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Shahidi v. Menz

A-5009-96T5 (N.J. Super. App. Div. 1998) (Unpublished)

LEASING; DRAFTING; INSURANCE; LIABILITY—Notwithstanding whether its insurance policy would have provided coverage, where a tenant’s obligation to indemnify its landlord is limited to incidents “within” the leased premises, no obligation is incurred for an accident, not the fault of the tenant, occurring on the roof or on a walkway outside of the leased premises.

This is an action by the owner of a commercial building against a commercial tenant, occupying only a portion of the premises, to recover on an indemnification agreement and on a breach of a promise to provide insurance coverage. The underlying negligence action arose when a door was blown by wind from a roof maintained and controlled by the owner. It crashed into a contractor that had been engaged by the tenant to remove an office machine from the leased premises while the contractor was walking between the building and its parking lot. Prior to trial of the underlying action, the owner settled with the injured party for a significant sum. The lease between the landlord and the tenant contained an agreement wherein the tenant would obtain and provide liability insurance for the benefit of the landlord “insuring the Landlord against any and all liability or claims of liability arising out of, occasioned by or resulting from any accident or otherwise within [emphasis added] the leased premises for injuries… .” The lease also contained a provision wherein the tenant agreed to indemnify its landlord “for any cause or reason whatsoever arising out of or by reason of the occupancy by the Tenant and the conduct of the Tenant’s business.” The landlord was unable to bring any evidence that its tenant contributed in any way, by act or omission, toward the cause of the accident.

The tenant obtained liability insurance but failed to name its landlord as an additional insured. It argued, however, that the landlord suffered no injury because the accident occurred outside of the leased premises and that, in negotiating the lease, it had expressly bargained for use of the emphasized word, “within,” in substitution for the form lease’s printed phrase, “in or about.” The landlord argued that the tenant’s insurance policy would have covered the accident because the scope of its coverage was not limited to incidents within the leased premises. The Court assumed that the landlord’s interpretation of the policy was correct, but held that the question was not whether coverage might have been included within the tenant’s insurance policy, but rather, whether the tenant’s admitted breach resulted in damage to the landlord. The Court ruled that the landlord was entitled to an expectation of no more coverage than that promised in the lease. Its review of case law showed that had the lease contained the phrase “in or about,” coverage may have been extended to this particular accident. However, in the case at hand, the parties specifically agreed to delete the phrase “in or about” from the lease and to substitute for it the word “within.” This left no ambiguity. Although the tenant took on some obligations with respect to the path traveled by the injured worker, the path was not part of the leased premises, and the Court found no need to search for the probable intent of the parties because the intent was clear from the lease language. Consequently, the Court enforced the lease agreement and the landlord was not entitled to coverage under the tenant’s insurance policy or to indemnification by the tenant.


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