in an effort to harmonize and give effect to all the

provisions of the contract so that none will be rendered meaningless.” Id. The provision requiring

AISD to obtain subrogation waivers from its insurers is either an agreement by AISD to waive

subrogation rights or a meaningless contract provision.          To avoid rendering this provision

meaningless, we must interpret it as a waiver of subrogation rights. As the court observed in

Walker Engineering, the “only reasonably conceivable purpose” of this contract provision is to protect

H. C. Beck from the risk of liability from an insured loss. See 102 S.W.3d at 841.

                Travelers, as subrogee standing in the shoes of its insured, cannot have a greater right

of subrogation than AISD. See TX. C.C., Inc. v. Wilson/Barnes Gen. Contractors, Inc., 233 S.W.3d

562, 571 (Tex. App.—Dallas 2007, pet. denied) (holding that insurer’s subrogation claim is barred

as matter of law where property owner waived subrogation “because [the insurer’s] rights are limited

to [the property owner’s] rights”). AISD’s waiver therefore effectively terminated the subrogation

rights of Travelers, AISD’s insurer.2 Because I would affirm the summary judgment on that basis,

I respectfully dissent.


        2
          The question of whether AISD actually obtained a proper waiver of subrogation from its
insurer has no effect on its contractual agreement with H. C. Beck to waive subrogation rights. See
TX. C.C., Inc. v. Wilson/Barnes Gen. Contractors, Inc., 233 S.W.3d 562, 574 (Tex. App.—Dallas
2007, pet. denied) (stating that while construction contract required property owner to provide
waivers of subrogation in all separate insurance policies, whether property owner did so “might
impact the insurer’s obligation to the insured but does not impact the applicability of the waiver in
a subrogation claim”); see also Indiana Ins. Co. v. Erhlich, 880 F. Supp. 513, 520 (W.D. Mich.
1994) (stating that even if property owner breached prime construction contract by failing to include
waiver-of-subrogation provisions in agreements with subcontractors, insurer could not argue that
waiver did not apply to subcontractors because insurer “as subrogee of [the property owner], is
hardly in a position to complain” about property owner’s breach of contract).

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                                         Diane M. Henson, Justice

Before Justices Pemberton, Waldrop and Henson

Filed: March 13, 2009




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