Contribution towards a landlord’s insurance passes with it the risk of loss
In Giddings Holdings Ltd. v. High 2014 BCSC 1658 the plaintiff sued the defendants alleging they were negligent in conducting their business thereby causing a fire that destroyed the plaintiff’s building. The defendants were tenants in the plaintiff’s commercial building. The tenancy agreement included contribution to the landlord’s building insurance coverage. Neither party had fire insurance.
The defendants applied for dismissal of the action. The defendants argued that due to their contribution towards insurance coverage the risk passed to the plaintiff and the plaintiff could not pursue the action. The court agreed and dismissed the action. In doing so the court explained that the rationale for this conclusion is that because the lessee paid for insurance, it gets the benefit of insurance coverage. To permit the landlord or the landlord’s insurer to then sue the lessee for fire loss caused by its negligence would deprive the lessee of that benefit. In this case the plaintiff’s failure to secure proper coverage, as per the tenancy agreement, was irrelevant.
This case reaffirms the often overlooked issue of the implied waiver of subrogation. Simply put, when rent includes contribution towards insurance for the risk at issue, the parties and their insurers cannot pursue the other for the loss. A party who receives the money waives, by implication, their right to sue the payer.
Case summary by: Brian Hoffmann