Wade Clark Mulcahy LLP

Recently, in Errazuri v. E Food Supermarket, Inc., 228 A.D.3d 732, the Appellate Division, Second Department decided on an appeal by two co-defendants in a personal injury suit, after both were denied summary judgment by the Supreme Court. Plaintiff filed suit after she sustained injuries arising from a trip and fall on a sidewalk abutting a supermarket, and sued both the tenant supermarket and the premises owner for negligence. In its responsive pleadings, the premises owner asserted a cross-claim against the tenant supermarket for contractual indemnification, citing the lease agreement between the co-defendants. After the close of discovery, the premises owner moved for summary judgment on its cross-claim, and the tenant supermarket also moved for summary judgment seeking dismissal of the cross-claim, and both motions were denied.

On appeal, the Second Department affirmed the denial of summary judgment to the premises owner, but reversed the Supreme Court’s denial of summary judgment in favor of the tenant supermarket. In explaining its decision, the court took a very granular approach in analyzing the terms of the lease agreement. The lease agreement provided that the tenant supermarket would indemnify the premises owner for “any claims arising from any breach or default on the part of the supermarket in the performance of its obligations under the terms of the lease.” As such, the court then turned to other lease provisions to determine the responsibilities of each party.

Importantly, although the main body of the lease provided that the supermarket was obligated to make “all repairs and replacements to the sidewalks,” the court did not end its analysis there. Instead, they found a conflicting term in the rider which stated that the owner was to “make all structural repairs and the tenant is required to make only nonstructural repairs.” The court then turned to another lease provision which stated that the tenant was required to “make nonstructural repairs to the sidewalks.” Because the rider provided that in the event of a conflict between the rider and the main lease, the rider prevails, the court concluded that the totality of the lease documents established that the responsibility to perform structural repairs of the sidewalk rested with the premises owner, not the tenant supermarket. Therefore, the supermarket was not obligated to indemnify the premises owner, and the supermarket was awarded summary judgment.

This case highlights the need for defense counsel to obtain all relevant lease agreements and documents from insured tenants and landowners. When facing a contractual indemnity claim, it is critical to fully parse all lease provisions and interpret them in a way that is consistent with the rest of the agreement, as it could make all the difference in a risk transfer opportunity.