Continental Ins. Co. v. Kennerson
| Decision Date | 22 September 1995 |
| Docket Number | No. 94-611,94-611 |
| Parties | 20 Fla. L. Weekly D2193, 20 Fla. L. Weekly D2255 CONTINENTAL INSURANCE COMPANY a/s/o Gulf National Life Insurance Company, Appellant, v. James R. KENNERSON, Individually, and Robert L. Higgins, Individually, and J & B Outlet, Inc., and James R. Kennerson and Robert L. Higgins d/b/a J & B Outlet, Inc., Appellees. |
| Court | Florida District Court of Appeals |
Edwin A. Scales of Lane, Trohn, Clarke, Bertrand, Vreeland & Jacobsen, P.A., Lakeland, for Appellant.
John F. Fannin and J. Clark Hamilton, Jr., of Fannin, Tyler & Hamilton, P.A., Jacksonville, for Appellees.
As a shopping center owner's insurer, Continental Insurance Company (Continental) seeks reversal of summary judgment denying recovery it seeks from shopping center tenants for fire damage it attributes to the tenants' alleged negligence. The question is whether, when a landlord agrees to bear the expense of repairing fire damage and assumes responsibility for procuring fire insurance, while the tenant agrees to and does in fact bear "its pro rata share of all costs of fire ... insurance," the parties to the lease have allocated the risk of fire to the landlord's insurer, here Continental. The trial court concluded that J & B Outlet, Inc., like other shopping center tenants, should be viewed as "a beneficiary of the fire insurance policy obtained by the Lessor," who had contracted with Continental to assume the risk of fire damage, and granted summary judgment against Continental. We affirm.
In April of 1989, appellees (collectively J & B) executed a "shopping center store lease." B & R Limited (B & R), then owner of the shopping center, was lessor. Gulf National Life Insurance Company (Gulf) subsequently purchased the shopping center from B & R, assuming B & R's rights and succeeding to B & R's obligations under the lease J & B had executed. (While itself an insurance company, Gulf acted insofar as pertinent here only in its capacity as owner and lessor of the shopping center.) The lease includes the following provisions:
Fire Damage
11. If the demised premises shall be partially damaged by fire, the damages shall be repaired by and at the expense of Lessor and the rent until such repairs shall be made shall be apportioned according to the part of the demised premises which is usable by Lessee. No penalty shall accrue for reasonable delay which may arise by reason of adjustment of insurance on the part of Lessor and for reasonable delay on account of "labor troubles," or any other cause beyond Lessor's control.
By addendum to paragraph 15 of the lease, "Additional Rent," the parties further agreed:
Lessor will, during the term of this lease, maintain fire and extended coverage insurance on the demised premises for the benefit and protection of Lessor. However, Lessee shall pay, during the term of this lease, in addition to the rent elsewhere provided herein, as additional rent hereunder, its pro rata share of all costs of fire and extended coverage insurance for the shopping center. Such pro rata share shall be in the same proportion as the total number of square feet of floor space in the demised premises bears to the total number of square feet of floor space in all buildings in the shopping center. Lessee shall pay the costs described herein within twenty (20) days of being billed therefor. Nothing herein contained shall obligate the Lessor to maintain fire and extended coverage on any improvements, equipment, merchandise, or other personal property of Lessee in the demised premises and it shall be the responsibility of Lessee to provide Lessee's own insurance on such items.
As agreed, Gulf used money furnished by J & B (among other tenants) to purchase fire insurance from Continental.
Originating in a storeroom leased to J & B, fire broke out on January 22, 1990, and damaged the shopping center. Continental paid Gulf $235,114.52 under the insurance policy for losses Gulf sustained on account of the fire. As Gulf's subrogee, Continental then brought the present lawsuit, alleging that J & B's negligence caused the fire. Without reaching the negligence question, the trial court granted summary judgment against Continental on the ground that the lease had the effect of placing the risk of fire loss on Continental, as Gulf's and J & B's insurer.
In general, an insurance company is entitled to step into the shoes of an insured it has compensated for a loss and sue any party whom the compensated insured could have sued for causing the loss. But "an insurance company cannot maintain a subrogation action against its own insured." Insurance Co. of North America v. Nezelek, 480 So.2d 1333, 1335 (Fla. 4th DCA 1985), review denied, 491 So.2d 279 (Fla.1986). Where "the obvious intent of the parties [to a lease] was to shift the risk of damages caused by fire to an insurer ... [the lessee] qualifies as an intended beneficiary under the insurance policy." U.S. Fire Ins. Co. v. Norlin Indus., Inc., 428 So.2d 325, 326 (Fla. 1st DCA 1983).
