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CC&R’s , Lease Agreements , & Insurance Policies: When A Loss Occurs in a Multi-Party Contractual Situation,

CC&R’s , Lease Agreements , & Insurance Policies: When A Loss Occurs in a Multi-Party Contractual Situation, Who Is Responsible and for What? Presented by: Larry M. Arnold Senior Partner AND Margaret R. Miglietta Partner Cummins & White, LLP • Newport Beach, CA.

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CC&R’s , Lease Agreements , & Insurance Policies: When A Loss Occurs in a Multi-Party Contractual Situation,

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  1. CC&R’s, Lease Agreements, & Insurance Policies: • When A Loss Occurs in a Multi-Party Contractual Situation, Who Is Responsible and for What? • Presented by: • Larry M. Arnold • Senior Partner • AND • Margaret R. Miglietta • Partner • Cummins & White, LLP • Newport Beach, CA

  2. Multi-Purpose Structures • Parties: • Land/owner • Tenants • Sub-Tenants • Mortgagee

  3. Common Lease Terms • Maintenance Obligations • Indemnity • Insurance • Waivers of Subrogation

  4. Lessor’s Warranties 2.2 CONDITION. Lessor . . . warrants that the . . . electrical, plumbing, fire sprinkler, lighting, heating, ventilating and air conditioning systems ("HVAC"), loading doors, . . .shall be in good operating condition . . .and that the structural elements of the roof, bearing walls and foundation of any buildings on the Premises (the "BUILDING") shall be free of material defects.

  5. Lessor Obligations -Maintenance The terms of a standard commercial lease provide no or limited obligation by Lessor to repair and maintain the premises: 7.2 LESSOR'S OBLIGATIONS. . . .it is intended by the Parties hereto that Lessor have no obligation, in any manner whatsoever, to repair and maintain the Premises, or the equipment therein, all of which obligations are intended to be that of the Lessee.]

  6. Maintenance Requirements By Lessee 7.1 LESSEE'S OBLIGATIONS.  . . . Lessee shall,. . . keep the Premises, Utility Installations, and Alterations in good order, condition and repair . . . , including, . . . all equipment . . . , such as plumbing, heating, ventilating, air-conditioning, electrical, lighting facilities, boilers, . . .fixtures, walls (interior and exterior), foundations, ceilings, roofs, floors, windows, doors, plate glass, skylights, landscaping, driveways, parking lots, fences, retaining walls, signs, sidewalks and parkways. . . .

  7. Insurance Requirements in a Standard Commercial Lease or Residential Lease

  8. Common Insurance Clauses-Lessee as the Insuring Party Article X: INSURANCE • Lessee agrees that it will . . . maintain in force fire insurance . . . for the full insurable replacement value thereof on the building of which the demised premises are a part, and on all fixtures and equipment therein of which Lessor is legal owner in good and solvent insurance companies.

  9. Insurance Clauses-Lessor as the Insuring Party Lessor agrees that it will at its cost and expense . . . maintain in force insurance, which shall be primary and non-contributing with any insurance maintained by Lessee,. . .

  10. Insuring Party-Generic (a) BUILDING AND IMPROVEMENTS. The Insuring Party shall obtain and keep in force a policy . .. in the name of Lessor, . . . insuring loss or damage to the Premises. . . . If Lessor is the Insuring Party, however, Lessee Owned Alterations and Utility Installations, Trade Fixtures, and Lessee's personal property shall be insured by Lessee under Paragraph 8.4 rather than by Lessor. . . . If such insurance coverage has a deductible clause, the deductible amount shall not exceed $1,000 per occurrence, and Lessee shall be liable for such deductible amount in the event of an Insured Loss.

  11. Lessee is Responsible for Lessee’s Own Property • PROPERTY DAMAGE. Lessee shall obtain and maintain insurance coverage on all of Lessee's personal property. . . . • BUSINESS INTERRUPTION. Lessee shall obtain and maintain loss of income and extra expense insurance in amounts as will reimburse Lessee for direct or indirect loss of earnings attributable to all perils commonly insured. . . . • . . . Lessor makes no representation that the limits or forms of coverage of insurance specified herein are adequate to cover Lessee's property, business operations or obligations under this Lease.

  12. Condominiums and HOA’s CC&R’s govern the obligations of the association and individual unit owners

  13. HOA Obligations Association Maintenance Responsibilities. The Association shall be exclusively responsible for all maintenance, repair, upkeep and replacement of the Common Area, Association Property, and the Limited Common Area . . . , and any facilities, landscaping, and structures located within such areas. The obligation of the Association . . . shall be limited to … painting, maintaining, repairing and replacing roofs, gutters, downspouts, and painting, weatherproofing and re-stucco of the exterior stucco building surfaces, if required by reason of normal wear and tear or deterioration. . . .

