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Insurance and Leases

Deslaurier Custom Cabinets Inc. v. 1728106 Ontario Inc. 2016 Ont CA

The landlord’s contractor caused a fire that destroyed most of the building and the tenant’s premises and property within it. The tenant’s insurer covered $10 million, but $4 million was not covered as outside the policy limits. The tenant commenced an action for the subrogated claim and the additional $4 million against both the landlord and the contractor. The landlord moved for summary judgment and was initially unsuccessful. The Court of Appeal reversed and dismissed the action against the landlord.

The lease required the tenant to insure against fire and required the tenant to add the landlord as a named insured. The lease also provided a clause by which the landlord indemnified the tenant for damage that it or its agents caused. The tenant had failed to add the landlord as a named insured. The Court of Appeal held that a provision forcing the tenant to insure would, unless the lease stipulated otherwise, cause the tenant to assume all of the risk against which the tenant was to insure. There was nothing in the lease to stipulate otherwise; the indemnification clause was interpreted to apply to matters for which there were no insurance provisions. Further, the court would not allow the tenant to benefit from its own breach of the lease; it was required to add the landlord as a named insured and did not.

Written by Jonathan Speigel Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.