Indiana Court Of Appeals Upholds Privity Requirement For Property Damage Claims Against Contractors

In United States Automatic Sprinkler Corp. v. Erie Ins. Exch., et al., No. 21A-CT-580, 2022 Ind. App. LEXIS 87 (Automatic Sprinkler), the Court of Appeals of Indiana (Court of Appeals) considered whether there is a privity requirement for property damage claims against contractors.

The court imposed a privity requirement. The court also addressed whether a subrogation waiver in a contract with a tenant applied to damage caused by work done outside the contract, at the landlord’s request. The court held that the waiver did not apply.

In this case, United States Automatic Sprinkler (Automatic Sprinkler) contracted with a tenant (Contract Tenant) to inspect and test a sprinkler system at a commercial building in Indiana.

The contract included a waiver of subrogation provision. The building landlord subsequently hired Automatic Sprinkler to repair a leak in the sprinkler system.

After completing the repairs, the system failed and flooded the building, causing significant property damage to several tenancies.