  14. Unit Owner Obligations Section 3. Condominium Owners' Maintenance Responsibilities. Each Condominium Owner shall be responsible for all portions of the Condominium Building which are not designated as the Association's responsibility as set forth in Section 1 of this Article. Each such Owner shall also be responsible for the interior of the Residence, including but not limited to, interior and structural walls, windows, glass, ceilings, floors, fixtures and appurtenances in a clean, safe, sanitary and attractive condition.

  15. CC&R Definition:“Common Areas” “Common Are” means all of the Properties, except the Units and individual Owner Lots, arid shall include the Limited Common Area Property owned in common by the Owners in the Condominium Project, and the Property owned by the Association designated for the common use and enjoyment of the Owners, and including all improvements and structures in such Common Area.

  16. CC&R Definition:Condominium or Unit “Condominium” shall mean a real property interest consisting of a separate interest in the space within a Unit, and an undivided interest as a tenant in common in the Common Area of the Phase in which the Unit lies.

  17. CC&R Definition:Limited Common Area “Limited Common Area”. . . shall include the space from the exterior walls of the building containing such Unit, to the as-built wall, fence, gate or other structures separating such area from other portions of the Condominium Project, or the area immediately adjacent to such Unit consisting of patios, courtyards, landscaping and walkways continuing to either the adjacent Lot line or enclosed by a wall, fence, gate, or other structure separating such area from other portions of the Common Area, including that portion of such wall, fence, gate, or other structure facing the Unit. . . .

  18. Insurance Requirements Condominium and HOA Communities

  19. CC&R Insurance Requirements for the HOA Section 1. Types of Insurance Coverage. The Association shall obtain and continue in effect the following insurance: (A) Fire and Casualty Insurance. A policy of fire and casualty insurance naming as parties insured the Association, Owners and any Institutional Holder of the Common Area, . . .for the full insurable, current replacement cost (excluding foundations and excavation. . . .) of the Common Area and all common facilities and the personal property of the Association.

  20. CC&R Insurance Requirements-Unit Owner Section 7. Owner's Obligation To Insure. Each Owner shall separately insure his or her “Unit” as defined by the Condominium Plan, and all personal property and other property and improvements within said Unit and any other item that the Association is not obligated to maintain or repair

  21. CC&R Special Limitations of Insurance Coverage (A) Property NOT Covered Exclusion Endorsement. Notwithstanding any other provision, the following items may be excluded from coverage under the Association’s insurance policies . . .: Any and all floor coverings, ceiling coverings and/or wall coverings, and any other item that is part of the Unit, Exclusive Use Common Area, or any other area as deemed by the Association. In such case it shall be the individual Owners’ responsibility to obtain insurance coverage for these items.

  22. Who Is Responsible?

  23. WhoShould Pay?

  24. Contract Entered Into By The Insured Controls A lease provision that requires one party to procure fire insurance “represents the agreement of the parties thereto that non-intentional loss by fire shall be paid from and only from the proceeds of the policy.” Liberty Mutual Fire Ins. v. Auto Spring Supply Co. (1976) 59 Cal. App. 3d 860.

  25. Contract Provisions Control “When the lease provides that one of the parties will obtain insurance for their mutual protection, their respective rights to participate in the insurance proceeds on the happening of the event insured against are determined by the lease provisions.” Parsons Manufacturing Corp. v. Superior Court 156 (1984) Cal.App.3d 1151 (no recovery by landlord’s insurer against tenant/tenant’s policy where tenant paid for fire insurance as part of rent payments)

  26. Double Insurance California Insurance Code, Section 590. A double insurance exists where the same person is insured by several insurers separately in respect to the same subject and interest.

  27. When “Other Insurance Clauses” Apply Equitable contribution claims are viable only if the insurers: (1) cover the same insured; (2) have the same level of liability; and (3) insure the same risk and interest. See, Travelers Casualty and Surety Company v. American Equity Insurance Company (2001) 93 Cal. App. 4th1142;

  28. The Same Insured This applies to the named insured, but can also apply to any additional named insureds. Therefore; Under a lease agreement providing that a tenant’s insurance also name the owner and landlord, the landlord and owner are typically insureds under their policy and under the tenant’s policy.

  29. Same Level of Liability The “other insurance” clauses must be equal: • Pro rata-policy will pay the claim equally or in proportion to the other policy's limits of coverage. • Excess-policy will not pay on the claim until the other policy's limits are exhausted. • Escape-the policy will pay nothing on the claim if any other applicable insurance exists. (Disfavored as it may result in denying an insured the benefit of the coverage he or she has purchased.)

  30. The Same Risk and the Same Interest • Insurance does not really insure the property, but more accurately the interest of the insured in the property. • Different persons may have separate insurable interests in the same property, i.e., a mortgagor and a mortgagee, a lessor and lessee. Lexington v. Allianz Insurance Company (2006) 177 Fed.Appx. 572, 2006 WL 1027013 (C.A. 9 (Cal.))

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