What damages are covered?
The Michigan Court of Appeals has declined to extend Labombard to preclude a tenant’s liability for all damages occasioned by the tenant’s negligence. In Antoon v. Community Emergency Medical Service, (1991), the lease agreement was silent regarding, among other things, who was to obtain fire insurance or how the risk was to be allocated.
Following a fire that occurred as a result of the tenant’s negligence, damage to the real property was covered by a policy secured by the landlord. It did not cover, however, damage to personal property or lost profits. The court held that the landlord was entitled to damages to personal property and lost profits if it could be shown that the damages were due to the tenant’s negligence.
In light of the ruling in Antoon, it appears that a landlord is entitled to recover against a tenant for damages to the landlord’s personal property and lost rental profits caused by the tenant’s negligence, although the Labombard rule would preclude the landlord from recovering for damages to the real property.
How can a landlord avoid Labombard?
The only discussion distinguishing a set of circumstances from the Labombard rule can be found in another Michigan Court of Appeals case, Stefani v. Capital Tire, (1988). In Stefani, a tenant appealed a jury verdict awarding the landlord damages following the destruction of the landlord’s building by fire, which the tenant conceded it negligently caused. The lease agreement contained the following provision: Tenant shall keep the premises fully insured against fire and casualty and plate glass damage. In Stefani, the lease was not silent on fire insurance. The tenant agreed to pay all premiums for insurance against loss by fire and to keep the premises fully insured against fire damage. The tenant could not reasonably believe that a portion of its rental payment was allocated to fire insurance premiums.
The court concluded that the lease was ‘clear and unambiguous’ regarding defendant’s duty to obtain fire insurance, and it was of no consequence that defendant did not expressly assume liability for damages caused by negligence. To avoid court battles and semantic debate, it is crucial that the lease agreement contain the express and unequivocal language discussed in Labombard and, more specifically, the key language as suggested in Stefani: Tenant shall be liable for any and all damages caused by his or her own negligence.
With this language in a lease agreement, a landlord may sleep easier at night.
Mark Masters is a senior partner with Secrest Wardle. Reach him at (248) 539-2844 or [email protected].
