December 2, 2019

On February 7, 2015, a fire ripped through a 5 Napkins Restaurant on South Florida’s popular outdoor retail strip on Lincoln Road in South Beach. The damages to the building were extensive and ultimately caused the restaurant to close. Michael B. Stevens, Esq., and Mary Grecz, Esq., from Derrevere Stevens Black & Cozad filed a subrogation lawsuit on behalf of the landlord’s carrier, Zurich American Insurance Company, against a number of contractors involved with the maintenance and installation of the hood system, fire suppression system, and its insured’s tenant, Puccini, LLC. The tenant immediately moved to dismiss the Complaint on the basis that, while not a named insured under Zurich’s insurance policy, they should be considered an implied co-insured and, therefore, Zurich should be barred from subrogating against them. The trial court ultimately agreed with the tenant and dismissed Zurich’s lawsuit with prejudice. An appeal was then taken by Zurich to the Third-District Court of Appeal.

On appeal, Zurich’s primary argument was that the trial court had used the wrong standard to evaluate whether the tenant should be considered an implied co-insured under the Zurich policy. In dismissing the Complaint, the trial court had relied heavily on the fact that part of the tenant’s rent was used to pay a portion of the premiums for the Zurich policy. The trial court all but ignored the remainder of the lease which placed the risk of loss for a fire on the tenant and never shifted it back to the landlord. The Third-District Court of Appeal, in reversing the trial court, utilized the “Case-By-Case” approach, and found that when looking at the lease as a whole, even though a portion of the premium was paid for with the tenant’s rent, it was clear that the intent of the parties was for the tenant to bear the risk of loss in the event of a fire. The tenant thereafter sought review by the Florida Supreme Court which ultimately declined jurisdiction on September 10, 2019, thereby sending the case back down to the trial court for Zurich to continue its pursuit of the tenant.