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Insuring Trouble
by Ron Davis

Failure of a tenant to provide proof of insurance on his leased shopping center property in the Fort Worth, TX, area has forced the tenantís business to shut down.

The tenant operated a dance club in Fort Worth under a long-term lease of property at the shopping center. But that lease required the tenant to carry liability insurance on that property. Moreover, the lease obligated the tenant to name the centerís owner as additional insured.

Those requirements became significant when a female patron of the dance club sued the tenant and the centerís owner. The patron claimed in her lawsuit that one of the clubís security guards injured her while she was on the premises.

The shopping center owner responded to the lawsuit by demanding proof that the tenant was carrying insurance that protected both parties. And when the tenant failed to provide such proof, the centerís owner sued, claiming breach of contract and demanding that the tenant pay any legal costs resulting from the womanís lawsuit.

The tenant then filed for bankruptcy protection. He also claimed that the shopping center owner had refused to comply with the lease terms by not providing gas service, lighting of or striping of the parking areas, and not providing electricity. He added that the common areas of the shopping center were not maintained properly.

Finally, the tenant argued that he did in fact insure the leased property. As evidence of that obligation, he provided the court with a certificate of insurance naming the shopping center owner as an additional insured.

But the injured patronís lawsuit predated the effective date of that insurance policy. On that basis, a Texas court rejected the argument of the tenant and declared the lease terminated. The tenant appealed.

A Texas appellate court upheld the lower-court decision, terminating the lease and thus requiring the tenant to defend the shopping center owner in the patronís lawsuit. Explained the judge, ď[The tenant] did not state when he had provided proof of insurance and, specifically, he did not assert that he had provided proof before [the centerís owner] notified him that the lease had been terminated. The tenantís conclusory statement is not competent evidence that he had provided proof of insurance before the lease was terminated and that he timely cured or began to cure his noncompliance.Ē (Stanton v. Forum Arlington Properties, Ltd., 2009 WL 1099454 [Tex.App.óFort Worth])

Decision: April 2009
Published: May 2009



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