In many of today’s commercial leases, the parties generally gloss over the insurance clauses considering them to be simply boiler plate or standard language. Generally speaking, little thought is given to the insurance clauses until in fact something bad happens. In a properly drafted Triple Net Lease, each party provides its own insurance to protect against events that will harm or interfere with a party’s business. In the recent matter of LIG Insurance Co., Ltd. v. Bonano Real Estate Group II, L.P., the Appellate Division upheld a ruling by the trial court that enforced the terms of the insurance clauses in the Lease as they were written.
In that matter, a first floor tenant suffered damage from a leaking bathroom on the second floor. After reimbursing its insured, the first floor tenant, Plaintiff the insurance carrier sued the Landlord on a claim of subrogation. Subrogation is a legal theory that permits the insurance company to step into the shoes of its insured after it has paid on the claim. The insurance company then has the standing of the aggrieved party. However, the lease properly provided for a waiver of claims between the Landlord and Tenant and required each party to obtain its own insurance. Based upon the properly drafted express terms of this Lease, the trial court dismissed the claims of the insurance company and the Appellate Division affirmed. Without such a clause the Landlord was exposed to a damage claim from the Tenant’s carrier.
Many Landlords typically use a lease that they have been using for many years without reviewing those terms and conditions on a regular basis. The case above described illustrates why a periodic lease checkup with your attorney is a good thing to protect against unintended losses and consequences of lease provisions that have not been kept up to date with the law.
Mark K. Follender is a Partner at Scarinci Hollenbeck and chair of the firm’s Real Property Tax Appeals Group, which represents private commercial property owners and municipalities throughout the State of New Jersey. Feel free to contact Mark Follender, if you would like to discuss your property tax appeal options or have questions about the article above.
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Commercial Lease Insurance Language is Upheld
Author: Scarinci Hollenbeck, LLC
In many of today’s commercial leases, the parties generally gloss over the insurance clauses considering them to be simply boiler plate or standard language. Generally speaking, little thought is given to the insurance clauses until in fact something bad happens. In a properly drafted Triple Net Lease, each party provides its own insurance to protect against events that will harm or interfere with a party’s business. In the recent matter of LIG Insurance Co., Ltd. v. Bonano Real Estate Group II, L.P., the Appellate Division upheld a ruling by the trial court that enforced the terms of the insurance clauses in the Lease as they were written.
In that matter, a first floor tenant suffered damage from a leaking bathroom on the second floor. After reimbursing its insured, the first floor tenant, Plaintiff the insurance carrier sued the Landlord on a claim of subrogation. Subrogation is a legal theory that permits the insurance company to step into the shoes of its insured after it has paid on the claim. The insurance company then has the standing of the aggrieved party. However, the lease properly provided for a waiver of claims between the Landlord and Tenant and required each party to obtain its own insurance. Based upon the properly drafted express terms of this Lease, the trial court dismissed the claims of the insurance company and the Appellate Division affirmed. Without such a clause the Landlord was exposed to a damage claim from the Tenant’s carrier.
Many Landlords typically use a lease that they have been using for many years without reviewing those terms and conditions on a regular basis. The case above described illustrates why a periodic lease checkup with your attorney is a good thing to protect against unintended losses and consequences of lease provisions that have not been kept up to date with the law.
Mark K. Follender is a Partner at Scarinci Hollenbeck and chair of the firm’s Real Property Tax Appeals Group, which represents private commercial property owners and municipalities throughout the State of New Jersey. Feel free to contact Mark Follender, if you would like to discuss your property tax appeal options or have questions about the article above.
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