INSURANCE-RELATED COURT CASES
Digested from case reports published online
COURT DECISIONS
Insurer can’t subrogate
In 2014, C.H. Yarber Construction entered into an agreement with Profile Properties to lease property in Cheyenne, Wyoming. The leased property contained an office facility, two warehouses, and approximately three-and-a-half acres of fenced yard space encompassing the buildings. Pursuant to the lease agreement, in addition to the $7,000 monthly rent, C.H. Yarber agreed to pay the full expense of Profile’s blanket insurance policy, which included commercial general liability insurance and “[f]ire and extended coverage insurance on the Building[.]” Profile agreed to furnish a copy of the blanket insurance policy with the invoiced expense to C.H. Yarber.
C.H. Yarber ran a metal fabrication business on the leased property that involved the welding, cutting, and grinding of metal. In the late afternoon of December 5, 2016, C.H. Yarber’s employees detected a fire on the property and called the Laramie County Fire District No. 1 (LCFD1). After making efforts to suppress the fire and taking thermal readings, LCFD1 determined that the fire was out and left the area. C.H. Yarber’s employees left soon after. Several hours later the property became engulfed in flames. The metal fabrication shop was destroyed.
West American paid the damages caused by the fire in accordance with Profile’s policy. In November 2020, West American filed a complaint in subrogation against C.H. Yarber alleging claims of negligence and breach of contract. C.H. Yarber moved for summary judgment on West American’s claims. In granting summary judgment the district court adopted a rule that holds that a tenant, as a matter of law, is an implied coinsured under its landlord’s fire insurance policy unless the landlord and tenant expressly agreed otherwise. The district court concluded that Profile’s lease agreement with C.H. Yarber did not expressly require C.H. Yarber to carry fire insurance and, because C.H. Yarber was also required to pay for Profile’s blanket insurance policy that covered fire losses, C.H. Yarber was an implied coinsured under Profile’s policy, thus precluding West American from filing its claims in subrogation. West American appealed.
On appeal, the court noted that a paragraph of the lease directly addressed Profile’s and C.H. Yarber’s intent concerning the risk of fire loss. It stated:
Commencing on the Commencement Date and continuing during the Term hereof, Tenant shall bear the sole expense, under Profile Properties, LLC blanket insurance policy and at Tenant’s actual cost invoiced by Landlord, the following insurance:
Property Insurance. Fire and extended coverage insurance on the Building, improvements and fixtures on the Premises in amounts equal to the replacement cost thereof.
Liability Insurance. Commercial general liability insurance with a minimum combined single limit for bodily injury, personal injury, loss of life and property damage of not less than $1,000,000.
Tenant’s Insurance Policies. The original of the insurance policy or policies shall remain in possession of Landlord; provided, however, Landlord shall deliver a copy of the policy with the invoiced amount to the Tenant upon obtaining said insurance. A certificate of insurance shall be issued naming Landlord as a loss payee and an additional insured on the policy or policies, as applicable, and providing Landlord with thirty (30) days’ prior notice of any cancellation or termination of the policy or policies. Tenant’s insurance policies shall be deemed primary over any policy maintained by Landlord with respect to any act or omission caused by Tenant or Tenant’s agents, employees or contractors. The coverage required above may be maintained under one or more blanket policies and may contain commercially reasonable deductibles.
Tenant will furnish Landlord a Certificate of Insurance annually reflecting the above.
According to the court, the paragraph unambiguously required Profile to obtain a blanket insurance policy that protected against fire losses in an amount equal to the replacement cost of “the Building, improvements, and fixtures on the Premises.” C.H. Yarber had to pay the “sole expense” of that policy. And Profile had to provide C.H. Yarber a copy of the blanket insurance policy along with an invoiced amount. Though the lease contained other provisions that addressed C.H. Yarber’s general obligations to maintain the property in good condition and hold Profile harmless for property damage C.H. Yarber might cause through its negligence, the court said that this specific plain language supported its conclusion that Profile intended to look solely to its blanket insurance policy to cover any losses from fire. Because the lease proved that Profile did not intend to look to C.H. Yarber to cover the insured loss, West American could not pursue its claims against C.H. Yarber in subrogation.
The judgment of the district court was affirmed.
West American Insurance Company v. Black Dog Consulting, Inc., d/b/a C.H. Yarber Construction—State of Wyoming Supreme Court—No. S-23-0052—November 9, 2023.
