Details Win (and Lose) the Case
by Ron Davis
A tenant lease that seemed ideal in excusing a Connecticut shopping center owner from any negligent acts has turned out to have a significant flaw after all.
The shopping center, located in Wallingford, had leased space to the tenant for the operation of a business named Quality Auto Care. And the language of that lease became crucial after two fires occurred at the shopping center.
The first fire caused considerable damage to the shopping center structure, but somehow spared the space occupied by Quality Auto Care. But the second fire, which followed a few days later (and was set by an arsonist), consumed the entire building, causing substantial damage to Quality Auto Care’s personal property.
Quality Auto Care was insured for such a mishap, and the insurer paid the tenant $1.7 million, plus $350,000 for “lost business income.” The insurer then sued the shopping center owner for reimbursement, claiming that his negligence resulted in the losses.
In response, the shopping center owner pointed to the tenant’s lease. It stated, in part, that “there shall be no liability on the part of the landlord to the tenant…for any damage or loss to any of the foregoing from any cause or for any reason whatsoever.”
In another part of the lease, “the foregoing” was defined as “all goods, wares, merchandise, equipment, furnishings, tools, machinery, and every other property of any other nature whatsoever, stored, used, maintained or kept on the leased premises” of the tenant. And the courts concluded that the language of the lease did in fact release the shopping center owner from liability to the tenant for any negligence in causing those types of personal-property losses.
But the courts ruled that the loss of business income was another matter.
Explained the Appellate Court of Connecticut, “Economic loss, including lost business profits, is intangible, speculative in nature and certainly cannot be stored, used, maintained or kept on any premises. Because of the restrictive language of the lease, we conclude that it does not encompass intangible losses such as lost business profits.” (B and D Associates, Inc. v. Russell, 807 A.2d 1001 [Conn.App. 2002])
Decision: October 2002
Published: December 2002