Landlord Tenant Fire Insurance Liability In California
In California, courts have held a lessee is not responsible for negligently caused fire damages where the lessor and lessee intended the lessor's fire policy to be for their mutual benefit.
In Fred A. Chapin Lumber Co. v. Lumber Bargains, Inc. (1961) 189 Cal. App. 2d 613, 618-619, 622 11 Cal. Rptr. 634, the court inferred the lessor's policy was for the mutual benefit of the lessor and lessee where the lease expressly required the lessor to maintain fire insurance. (Accord, Gordon v. J. C. Penney Co. (1970) 7 Cal. App. 3d 280, 282, 284 86 Cal. Rptr. 604.)
In Liberty Mutual Fire Ins. Co. v. Auto Spring Supply Co. (1976) 59 Cal. App. 3d 860 131 Cal. Rptr. 211 (Liberty Mutual), the lessee's insurer was denied subrogation against the sublessee.
Under the lease agreements, the sublessee's rent covered the premium on the lessee's fire policy and proceeds of the policy were to be used to repair fire damages.
The court held it was "quite obvious . . . the parties to the lease and the sublease all intended that the proceeds of Liberty's fire insurance policy, maintained by the lessee at the sublessee's expense, were to constitute the protection of all parties to the lease documents against the fire loss.
This was the commercial expectation of these parties. Stated otherwise, under the facts of this case, we regard the subtenant . . . as an implied in law co-insured of the lessee, absent an express agreement between them to the contrary." (Id. at p. 865.)
The Liberty Mutual court relied on General Mills v. Goldman (8th Cir. 1950) 184 F.2d 359, 365-366 (General Mills), for the proposition that "even an implied provision for fire insurance in a lease represents the agreement of the parties thereto that nonintentional loss by fire shall be paid . . . only from the proceeds of the policy." (Liberty Mutual, supra, 59 Cal. App. 3d at p. 866.)
In General Mills, "the lease relieved the tenant . . . from liability for fire loss through its provision that on termination of the lease the tenant should return the property in good condition, ' "loss by fire . . . excepted." (Liberty Mutual, supra, at p. 866, fn. 6, quoting General Mills, supra, at p. 366.)