A fire at commercial premises is at the center of a dispute between the insurers of a landlord and tenant
in the recently reported decision of Imperio Banquet v. Alternative Access and Mobility. The lease
required the tenant to contribute its proportionate share of the landlord’s premiums for ‘public liability,
fire and other coverages’ insurance. Other parts of the lease made it clear that the Additional Rent paid
by the tenant was for ‘Building Insurance’. The tenant was also required to obtain insurance but only to
insure the property and operations of the tenant. Moreover the tenant’s repair obligations expressly
excluded the portions of the building which were expressly the responsibility of the landlord, ‘namely
the roof, foundation, structure, outside walls and unit heaters.’ The tenant paid the additional rent. The
landlord obtained the building insurance. When a fire resulted in damage to the building as a result of
the negligence of the tenant’s employee, the landlord’s insurer attempted to subrogate. The court
granted summary judgment to the tenant, referring to Ross Southward v. Pyrotech in finding that where
the tenant contributed to the insurance obtained by the landlord, the tenant should obtain the benefit
of that insurance as it was evident that the underlying lease shifted the risk of this type of loss to the
landlord. Contractual risk shifting cases are often tricky and a close read of the underlying agreement, in
this case the lease is critical to understanding which party was to bear the risk of loss.
