A fire insurer asserted its subrogation rights against a security service, retained by its insured, when fire damaged extensive office space occupied by the insured wile one of the security firm’s employees was on duty. The insured had a contract with the security firm for 24 hour a day, 7 days a week protection.

The security contract between the security service and the insured waived subrogation rights, but the insurer contended that the waiver was not enforceable because no notice of the waiver was given to it prior to the loss, and that the provisions of the waiver were ambiguous and not consistent with the liability limits. The trial court found the subrogation waiver to be enforceable, and barred the subrogation action brought by the insurance company. The insurer appealed.

The appeal court noted that the security contract specified: “Client (….) hereby waives any and all rights of subrogation that any insurer of (the client) may have against (the security firm).”

The court found the provision was clear and showed that the parties intended that the insurance company for its insured would cover any loss without bringing an action for subrogation against the security firm. There was no evidence in the record to show that the security service or its insurance carriers had any knowledge of the interest of the client’s insurer as subrogee under the policy issued to the client.

The appeal court concluded that there was no ambiguity or inconsistency, and the the waiver in question was valid. There was no claim of fraud or overreaching. The parties involved were two separate corporate entities and voluntarily entered into the contract.

The judgment entered in the lower court was affirmed in favor of the security firm ad against the client’s insurer.

The Hartford, As Subrogee, Appellant v. Burns International Security Services, Inc., Et Al., Appellee. No.86-3476. Appellate Court of Illinois, First District, Fourth Division. June 23, 1988, 526 North Eastern Reporter (2d) 463.