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McInally v. Frank Investments, Inc.

A-6058-01T5 (N.J. Super. App. Div. 2003) (Unpublished)

LEASES; NEGLIGENCE; LANDLORD’S LIABILITY; INSURANCE—If a tenant wouldn’t be liable for an accident, then it doesn’t matter whether the tenant was carrying the amount of liability insurance coverage required of it under its lease.

A property owner leased a major portion of his building to a movie theater and a small portion to another tenant. He maintained offices above the theater. The parking area was not within the theater’s defined premises and was available to other occupants of the building. The theater’s lease contained an indemnification provision wherein the theater indemnified and held the landlord harmless with respect to accidents, injury or damage occurring or claimed to be occurring within the premises. The lease also contained an insurance provision requiring the theater to maintain insurance, and name the landlord as an insured for all claims, accidents, injuries and damages covered by the indemnification provision. After a theater customer fell on ice and snow in the parking lot, the landlord claimed that the theater was in violation of the insurance provision because “it had obtained an insurance policy with a $250,000 deductible, which in [the property owner’s] view did not constitute ‘comprehensive’ general liability insurance.” The lower court decided, as a matter of law, that it didn’t matter whether the theater obtained the proper insurance because the insurance was only intended to insure the theater’s obligation to the property owner. The theater was not negligent and the accident happened in the parking lot, which was not part of the theater’s premises. The Appellate Division agreed, pointing out that “there can be no legitimate claim that [the theater’s] insurance obligations under [the lease] were somehow broader than its indemnification obligations within” the same article as the indemnification provision. Here, “the indemnification obligation and the insurance obligation [ran] in tandem.” While it is true that “the contractual obligations to insure and to indemnify can be entirely separate,” it is necessary to determine the parties’ intent, including by looking at the language of the contract. Here, it was “indisputable” that the liability insurance was coextensive with the indemnity obligation.

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