A Cautionary Tale for Commercial Tenants: Florida Court Holds that Tenant’s Payment of Landlord’s Insurance Premiums Did Not Entitle the Tenant to Coverage
A Florida court recently issued a decision that serves as a warning to commercial tenants who believe they are covered by their landlords’ insurance policies. The Third District Court of Appeal in Zurich American Insurance Company v. Puccini, LLC concluded that a tenant’s payment of the landlord’s insurance premiums did not make the tenant a co-insured with the landlord. Instead, the court allowed the insurance company to proceed with its $2.1 million negligence lawsuit against the tenant after the company covered the landlord’s losses from a fire.
The tenant in Puccini operated a restaurant. The lease obligated the tenant to pay the landlord’s insurance premiums. However, the lease also provided that the tenant bore sole responsibility for property damage caused by its own negligence, would hold the landlord harmless for any property damage it caused, and must maintain its own insurance. Several years into the lease, a kitchen fire caused significant damage to the property. After paying the landlord $2.1 million, the insurance company brought a subrogation lawsuit against the tenant for negligence.
The tenant sought dismissal of the insurance company’s lawsuit by arguing that its payment of the premiums made it an implied co-insured under the landlord’s fire insurance policy. Under Florida law, an insurance company may not bring a subrogation lawsuit against its own insured even if the insured’s negligence caused the loss. However, the court held that the tenant was not insured. Although the lease obligated the tenant to pay the landlord’s premiums, the court concluded based on the lease as a whole that “the clear intent of the parties was that Tenant or Tenant’s insurer would bear the risk of loss due to damage resulting from Tenant’s negligence,” and therefore “Tenant is not an implied co-insured under Zurich’s policy.”
One of the three judges considering the case strongly disagreed with the decision, stating in a dissenting opinion that the decision “departs from well-established Florida law and the modern trends across the country” and “makes no economic sense.” The dissenting judge contended that the court should follow the decisions of other Florida appellate courts that “adopt the rather unremarkable and well-established law that an insurance company cannot bring an action in subrogation against a tenant for a fire loss covered by fire insurance for which the tenant pays the premiums.” Since there is a split among Florida appellate courts on this topic, it remains to be seen whether the Puccini decision reflects a lasting development in the law or is merely an outlier.
Even if the Puccini decision does not gain wide acceptance in Florida law, it identifies issues that commercial tenants may avoid entirely with proper legal counsel. Prospective tenants considering new leases should determine whether the proposed lease obligates the landlord to maintain insurance coverage for their benefit or else procure their own insurance with the advice of legal counsel. Existing commercial tenants who do not have separate insurance coverage, especially those operating businesses like restaurants with high risk of fire or other liabilities, should consult with a legal professional to ensure that their leases actually protect them against losses.
James Jeffrey Burns is a business and commercial litigation attorney with Johnson, Newlon, & DeCort, P.A. in Tampa, Florida. He can be reached by phone at (813) 699-4859 or on the web at www.jnd-law.com.
 Zurich American Insurance Company v. Puccini, LLC, — So. 3d —, 2019 WL 454222 (Fla. 3d DCA Feb. 6, 2019).
 Id. at *5-6.
 Id. at *6 (Logue, J., dissenting).
 Id. at *6-7 (citing Continental Ins. Co. v. Kennerson, 661 So. 2d 325, 328 (Fla. 1st DCA 1995); Underwriters of Lloyds of London v. Cape Publications, Inc., 63 So. 3d 892, 896 (Fla. 5th DCA 2011)).