The owner of a leased commercial premise may be able to claim fire damage from the tenant.
This appeal involved a dispute over which party - the respondent landlord or the appellant tenant - assumed risk for loss occasioned by fire. The Court of Appeal ruled that by requiring the appellant to contribute to the cost of insurance, the Offer to Lease passed the risk of loss on to the respondent.
1044589 Ontario Inc. (c.o.b. Nantucket Business Centre) v. AB Autorama Ltd., [2009] O.J. No. 3768, September 16, 2009, Ontario Court of Appeal, J.A. Laskin, J.M. Simmons, and R.G. Juriansz JJ.A.
The appellant leased a single unit in a commercial mall owned by the respondent. A fire occurred in the appellant’s unit, causing damage to the building and its contents, and interrupting the appellant’s business. The parties brought a motion seeking a determination regarding whether the respondent or its insurer was entitled to claim damages against the appellant. This question was itself dependant on whether the terms of the Offer to Lease had passed risk of loss caused by the fire on to the appellant or the respondent. For the purposes of the motion, it was assumed that the appellant’s negligence occasioned the loss. The Superior Court ruled that the appellant had assumed the risk of loss, and that the respondent was therefore entitled to pursue its claim.
The Court of Appeal disagreed, holding that the respondent had assumed risk of loss. In so ruling, the Court of Appeal turned to the terms of the Offer to Lease and the Supreme Court of Canada’s decision in Ross Southward Tire Ltd. v. Pyrotech Products Ltd., [1976] 2 S.C.R. 35. In Ross, the lease contained a condition requiring the tenant to pay for insurance, but did not contain a covenant requiring the landlord to obtain such insurance. The lease did not specifically mention insurance for losses occasioned by fire. The Supreme Court of Canada ruled that given the terms of the lease, the risk of losses caused by fire passed to the landlord and precluded a subrogated claim against the tenant for damages. The Court of Appeal found that the Offer to Lease in the case at bar was in substance identical to the lease in Ross, insofar as it required the appellant to contribute to the cost of insurance, but imposed no reciprocal obligation on the respondent. The Court of Appeal held that if a tenant is required to pay for insurance, it is entitled to the benefit of that insurance. As a result, in order for the appellant to be deprived of such a benefit, the Offer to Lease must contain a specific term to that effect.
This case was originally summarized by Kim Yee and edited by David W. Pilley.
