Landlord’s insurer entitled to subrogate against tenant notwithstanding language of lease that gave tenant benefit of landlord’s insurance where lease included exception for damage caused by tenant’s negligence

Insurance law – Property insurance – Subrogation – Fire – Landlord and tenant – Commercial tenancy – Leases, share of insurance cost – Appeals – Special case

Royal Host Limited Partnership v. 1842259 Ontario Ltd., [2018] O.J. No. 2643, 2018 ONCA 467, Ontario Court of Appeal, May 18, 2018, A. Hoy A.C.J.O., R.G. Juriansz and B. Miller JJ.A.

The appellant owned a multi-story commercial building in which it operated a hotel. The respondents leased a portion of the building in which they operated a restaurant. A fire broke out in the respondents’ kitchen causing extensive damage to the building. The appellant was indemnified by its insurer for its losses and its insurer commenced a subrogated action seeking recovery of the amounts paid to the appellant.

The respondents took the position that the terms of the lease prevented the appellant from bringing the action even if the fire had been caused by their negligence. The respondents brought a motion by way of a special case seeking a determination of the issue. The motion judge concluded the lease barred the appellant’s insurer from bringing a subrogated action against the respondents.

The Court of Appeal reviewed the lease and concluded that, notwithstanding an obligation on the landlord to purchase and maintain fire insurance on the building and the tenant’s agreement to pay its proportionate share of the cost, the tenant remained liable for its own negligence. In the result, the appeal was allowed and the stated case answered in the negative.

This case was digested by Cameron B. Elder, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please contact Cameron B. Elder at [email protected].

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