Many commercial leases provide for mutual waivers of subrogation in the event of a casualty loss. Essentially, if both landlords and tenants agree to surrender certain rights, their insurance companies might have to step into their shoes and sue each other for negligence or other misconduct. They accept these limitations on their right to sue because they believe they can rely on their own insurance policies to cover their property damages if there is a fire or other casualty.
In a recent case, The GAP Inc. v. Red Apple Companies Inc., 725 N.Y.S. 2d 312 (N.Y. App. Div. 2001), the lease waivers proved inadequate to protect the landlord against a suit by the tenants. In that case, GAP Inc. and Rite Aid Corp. leased first-floor space from the landlord and suffered a loss from a fire that started in the space of another tenant. They alleged that the landlord negligently failed to provide adequate fire protection equipment, in particular, a sprinkler system.
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