Commercial Tenant’s Insurer May Recover Against Landlord For Lost Income But Not Property Damage
December, 2002
Facts
B and D Associates, Inc. v. Russell, 807 A.2d 1001 (Conn. App.), involved a fire within a commercial building. The named plaintiff (the case was a subrogation action by the tenant’s insurer, Hartford Fire Insurance Company), had a commercial lease, which provided in Section 24 as follows:
RISK OF LOSS. It is expressly understood and agreed between the parties hereto that all goods, wares, merchandise, equipment, furnishings, tools, machinery and every other property of any other nature be stored, used, maintained or kept on the herein leased premises by said TENANT, TENANT’s agents, servants, customers or by any other person or persons whatsoever solely at the risk of TENANT and/or any of the aforementioned persons or classes of persons; and there shall be no liability on the part of the LANDLORD to said TENANT and/or to any of said persons or classes of persons, or to anyone else for any damage or loss to any of the foregoing from any cause or for any reason whatsoever.
There were two fires at the premises. Hartford paid its insured, the tenant, $1,699,012.42 for property damage and $350,000 for lost business income. Hartford commenced this subrogation action against the landlord. The landlord moved for summary judgment, asserting, among other things, that pursuant to Section 24 of the Lease, it had no liability to the tenant (and Hartford by way of subrogation). The trial court granted the motion, finding that the lease released the landlord from liability flowing from the landlord’s negligence.
Analysis
The appellate court affirmed in part and reversed in part and remanded. The court stated that Section 24 of the Lease was “clear and unambiguous.” Section 24 “unmistakably evidences an intent to release the defendant from liability to the plaintiff, no matter how incurred, for the types of losses listed in Section 24.” Therefore, the court held that plaintiff could not recover from the landlord for property damages.
However, the court noted “that in Section 24, the phrase ‘every other property of any other nature whatsoever,’ when considered in isolation, could include damage in the form of lost business profits, Section 24 continues on and qualifies that phrase by requiring that such property be ‘stored, used, maintained or kept on the herein leased premises....’ Economic loss, including lost business profits, is intangible, speculative in nature and certainly cannot be stored, used, maintained or kept on any premises.” Therefore, the court held that plaintiff could recover from the landlord for lost business profits.
Learning Point:
It is imperative to carefully read a lease provision which one party relies upon as a defense. Although that provision may protect a party from liability for one type of claim/damage, the provision when read as a whole may not protect that party from liability for all types of claims/damages.
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