In Moran-Alvardo v. Nevada Court Realty, LLC, the plaintiff fell on snow and ice in the parking lot of a strip mall where Dunkin Donuts was a commercial tenant. Plaintiff sued Dunkin Donuts and the strip mall owner due to the injuries he allegedly incurred from the fall. Subsequently, the strip mall owner filed a third-party complaint against Dunkin Donuts pursuant to a contractual indemnification provision in its lease agreement.

In the trial court, the parties stipulated that the strip mall owner was contractually obligated to remove ice and snow in the area of plaintiff’s fall. According to plaintiff, snow and ice had not been “touched.” Thereafter, the trial court held that the strip mall owner’s failure to remove snow and ice three days after the last snow fall constituted gross negligence. The trial court also noted that the lease agreement indemnified the strip mall owner for negligence—but not gross negligence or willful misconduct. As such, Dunkin Donuts was relieved from its contractual responsibility to indemnify the strip mall owner, but Dunkin Donut’s insurer was still ordered to defend the strip mall owner.

The insurer challenged the trial court’s decision, finding that the strip mall owner was entitled to coverage under the policy’s additional insured provision. The insurer argued that it was irreconcilable to require it to provide coverage to the strip mall owner when the trial court already found that the strip mall owner was grossly negligent. Citing prior precedent, the insurer argued that its obligation to provide coverage to a named additional insured (the strip mall owner) must be “coextensive with scope of [the] tenant’s own liability.”

The Appellate Division held in favor of the insurer and reversed the trial court’s order that required defense of the strip mall owner. The Appellate Division reasoned that the lease agreement only obligated Dunkin Donuts to maintain a CGL policy naming the strip mall as an additional insured and the resultant policy expressly excluded the strip mall’s grossly negligent conduct.

Thanks to Ken Eng for his contribution to this post and please write to Mike Bono with any questions.