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Buildings insurance and the negligence of tenants

Buildings insurance and the negligence of tenants


Adrian Bingham

Adrian Bingham Partner

Insurers and landlords may look to a tenant to indemnify them if damage to a building happens as a result of the tenant’s negligence. The formulation of the insurance provisions in the lease are crucial, and this is key for solicitors to address when negotiating and drafting the lease.

In a lease it is usual for landlords to contract to provide buildings insurance to cover risks such as fire, water damage, lightning, explosions, storm damage, and malicious damage, among others. These risks are covered whether these are accidental or by negligence. In return for this obligation being carried out by the landlord the tenant will usually pay a proportionate amount to meet the landlord’s insurance premium payments.

The insurance will usually pay out for the repair and/or reinstatement of the building or premises and all of the costs that arise out of that task, as well as covering the landlord for a period of lost rent.

Provided the tenant has not done anything which invalidates the insurance, the tenant’s usual obligations including paying rent and carrying out maintenance obligations, will be suspended, at least for a period. Whether or not the insurance is invalidated will be a matter for the insurance contract, but most often only deliberate or reckless actions will cause invalidation.

The question that many insurers may ask is whether, if the manifestation of the insured risk has been as a result of the tenant’s negligence, they can by subrogation recoup from the tenant the insurance monies that they have paid out to the landlord. Perhaps, to take an example from the case of Frasca Judd v Golovina in 2016[1], the tenant has turned the heating off and the pipes have frozen and burst despite the fact that the lease required her to leave the heating on if she was away.

Landlords may ask themselves a similar question; can they seek damages from the tenant as a result of the tenant’s negligence causing the damage to their property?

The “Mark Rowlands Rule”

The Court of Appeal looked at these questions in detail in the case of Mark Rowlands v Berni Inns Ltd[2] and came to a decision now known simply as the “Mark Rowlands Rule”. In this case a fire started in a building in Leeds as a result of the tenant’s negligent storage of flammable material. The tenant only occupied the lower ground floor and part of the ground floor, but the fire spread throughout the whole building.

The Court held that the fact that the tenant had an obligation to pay an amount for the insurance premiums to the landlord indicated that the tenant was not expected to seek separate and additional insurance cover and would not be liable for any loss or damage caused to the building during the tenancy which was insured. Moreover the lease, on the triggering of the insurance provisions, released the tenant from obligations such as paying rent and keeping the premises in good repair so it was deemed to be clear that the tenant was also, even if not expressly named in the policy, a beneficiary of the insurance policy.

By virtue of being advantaged by the policy whilst indirectly paying for its premiums a subrogated claim could not be brought against the tenant.

Likewise the tenant had already paid, by reimbursing the landlord, for the insurance premiums covering the risk emanating from his or her potential negligence. The tenant should not therefore pay for its negligence a second time or be pursued by the landlord for damages; the insurance monies alone indemnify the landlord.

In Frasca-Judd v Golovina, mentioned briefly above, the lease did provide that the landlord must insure the property, but the tenant was not paying insurance rent. However there was a clause in the lease which required Ms. Golovina to compensate the landlord in the event of fire. The same clause was not present for water damage. Therefore the High Court deemed that the parties had intended that in the event of water damage, even as a result of the tenant’s negligence, no subrogated claim could be brought and the damage was to be compensated by the insurance monies only.

The Court also concluded that a covenant by the landlord to the tenant to insure the demised premises in return for mutual obligations by the tenant was an important indicator that the parties intended that the tenant need not take out insurance for the risk covered by the landlord, and that the tenant would not be liable for any loss or damage suffered by the landlord falling within the scope of what the landlord had agreed to cover.

Understanding exactly what is insured

Both parties should understand fully what the lease requires to be insured and what the consequences of that are. This was dealt with in the case of Prezzo v High Point Estates Ltd[3], a case where the landlord did manage to pursue the tenant for damages resulting from a fire for which the tenant was responsible.

The tenant only occupied a part of the building., and the lease obliged the landlord to insure only the tenant’s premises. The tenant did not have the benefit of the landlord’s insurance cover for any other part of the building, and in consequence was liable for the damage which their negligence caused to the entirety of the building, not just the premises which they occupied.

It is crucial that both landlords and tenants understand the insurance provisions which they are entering in to, and it is especially important for tenants so that they are not held liable for damage to a building or complex which they only occupy a proportion. The landlord will also obviously want to be sure that they can recoup all of the losses which occur as a result of damage to their building. 

This article was co-authored by Edward Knox, Trainee Solicitor at Ince

[1] Frasca-Judd v Golovina [2016] EWHC 497 (QB)

[2] Mark Rowlands Ltd v Berni Inns Ltd [1985] 3 All ER 473

[3] Prezzo Ltd v High Point Estates Ltd [2018] EWHC 1851 (TCC)

Article authors:

Adrian Bingham

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