A landlord may not be responsible for losses not covered by a tenant’s insurance policy – if the lease requires the tenant to obtain insurance

An insured whose loss is less than the deductible under its insurance policy may not turn to the lease to cover those losses.

Lincoln Canada Services LP v. First Gulf Design Build Inc., [2007] O.J. no. 4167, Ontario Superior Court of Justice, B.A. Conway J., October 31, 2007

Lincoln Canada Services LP (“Lincoln”) leased a building from First Gulf Design Build Inc. (“First Gulf”). A sprinkler leak occurred and Lincoln sustained a loss of $72,153.17. This was less than the deductible under its insurance policy. Lincoln sought to recover those losses from First Gulf pursuant to the lease between the parties.

First Gulf argued that section 7.01 of the Lease, which required the Tenant to maintain insurance coverage for sprinkler leakage in the name of the Tenant and the Landlord and required that the policy contain a waiver of any subrogation rights the Tenant’s insurer may have against the Landlord, prevented Lincoln and its insurers from making any claim against it for damage which is covered by the required insurance policy.

The Court found that the provision relieved the Landlord from the risk of liability for sprinkler leaks arising from the Landlord’s negligence and brought that risk under the insurance coverage to be maintained by Lincoln. The Court found that the amount of the deductible was a matter between the party and its insurer and did not change the allocation of risk as between the parties to the Lease.

This case was originally summarized by Sarah Swan and edited by David W. Pilley.

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