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Commercial General Liability ("CGL") policies typically provide two distinct benefits to policyholders: defense against potentially covered claims, and indemnity against covered claims. Because the duty to defend is broader than the duty to indemnify, it is as important, if not more important, than the duty to indemnify. <i>See, e.g., Buss v. Los Angeles Superior Court</i>, 65 Cal.Rptr.2d 366, 373, 939 P.2d 766, 773 (1997). Insurers often accept their defense obligations, however, subject to reservation of their rights to assert non-coverage. Now, with increasing frequency, insurers also are demanding reimbursement if it turns out that the liability claim was not covered.
Highlights of the latest commercial leasing cases from around the country.
There are frequently varying shades of gray between a true ground lease and a space lease, particularly in retail real estate. The true ground lease is exactly that: a lease of ground — dirt — generally for a long term where the landlord has few, if any, obligations and, in fact, few rights other than to collect a rent stream which can only be interrupted in extremely limited circumstances. A space lease, of course, provides a landlord with varying responsibilities from construction to maintenance, repair, enforcement of other tenant obligations, etc., as well as creating various landlord rights such as use restrictions, radius restrictions, continuous operation provisions, etc. Landlords often get into trouble when they blend concepts from both ground and space leases without carefully considering whether the blend actually works throughout the lease term.
By now many of us have either heard or read several articles written about compliance with the Executive Order 13224, titled "Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism" (the "Executive Order"). Although the probability of leasing or selling to any "Persons Who Commit, Threaten to Commit, or Support Terrorism," is extremely low, the consensus among the real estate bar seems to be that it is better to comply with the Executive Order and protect yourself and your client rather than risk the stiff penalties and stigma that would follow by inadvertently violating it. It is apparent that the creation of a Landlord-Tenant relationship or a conveyance of a property interest would give rise to an obligation to comply with the Executive Order, thereby triggering all of the potential liability associated with violating it.
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In the landlord-tenant arena, the issue of whether terrorism insurance must be purchased has two frequently encountered aspects. In one factual pattern, a tenant of a single-user property is required by its lease to purchase certain insurance coverage to protect both its own interest and the landlord's. Does this lease provision include terrorism insurance, as well as other types of coverage generally required on the leased premises? In another factual pattern, tenants of a multi-tenant facility must reimburse the landlord for their share of the landlord's taxes, common area expenses and insurance premiums. Do those insurance premiums properly include the landlord's cost of obtaining terrorism insurance?
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Recent cases of importance to your practice.
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The Court of Appeals recently confronted a significant zoning issue: When, and on what terms, can the state or a state agency transfer to a private entity its exemption from local zoning restrictions? In <i>Matter of Crown Communication New York, Inc. v. Department of Transportation</i> (NYLJ 2/14/05, p. 19, col. 4), a divided court held that telecommunications towers erected on state land were immune from local zoning regulations even when the much of the space on the towers had been leased to private companies. The court's decision, however, raises as many questions as it resolves.
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Rulings of interest to you and your practice.