In Agra-By-Products, Inc. v. Agway, Inc., 347 N.W.2d 142 (N.D. 1984), Agway leased land and buildings from Agra.
The lease provided that certain property insurance would be kept in force, and Agway would reimburse Agra for all insurance premiums on the property. However, the insurance coverage was for less than the actual value of the buildings. After a fire damaged the leased buildings and other adjacent property, Agra sued Agway.
The Court first concluded Agway was a co-insured under Agra's property insurance and subrogation was therefore barred. Id. at 146-50.
The Court further concluded, however, that Agway was not absolved of liability for losses exceeding the insurance coverage:
Looking to the lease, we find no agreement as to the procurement and maintenance of a specified level of insurance. Agway agreed to reimburse Agra for "all insurance premiums of any nature of kind paid by Agra for said insurance on the buildings" subject to the lease; "said insurance" referring to the insurance provisions in full force and effect as shown by the policy of insurance attached to the lease. Agra did not agree "to insure the premises against loss by fire to the extent of the fair insurable value thereof." See City of Deland v. Dri-Clime Lamp Corp., 348 So. 2d 1239, 1242 (Fla. App. 1977). The terms of the lease cannot be construed to absolve Agway from liability for its negligence in causing Agra's uninsured loss. We conclude that Agway is limited in its protection under the lease to the extent of insurance coverage provided for by "the insurance provisions in full force and effect as shown by policy of insurance attached to and made a part of the lease." We construe this provision to include all insurance, in effect at the time of the fire, purchased by Agra on the leased property during the term of the lease with Agway.
We hold, as a matter of law, that the provisions of the parties' lease absolve Agway from liability to Agra for fire damage caused by Agway's negligence to property subject to the lease, but only to the extent of insurance coverage purchased by Agra provided by the insurance policy or policies in force and effect for the property under lease to Agway. (Agra-By-Products, 347 N.W.2d at 151-52.)