State Farm faced a big legal setback in a case tied to a fire that destroyed a building in August 2015. The ruling, handed down by the Appellate Division, Second Department on November 26, 2025, highlights a tricky legal pitfall in insurance recovery efforts when multiple parties are involved.
Here’s what happened: New Age Management, LLC owned a building that caught fire. Two businesses rented the space, Brownstones Coffee, Inc. and Country Fare Market, Inc. State Farm insured the building and paid for the damage. Naturally, State Farm wanted to get that money back by going after the tenants. But it wasn’t that simple—the tenants had their own insurers, who also sought to recover their payments by suing New Age.
The courts soon became a battlefield over “waiver of subrogation” clauses included in the leases. These clauses usually stop landlords and tenants from suing each other’s insurance companies for covered losses. When the tenants’ insurers filed lawsuits, New Age used these waiver clauses to block the claims. The lower court agreed, dismissing the insurers’ cases in July 2022.
Then things got complicated. State Farm, after seeing New Age successfully use the waiver clause as a defense, argued the opposite stance: that those same clauses should not block its recovery against the tenants. The tenants spotted this contradiction and asked the court to throw out State Farm’s claim. The court agreed with the tenants, citing the legal principle of judicial estoppel.
Judicial estoppel stops a party from making one argument to win a case and then switching to the opposite position in a related case. Since New Age had already convinced a court that waiver clauses blocked recovery, State Farm couldn’t go back on that in the same fire incident. The courts dismissed State Farm’s claims against the tenants in July 2022, and that decision was confirmed by the appellate court in November 2025.
The case sends a clear message to insurers: you have to be careful. If your insured takes a certain legal position and wins, you’re stuck with that stance in all related lawsuits. Fighting against this can backfire and kill your chance to recover money. It also shows the importance of communication between insurers and their insureds, especially when several lawsuits are happening at once.
Waiver of subrogation clauses, while common, turn into legal facts once used in court. They can protect parties from claims but also limit recovery options. This ruling reminds everyone that inconsistent legal moves in connected cases can lead to losing everything.
For insurance professionals, the lesson is straightforward: coordinate your legal strategies early, respect the positions your insured takes, and be mindful of standard lease clauses. Otherwise, you might find yourself barred from recovering what you paid out, just like State Farm did in this case.