Fire Subrogation Action Dismissed Based on More Specific Lease Provision

COMMERCIAL PROPERTY – SUBROGATION – LEASED PREMISES
Greenwich Ins. Co. v. Volunteers of America-Greater N.Y., Inc.
(1st Dept., decided 5/21/2009)

Greenwich Insurance Company paid for fire damage to premises leased to the defendant and commenced this subrogation action to recover its payments.  The defendant's lease with Greenwich's insured, the subrogor, contained two provisions regarding the defendant's liability for damages to the leased premises -- one specific to fire damage, and one general to all damages.  Which do you think controlled?

In AFFIRMING New York Supreme's order granting defendant's motion for summary judgment, the First Department held:

Paragraph 12 of the lease, which obligates defendant to pay for damages specifically caused by fire only if the fire was "caused by [defendant's] actions," controls over paragraph 13, which generally obligates defendant to pay for any damages "caused by [defendant] or any occupant or visitor" (see Bank of Tokyo-Mitsubishi, Ltd., N.Y. Branch v Kvaerner a.s., 243 AD2d 1, 8 [1998]). Since the fire was allegedly caused by defendant's subtenant smoking in bed, and not by defendant's own actions, defendant cannot be held responsible for the cost of repairing the damage under the terms of the lease. We have considered plaintiff's other arguments and find them unavailing.

Subrogating insurers are bound by the provisions in their insureds' contracts and leases with parties who would be potential defendants in subrogation actions.  Contract or lease provisions that are more specific generally trump ones that are less specific or more general.  As in this case.