Tenant's Insurance Policy Fails to Meet Lease Requirements

June 29, 2009
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Facts: An insurance company filed a lawsuit against a landlord. The landlord had filed a third-party action against a tenant relating to a lease. The tenant, who signed a lease with the landlord to operate a restaurant in an office building, had an insurance policy that listed the landlord as an additional insured. The policy also included an endorsement that excluded commercial general liability coverage to an additional insured for its own acts or omissions. One of the tenant’s employees was injured after repairing the HVAC system located on the building’s roof by slipping on the roof while climbing over the roof joint. The tenant filed a lawsuit against the landlord. A trial court ruled that the tenant did not breach the lease because the tenant had no obligation under the lease to insure or indemnify the landlord for his own negligence. The landlord appealed.

Decision: An Illinois appeals court reversed the trial court’s judgment and sent the case back to the trial court to also address damages, if warranted.

Reasoning: The appeals court reasoned that the insurance provision in the lease agreeing to name the landlord as an additional insured on the tenant’s comprehensive general liability insurance policy covering all losses notwithstanding any act or negligence of the tenant or landlord was enforceable. Further, the tenant’s policy failed to meet the requirements of the lease because the endorsement overrode the policy, thereby eliminating insurance covering the tenant for its own acts and omissions.

n Clarendon America Insurance Company v. Prime Group Realty Services, Inc., March 2009