Dec 15 2014

Ice and Snow Claims – Contractual Protections for Third-Party Liability Claims

Ice and snow claims present an ordinary but potentially significant risk to the commercial landlord. Since 2010, court decisions in Massachusetts have heightened this risk while at the same time limiting the landlord’s ability to seek commercial protection from others.1 While commercial landlords can still shift the risks associated with such claims through contractual language, it is important that they consider alternative contractual risk management approaches to third-party ice and snow claims.

Indemnification Provisions

One way in which commercial landlords have traditionally sought to protect themselves from third-party ice and snow claims is to require that they be indemnified for such claims by their tenants.2 Under Massachusetts law, such contracts of indemnity have typically been upheld if indemnity is the intention of the parties.[3] However, there is a statutory exception to that general rule, which holds that landlords cannot, by contract, transfer the risk of loss due to the landlord's negligence to the tenant.4 The risk of using such a provision is significant. Under Massachusetts law, not only would such a lease term not permit a landlord to be indemnified for its own negligence, but would be deemed void in its entirety.5 Accordingly, even if a third-party claim were made against a landlord solely for the tenant’s negligence, the landlord still would not be able to obtain indemnity based on such a provision.6

Historically, landlords had treated this statute as applying only to residential rather than commercial properties. However, the Supreme Judicial Court has expressly rejected this interpretation.7 Accordingly, any provision which potentially makes a commercial tenant responsible for even a portion of the landlord’s alleged negligence is considered in violation of Massachusetts law and thus unenforceable.

Insurance Provisions

One way for commercial landlords to obtain additional third-party claims protection beyond indemnity from their tenants is to require those tenants to obtain insurance and name the landlord as a primary additional insured. Commercial lease provisions requiring a tenant to acquire insurance for the benefit of a landlord have long been recognized and generally upheld in Massachusetts. The rationale applied by the courts is that “Commercial tenants tend to be more sophisticated about the terms of their leases and, unlike residential tenants, commercial tenants generally purchase liability insurance.”8 In one instance a Massachusetts court has even required a commercial tenant to reimbursement for insurance premiums paid by the landlord after the tenant failed to secure insurance in accordance with terms of its lease.9

The benefit of such a provision over indemnity is twofold. First, securing performance under an indemnity agreement is only effective if the tenant has the assets to do so, while an insurance policy provides protection regardless as to the tenant’s financial  condition. Second, as discussed above, indemnity may only be required for purely vicarious liability claims, while insurance provides the landlord with protection for all covered claims regardless of liability. This has been confirmed by the Supreme Judicial Court, which has held that the statutory limitations on indemnity do not apply to provisions requiring that the tenant obtain insurance for the benefit of the landlord.10 

Supported by a decision of the United States District Court for the District of Massachusetts interpreting Massachusetts law, the Supreme Judicial Court distinguished between an obligation to purchase liability insurance from an obligation to indemnify a landlord.11 In the U.S. District Court case, the judge rejected a commercial tenant's argument that its obligation under the lease to purchase liability insurance insuring both the landlord and the tenant violated the Massachusetts indemnification statute. The judge reasoned that, “[c]ourts in other jurisdictions have maintained the distinction between contractual terms obligating one party to carry insurance for the benefit of another and contractual terms for indemnification.”12 The Supreme Judicial Court has agreed, confirming that such provisions are enforceable.13

Leases Assigning Maintenance Obligations to Tenant

Another way in which commercial landlords can protect themselves against third-party claims is to contractually assign responsibility for ice and snow treatment and removal to a commercial tenant. In the context of a commercial lease, a landlord has a duty of care to maintain the property in safe condition, with attendant liability if he does not, in only two circumstances:

  1.  if the landlord has undertaken the duty pursuant to the terms of the lease, or
  2. if the location of the defect causing the injury was in a common or other area appurtenant to the leased premises “over which the [landlord] had some control.”14 

Absent these circumstances, third-party negligence claims against landlords fail for lack of duty.15

The central document which will establish the scope, or absence, of a duty to third parties will be the lease between the landlord and its tenant(s). Therein, a landlord may apportion some, or all, of the maintenance obligations to its tenant(s). Such language, if clear, is to be interpreted consistent with the parties’ intent; meaning that if the landlord expressly states that responsibility for removal of ice and snow rests with the tenant, absent behavior to the contrary, that will establish the absence of a duty on the part of the landlord.

Third parties often seek to circumvent such a lease provision based on the argument that the landlord maintained “some control” over the area of the alleged defect.16 A typical assertion is that despite the lease language, the landlord nonetheless undertook certain maintenance responsibilities for the area in question.17 While this can be a question of fact, absent evidence of such conduct, the mere allegation alone cannot defeat a motion for summary judgment.18 

The trend in Massachusetts has been to expand landlord liability to third-parties. As a result, traditional indemnity provisions may no longer be sufficient to protect commercial property owners.  However, drafting of lease agreements containing alternative methods of risk allocation and clear language regarding maintenance responsibility can limit a commercial landlord’s exposure for third-party liability claims. 

