The Lawyers Weekly - October 29, 2010

Insurance covenants and immunity from landlord-tenant claims

In a trilogy of decisions more than 30 years ago, the Supreme Court of Canada held that a tenant can be exculpated from claims by the landlord for loss or damage to its property, in either contract or tort, despite an otherwise enforceable covenant to repair by the tenant. That is, if either: (1) the landlord covenants to insure the property (Agnew-Surpass Shoe Stores Limited v. Cummer-Yonge Investments Ltd., [1976] 2 S.C.R. 221; and T. Eaton Company v. Smith et al., [1978] 2 S.C.R. 749); or ( 2) the tenant covenants to pay its proportionate share of the insurance premiums (Ross Southward Tire Ltd. v. Pyrotech Products Ltd., [1976] 2 S.C.R. 35).

Since the trilogy, appellate courts have consistently applied what came to be known as the doctrine of “tort immunity” to deny claims for the cost of repairing damage to hired chattel as well as real property — despite covenants to repair — under a wide variety of hiring contracts. However, trial courts have periodically misunderstood and accordingly failed to apply the doctrine.

In particular, trial judges
have misunderstood and misap-

NEO
TUYTEL

“

Appellate courts have
consistently applied
what came to be
known as the doctrine
of ‘tort immunity’ to
deny claims for the
cost of repairing
damage to hired
chattel as well as
real property...

plied the Ontario Court of Appeal’s decision in Lee-Mar Developments Ltd. v. Monto Industries Ltd., [2001] O.J. No. 987 (C.A.), and misread and failed to apply the Supreme Court of Canada (SCC)’s decision in Ross Southward.

Fortunately, such misconceptions were recently dispelled by the Ontario Court of Appeal in 1044589 Ontario Inc. v. AB Autorama Ltd., [2009] O.J. No. 3768 (C.A.).

Ross Southward v. Pyrotech

First, in Ross Southward, the lease provided: “the lessee shall pay all…insurance rates immediately when due.” But there was no covenant, by either party, to obtain or maintain the insurance coverage for which the tenant covenanted to pay the premiums. Unlike Agnew-Surpass, the lease also contained the usual tenant’s covenant to repair the premises, and covenants to leave the property in good repair.

In dismissing the landlord’s
claim against the tenant for fire
damage to its property, the SCC
stated:
“The tenant may well be
liable to answer for negligence
in other respects but, in my
opinion, it is entitled to rest in
respect of loss by fire on the dis-
charge of its obligation to pay
for fire insurance…[T]he
present case…is concerned…
with an assertion of a claim by a
tenant to benefit from its pay-
See Covenants Page 13
A man who claimed he had thousands of dollars of silk ties stolen –
twice – has been charged with insurance fraud.
Carlton Wopperer, of Washington, U.S.A., told police in January of
last year that thieves had broken into his car and stolen 212 silk ties,
worth a total of US$33,000. His insurance company paid up. Six
months later, he made a similar claim.
Wopperer’s insurers became suspicious and examined his receipts for
the ties. They discovered that most of the ties had been returned almost
immediately after being purchased. Wopperer has now been charged
with insurance fraud, according to The Seattle Times.
It’s a new take on white collar crime. — Natalie Fraser
PHOTOSAURUS / DREAMS TIME.COM
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