It is well established that parties to a contract may mutually agree that one party will obtain insurance as part of the bargain, to shift the risk of loss from both of them to the insurance carrier. If loss occurs, they are deemed to have agreed to look solely to the insurance, without regard to which party was negligent, and subrogation is not allowed. Housing Investment Corp. v. Carris, 389 So.2d 689 (Fla. 5th DCA 1980); Smith v. Ryan, 142 So.2d 139 (Fla. 2d DCA 1962).
Fairchild v. W.O. Taylor Commercial Refrigeration and Elec. Co., 403 So.2d 1119, 1120 (Fla. 5th DCA 1981). Accord, City of Deland v. Dri-Clime Lamp Corp., 348 So.2d 1239 (Fla. 1st DCA 1977); Smith v. Ryan, 142 So.2d 139 (Fla. 2d DCA 1962). The decision in Tout v. Hartford Accident and Indem. Co., 390 So.2d 155 (Fla. 3d DCA 1980) is not to the contrary. 1
Continental cites paragraph 10 of the lease, "Indemnity and Liability Insurance," as a reason to conclude that the insurance contemplated by the addendum to paragraph 15 was not intended for the benefit of lessees. Paragraph 10 reads, in part:
Lessee will, during the term of this lease, at its own cost and expense, maintain and provide general liability insurance for the benefit of and protection of Lessor and Lessee (said policy to name Lessor as a co-insured), in an amount not less than $200,000.00 for injuries to any one person, and not less than $500,000.00 for injuries to more than one person and for damages to property in an amount not less than $50,000.00 arising out of any one accident or occurrence. Said policy shall cover the demised premises, the sidewalks adjoining same and the other areas of the shopping center used by Lessee. The public liability policy or a certificate thereof shall be delivered to Lessor at the commencement of the term, together with proof of payment of premium and renewals not less than twenty (20) days before its expiration date. Said policy and/or certificate shall contain an undertaking by the insurer to give Lessor not less than ten (10) days' written notice of any cancellation or change in scope or amount of coverage of such policy. If Lessee fails to comply with this requirement, Lessor may obtain such insurance and keep same in effect and Lessee shall pay Lessor the cost thereof upon demand as additional rent.
In this paragraph, the lease specifies that general liability insurance 2 is to be procured for the benefit of both parties to the lease, and that they are to be named as co-insureds.
While this provision contrasts with the addendum to paragraph 15, which states that fire insurance is to be procured for the lessor's benefit and protection, the parties' complete agreement regarding possible fire damage can only be understood properly if the addendum is read together with paragraph 11, which provides that damage caused by fire "shall be repaired by and at the expense of Lessor." The parties agreed that, in the event of fire, J & B would be excused even from paying rent for damaged premises while the lessor applied insurance proceeds (under the policy J & B was billed for) to effect repairs.
The lease gives J & B notice that it is responsible for procuring fire insurance for "improvements, equipment, merchandise, or other personal property of Lessee." We reject Continental's contention that the lease imposed on J & B sub silentio the additional responsibility to procure a second policy of fire insurance covering the landlord's property it was already paying to insure. See United Fire & Casualty Co. v. Bruggeman, 505 N.W.2d 87, 89 (Minn.Ct.App.1993); Rock Springs Realty, Inc. v. Waid, 392 S.W.2d 270, 278 (Mo.1965); Sutton v. Jondahl, 532 P.2d 478, 482 (Okla.Ct.App.1975); Rizzuto v. Morris, 22 Wash.App. 951, 592 P.2d 688, 690 (1979). The parties plainly agreed to shift the risk of fire damage to an insurance company.
The present case resembles the Dri-Clime Lamp case, which arose in the wake of a fire on premises leased by the City of Deland to Keller Kitchen Cabinets, Inc. (Keller). Under the lease, "the landlord was obligated to rebuild the premises to the extent of the insurance coverage if ... damaged or destroyed by fire." Dri-Clime Lamp, 348 So.2d at 1240. The lease required Keller to procure fire insurance "in such amounts as shall be approved by the Landlord ... for the mutual benefit of Landlord and Tenant." Id. In accordance with this provision, Keller had procured and the City had approved fire insurance in the amount of $100,000. After a fire caused damage to the building in the amount of $150,000, the City sought to recover the entire amount from the lessee and its insurer ().
Marshalling authorities from other jurisdictions, the Dri-Clime Lamp court held that the City could not sue its lessee for negligence and that its recovery was limited, by virtue of...
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