The Court of Appeal, in dismissing the appeal, held that the waiver of subrogation clause did not apply because it had to be read in connection with the declaration page of the policy. The motions judge erred in concluding that the insurer was entitled to subrogate in the name of the landlord, who was not a named insured, based only on the insurable interest of the landlord in the building.

Sooter Studios Ltd. v. 74963 Manitoba Ltd., (c.o.b. Sooter Bridal Salon) [2006] M.J. No. 11 Manitoba Court of Appeal

The insurer paid the plaintiff/landlord (the “Landlord”) under an insurance policy for fire damage to the premises (the “Premises”) leased by the defendant/tenant (the “Tenant”). The Defendant Kresz was the sole director, officer and shareholder of the Tenant. The insurer commenced a subrogated claim against the Tenant. The Defendants brought a motion for summary judgment to dismiss the claim on the basis that the insurer had no right to bring the subrogated claim. The motions judge dismissed the motion, and the defendants appealed. The Court of Appeal dismissed the appeal.

The lease did not contain an explicit provision passing the risk of fire damage caused by the tenant’s negligence to the landlord. Accordingly, the insurer was not barred from bringing the subrogated claim under the terms of the lease.

The motions judge erred in concluding that the insurer was entitled to subrogate in the name of the Landlord based only on the insurable interest of the Landlord in the building. The Landlord was not a named insured under the policy and the policy did not identify anyone as an unnamed insured. The issue of whether the Landlord was an unnamed insured was matter for trial.

Kresz was a named insured under the policy, but only in respect of a different property. The motions judge correctly concluded that the waiver of subrogation clause must be read in connection with the declaration page of the policy. As such, the waiver of subrogation with respect to the Premises did not apply to Kresz.

In the result, the appeal was dismissed, with no costs awarded to either party because the issue of subrogation remained a live issue.

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