[1] For example, in Papadopoulos v. Target Corp., 457 Mass. 368 (2010), the Supreme Judicial Court eliminated the “natural accumulation of ice and snow” defense in Massachusetts. Similarly, in Norfolk & Dedham Mut. Fire Ins. Co. v. Morrison, 456 Mass. 463 (2010), the Supreme Judicial Court limited a commercial landlord’s ability to obtain indemnity for third-party claims. 

[2] Typical indemnity provisions require the tenant to be “solely responsible for” and “indemnify and hold harmless” the landlord for claims of personal injuries and property damage occurring on the leased premises except for those “resulting from the sole negligence” of the landlord.

[3] Shea v. Bay State Gas Co., 383 Mass. 218 (1981).

[4] Mass. Gen. Laws ch. 186, § 15, states:

Any provision of a lease or other rental agreement relating to real property whereby a lessee or tenant enters into a covenant, agreement or contract, by the use of any words whatsoever, the effect of which is to indemnify the lessor or landlord or hold the lessor or landlord harmless, or preclude or exonerate the lessor or landlord from any or all liability to the lessee or tenant, or to any other person, for any injury, loss, damage or liability arising from any omission, fault, negligence or other misconduct of the lessor or landlord on or about the leased or rented premises or on or about any elevators, stairways, hallways or other appurtenance used in connection therewith, shall be deemed to be against public policy and void.

[5] Finley v. Gateway Self-Storage of Massachusetts, Inc., 57 Mass.App.Ct. 1102 (2003).

[6] Depending on the language of the provision, inclusion of the phrase “To the extent permitted by law” may allow it to operate for purely vicarious liability claims. However, no provision will not protect landlord from claim that its negligence was part of cause of injury, meaning that the landlord will have to defend itself and is subject to joint and several liability.

[7] Norfolk & Dedham Mut. Fire Ins. Co. v. Morrison,  456 Mass. 463 (2010).

[8] Seaco Ins. Co. v. Barbosa, 435 Mass. 772, 778, 779, 761 N.E.2d 946 (2002). See also Evans v. Sack, 320 Mass. 84 (1946) ( “The obligation of the lessee was to keep the building and improvements insured *472 ... for the benefit of the lessors”); Richmond v. Kelsey, 225 Mass. 209 (1916), citing Adams v. North Am. Ins. Co., 210 Mass. 550 (1912) (“[A covenant to pay insurance] like that for the payment of taxes and betterments, was inserted for the benefit and indemnity of the lessor”).

[9] Parkway Corp. v. Clark Equip. Co., 9 Mass.App.Ct. 878 (1980).

[10] Norfolk & Dedham Mut. Fire Ins. Co. v. Morrison,  456 Mass. 463 (2010).

[11] Id., citing Great N. Ins. Co. v. Paino Assocs., 364 F.Supp.2d 7 (D.Mass. 2005).

[12] Id., citing, Olympic, Inc. v. Providence Wash. Ins. Co., 648 P.2d 1008, 1011 (Alaska 1982).

[13] To obtain the fullest protection from such a provision, careful drafting of such provisions is important. Merely by way of example, the lease should require that the tenant obtain insurance which names the landlord as an additional insured, on a primary basis, without application of an “other insurance” provision. Additionally, the landlord should be cognizant of any self-insured retention or deductible requirements, and seek to have the insurance apply as to the landlord regardless as to the tenant’s payment of such amounts.

[14]  Sheehan v. El Johnan, Inc., 38 Mass. App. Ct. 975 (1995), quoting Chausse v. Coz, 405 Mass. 264, 266 (1989). See also, Humphrey v. Byron, 447 Mass. 322, 328-329 (2006).

[15] Chen v. Bram, Middlesex Superior Court, C.A. No. 09-4770-A, Decision on Summary Judgment, May 10, 2011 (Leibensperger, J).

[16] Chausse v. Coz, 405 Mass. at 266.

[17] Conversely, merely because a landlord is in control of an area does not automatically excuse a tenant’s failure to protect third-party invitees. As the Supreme Judicial Court stated in Norfolk & Dedham Mut. Fire Ins. Co. v. Morrison, “While the general rule in Massachusetts is that ‘the party in control of premises owes a duty to a lawful visitor to keep them in reasonably safe condition,’ Hopkins v. F.W. Woolworth Co., 11 Mass.App.Ct. 703, 704 (1981), ‘[m]ore recent cases have deemphasized control as the all-decisive determinant and have focused the inquiry on whether the defendant owed a duty of care to the plaintiff.’ Id. at 705. A tenant is not “automatically relieved” of a duty, either to warn or to make repairs, even where the landlord retains control of some portion of the common area, if the tenant is aware of the unsafe condition. Id., citing Monterosso v. Gaudette, 8 Mass.App.Ct. 93, 97-98 (1979).”

[18] Chen v. Bram, Middlesex Superior Court, C.A. No. 09-4770-A.

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