In St. Paul Mercury Ins. Co. v. The Viking Corp., No. 07-1948 (7th Cir. Aug. 21, 2008), the insurer paid for damages to the insured’s building and then filed suit against a fire sprinkler manufacturer.   The insured occupied its building for six months when a fire sprinkler manufactured by Viking was activated and caused serious damage to the building.  A subcontractor purchased the fire suppression system from Viking and installed the system.  There was a one year warranty on the system, but it was explicitly limited to the original purchaser, the subcontractor. 

   After St. Paul paid the insured for the water damage, it sued Viking via subrogation.  Viking moved for summary judgment.  The lower court granted the motion, concluding that a lack of privity between Viking and the insured barred St. Paul’s breach of warranty claim.

     On appeal, the 7th Circuit agreed that privity was lacking because Viking’s warranty was expressly limited to the original purchaser, the subcontractor, and did not encompass the insured, or by extension, the subrogee, St. Paul.  There was no agency relationship between the insured and subcontractor that would establish privity between the insured and Viking.  Therefore, the lower court’s order granting summary judgment was affirmed.

     Similar to St. Paul Mercury Ins. Co., Hawaii case law holds the insurer’s subrogation rights flow from the insured’s rights, and the insurer "steps into the shoes" of the insured.  State Farm Fire v. State Farm Mut. Auto., 90 Hawai`i 315, 329, 978 P.2d 753, 767 (1999).