A commercial lease requiring the tenant to maintain insurance coverage of $2 million in a “single limit” was not the same as requiring such coverage “per incident” | Schlam Stone & Dolan LLP

On June 27, 2022, New York County Commercial Division Judge Margaret Chan issued a decision in Booston LLC v 35 West Realty Co., LLCIndex No. 654308/2019, ruling that a commercial lease that required the tenant to maintain general liability coverage of $2 million in a “single limit” allowed the tenant to maintain coverage for $2 million in total , rather than $2 million “per incident”, explaining:

“[W]here there is ambiguity as to the meaning of a lease prepared by the defendant, the ambiguity must be resolved in favor of the tenant” (Campos v 68 East 86th St. Owners Corp., 117 AD3d 593, 595 [1st Dept 2014][internal citation omitted]). Further, “it is well established that no additional liability or requirement shall be imposed on a tenant by construction unless clearly in accordance with the terms of the instrument under which it is claimed” (112 West 34th St. Assocs., LLC v 112-1400 Trade Properties, LLC, 95 AD3d 529, 531 [1st Dept 2012]lv refused 20 NY3d 854 [2012][internal citation omitted]).

Furthermore, where a lease is ambiguous and capable of different meanings, the court may look to the surrounding circumstances to determine the intention of the parties (67 Wall St. Co. v Franklin Nat. Bank, 37 NY2d 245, 248 [1975]). In this regard, “the course of the parties’ performance under the contract is considered the ‘most compelling evidence of the parties’ agreed intent'” (Federal Ins. Co. v Americas Ins. Co., 258 AD2d 39 , 44 [1st Dept 1999]).

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A review of New York case law indicates that “single limit” (or “combined single limit”) is most often used in the context of auto insurance, meaning that the coverage limit applies to the both bodily injury and property damage, unlike “split limit”, which means a separate limit for bodily injury and property damage (PrudentialProp &Cas. Co. vSzeli, 83 NY2d 681, 684 [1994]; Jones vs. Peerless, 281AD2d 888, 888 [4th Dept 2001]). Thus, in this context, “single limit” refers to the type of losses covered by the insurance as opposed to whether the insurance cover is based on one event or for all events during the course of the period. an insurance period.

Moreover, in the general context of liability, the term “single limit” has been used with “per event”, indicating that contrary to the defendant’s position, “single limit” is not synonymous with “per event”. (see for example Great N Ins. Co. v. Interior Constr. Corp., 7 NY3d 412, 416 [2006][lease provision obligated tenant, “at its own expense, to maintain a comprehensive general liability insurance policy naming [defendant] as an additional insured with coverage of at least $5 million “combined single limit per occurrence for bodily injury and property damage liability”][emphasis added]). Moreover, the fact that the provision allows alternative coverage “under an original umbrella policy”8 does not support the defendant’s interpretation. So, at the very least, the insurance provision of the lease is ambiguous as to whether the $2,000,000 coverage requirement refers to per-event coverage or comprehensive coverage.

To the extent that the insurance requirements of the lease are ambiguous as to whether $2,000,000 means all-inclusive or per occurrence, the provision should be read in favor of finding that the plaintiff has complied with the insurance provision. of the lease by providing coverage of $1,000,000 per occurrence and $2,000,000 in aggregate coverage. And, a contrary interpretation that would require plaintiff to provide $2,000,000 per occurrence coverage would impermissibly add to plaintiff’s obligations under the lease that were not clearly required by its terms (see 151 W. Assoc, v Printsiples Fabric Corp., 61 NY2d 732, 734 [1984][affirming court order denying landlord a judgment of ejectment based on the “uncertainty” regarding whether an agreement involving tenant’s creditors fell within the meaning of term “arrangement” in the lease’s bankruptcy clause]; 67 Wall St. Co. vs. Franklin Nat. Bank, 37 NY2d at 249 [construing ambiguous article of lease in lessee’s favor]).

And, significantly, the court’s interpretation is consistent with the intention of the parties based on their conduct under the lease in that the plaintiff provided insurance coverage in the amount of $1,000,000 per occurrence. and $2,000,000 in total for five years before defendant objected (see Federal Ins. Co. v. Americas Ins. Co., 258 AD2d at 44 [ “Generally speaking, the practical interpretation of a contract by the parties to it for any considerable period of time before it comes to be the subject of controversy is deemed of great, if not controlling, influence”] Kalmon Dolgin Co. v. Walnut Lanes, Inc., 27 AD2d 843, 843 [2d Dept 1967][when record indicates that tenant and its predecessor paid fire insurance premiums for seven years without objection “construction of the lease [consistent with this payment]… is entitled to great weight because it was made by the parties themselves”]).