Daily Development for Friday, April 14, 1995

By: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
prandolph@cctr.umkc.edu

Here are three interesting cases suggesting some unforeseen relationships arising from the relative responsibility for landlords and tenants for paying insurance premiums. The bottom line, consider carefully the clarity of relationship and the implications of the "boiler plate" in those lease provisions. Spell out the desired results in detail. Even so, under some of the cases reported, you may not get what you want, just like Mick Jagger.

LANDLORD/TENANT; INSURANCE: Tenants are co-insureds with landlords under fire insurance policies acquired by landlord and consequently not liable for negligence in subrogation actions. United Fire & Casualty Co. v. Bruggeman, 505 N.W.2d 87 (Minn.App. 1993). In a case of first impression, the court adopted the majority position in finding that the landlord and tenant are co- insureds since each has an insurable interest in the property. The tenant is deemed to share in the expenses associated with protecting the shared propriety interests by virtue of the regular monthly rental payments. When payment of rent is understood to include insurance premises, the parties' status as co-insureds renders nugatory the issue of the relative negligence of the separate interest holders. Therefore, the negligent tenants responsible for the fire damage were not liable to the insurer for the proceeds paid to the landlord. The court was careful to limit the scope of its ruling solely to the subrogation context.

LANDLORD AND TENANT; INSURANCE; PROCEEDS: Contractual provision providing that tenant would purchase fire insurance policy with landlord as loss payee and tenant would maintain and repair building required that fire insurance proceeds be paid to landlord and tenant repair building at its expense. Edwards v. Conforto, 636 So.2d 901 (La. 1993). This hotly contested case was reversed following rehearing, with three dissenters each writing dissenting opinions. The opinion noted that unjust enrichment was a possible approach to facts such as those before the court, but that it construed the contract as clearly allocating to the tenant the responsibility to insure the landlord's interest and separately undertake to make repairs where necessary. Comment: Does the court's view really reflect the probable expectations of the parties to this long term lease? Obviously, there is room to differ. It probably is an issue as to which there should be a clear rule, around which parties could bargain, but the clear rule should be the rule that reasonable parties would expect to apply absent special provisions in the contract.

Compare: American National Bank and Trust Co. v. Edgeworth, 618 N.E.2d 899 (Ill. App. 1993) (Where landlord acquires insurance and is paid proceeds after accident, landlord has duty to apply proceeds to repair, even if the lease provides that tenant must repair any damages caused by tenant's negligence and injury is caused by tenant's negligence).

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