I often come across cases that involve properties where the insured is a tenant and the landlord secures their own insurance policy on the property as well. This begs the question, which insurance carrier is responsible for the repair after a loss? In New York, the answer…both.

Way back in 1942, the owner of Alexandra Restaurant, and lessee of property in Manhattan, was insured by New Hampshire Insurance Company of Manchester against loss by fire on improvements of a structural character.1 According to the lease between Plaintiff and the landlord, the landlord was obligated to repair any damages that occurred at the property (with certain exceptions). On December 29, 1943, a fire occurred which caused $3,954.89 worth of damages. Plaintiff then submitted a claim to their insurer who conceded that Plaintiff suffered a covered cause of loss but refused to pay that sum.

The reason for the carrier’s refusal was because the landlord, pursuant to the terms of the lease, fully repaired the damage caused by the fire out of the proceeds of the landlord’s insurance policy. Defendant then made the plausible argument that no payment was due to Plaintiff because the Plaintiff did not incur any reimbursable damages and was already made whole.

The Supreme Court, Appellate Division, First Department didn’t see it that way even though this appeared to be double indemnity. The court reasoned:

The fact that improvements on land may have cost the owner nothing, or that, if destroyed by fire, he may compel another person to replace them without expense to him, or that he may recoup his loss by resort to a contract liability of a third person, in no way affects the liability of an insurer, in the absence of any exemption in the policy.

Currently, most policies have exemptions to prevent such an occurrence from happening but this policy did not. Here, the parties agreed that the insurer would pay for a ‘direct loss and damage by fire’ to property to the extent of its actual cash value. The court concluded that the Plaintiff’s contract with the landlord was wholly independent of any relation to the insurance company. The landlord’s obligation to repair in case of fire was something Plaintiff purchased with its own funds and was reflected in the amount of rent paid. Regarding subrogation, even though there was a subrogation clause in the policy, the court stated that the policy did not contain a clause specifically granting the insurer subrogation to contract rights belonging to the insured.

When trying to find a quote to leave you with involving double indemnity, my searches always led me to the 1944 movie, Double Indemnity. So, here’s a quote by Barbara Stanwyck from that movie: “He’s a big politician ain’t he? He’s a big something and it ain’t a politician.”
1 Alexandra Restaurant, Inc. v. New Hampshire Ins. Co. of Manchester, 272 A.D. 346 (1st Dep’t 1947).