Western Heritage Insurance Co. v. Frances Todd, Inc.Annotate this Case
The Covenants for Berkeley’s East Shore Commercial Condominiums Owners’ Association require it to maintain a master policy of all risk property insurance coverage, naming as insured the Association, the owners and all mortgagees. “Any insurance maintained by the Association shall contain [a] ‘waiver of subrogation’ as to the Association, its officers, Owners and the occupants of the Units and Mortgagees.” Article 13.4 prohibits an individual owner from obtaining fire insurance while allowing an owner to obtain individual liability insurance. The defendants leased a Commercial Condominium for a furniture manufacturing business. The Lease required the Lessee to maintain liability insurance, naming Lessor as an additional insured but did not specify which party would carry fire insurance. Western issued an insurance policy to Eastshore for the commercial properties; each owner was a named insured. A fire erupted in the condominium leased by defendants, damaging that and other units. Western paid for the fire damage then filed a subrogation complaint against defendants, alleging the fire was caused by their negligence. The trial court concluded that the Lease contemplated that the Western policy would be for defendants’ benefit so that subrogation was inappropriate. The court of appeal affirmed, concluding that defendants reasonably expected their landlord, an insured under the policy, to procure fire insurance. Western was barred from suing its own insured for negligently causing a fire, and the defendants were implied insureds under the policy, even if defendants were negligent.