search the entire site.
or go to the recent opinions, or the chronological or subject indices.
Great American Insurance Company v. The Buckaroo Club (7/26/96), 921 P 2d 626
Notice: This opinion is subject to formal correction before
publication in the Pacific Reporter. Readers are requested to bring
errors to the attention of the Clerk of the Appellate Courts, 303 K
Street, Anchorage, Alaska 99501, phone (907) 264-0607, fax (907)
THE SUPREME COURT OF THE STATE OF ALASKA
GREAT AMERICAN INSURANCE )
COMPANY, Subrogee of ) Supreme Court No. S-6368
DIONISIOS MARUDAS and )
ATHINA MARUDAS, d/b/a PIZZA ) Superior Court No.
OLYMPIA, ) 3AN-92-4065 Civil
v. ) O P I N I O N
BAR CLUB, INC., d/b/a ) [No. 4373 - July 26, 1996]
THE BUCKAROO CLUB, )
Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Anchorage,
Mark C. Rowland, Judge.
Appearances: Robert L. Griffin, Law Offices
of Mason & Griffin, Anchorage, for Appellants.
A. Robert Hahn, Anchorage, and John R.
Strachan, Anchorage, for Appellees.
Before: Rabinowitz, Matthews, Compton and
Eastaugh, Justices. [Moore, Chief Justice, not
MATTHEWS, Justice, concurring.
Pizza Olympia rented a portion of a building from the Bar
Club, d/b/a/ Buckaroo Club, which did business in the remainder of
the building. A fire damaged both portions of the building. After
paying Pizza Olympia's claim, Great American Insurance Company, its
insurer, brought a subrogation action against the Bar Club,
alleging that its negligence caused the fire and Pizza Olympia's
losses. The Bar Club successfully moved for summary judgment,
prevailing on the theory that it was an implied co-insured under
Pizza Olympia's fire insurance policy, and therefore not liable in
subrogation. Great American Insurance appeals. We reverse.
II. FACTS AND PROCEEDINGS
Pizza Olympia rented a portion of a building from the Bar
Club, Inc., which occupied the other part of the building. The
lease contained a clause obligating Pizza Olympia to name the Bar
Club as a co-insured in all "liability insurance policies
pertaining to the premises." Pizza Olympia obtained an insurance
policy from Great American Insurance Company. The policy contained
an endorsement modifying the "Commercial General Liability Coverage
Part"by naming the Bar Club as an additional insured, "but only
with respect to liability arising out of the ownership, maintenance
or use of that part of the premises leased to"Pizza Olympia. The
Bar Club was not named as an additional insured under the fire
insurance portion of the policy. Pizza Olympia annually provided
the Bar Club with a copy of the policy.
In 1991 a fire damaged the entire building. The Bar Club
and Pizza Olympia each individually settled with their respective
insurance companies. Great American then brought a subrogation
action against the Bar Club, alleging that its negligence caused
the fire and Pizza Olympia's losses.
The superior court held that Alaska Ins. Co. v. RCA
Alaska Communications, Inc., 623 P.2d 1216 (Alaska 1981), mandated
summary judgment in favor of the Bar Club. Specifically, the court
concluded that because RCA had held that a landlord's insurer could
not sue a tenant for fire damage due to that tenant's negligence,
"general principles of equity and fundamental fairness . . . would
preclude the tenant's insurer from suing the landlord . . . ."
Great American Insurance appeals.
A. Standard of Review
Summary judgment will be affirmed if there are no genuine
issues of material fact and if the moving party is entitled to
judgment as a matter of law. In re Estate of Evans, 901 P.2d 1138,
1140 (Alaska 1995). On questions of law, we are not constrained by
the superior court's decision, but instead "adopt the rule of law
that is most persuasive in light of precedent, reason, and policy."
Guin v. Ha, 591 P.2d 1281, 1284 n.6 (Alaska 1979).
The Bar Club, relying on Alaska Ins. Co. v. RCA Alaska
Communications, Inc., 623 P.2d 1216 (Alaska 1981), argues that
equitable principles dictate it should be considered an implied co-
insured under Pizza Olympia's fire insurance policy. In RCA, a
fire destroyed a building which RCA rented from Bachner Rental
Company, the building's owner. Id. at 1217. Bachner's insurer
paid Bachner for the fire loss, and then commenced a subrogation
action against RCA, contending that RCA had negligently caused the
fire. We held that RCA was an implied co-insured under Bachner's
fire insurance policy. We reasoned that it would "contradict the
reasonable expectations of a commercial tenant to allow the
landlord's insurer to proceed against it after the landlord had
contracted in the lease to provide fire insurance on the leased
premises,"and that "in a situation of this type it would be
undesirable as a matter of public policy to permit the risk of loss
from a fire negligently caused by a tenant to fall upon the tenant
rather than the landlord's insurer." Id. at 1219.
We distinguished RCA in Olympic, Inc. v. Providence
Washington Ins. Co., 648 P.2d 1008 (Alaska 1982). In Olympic, a
lease required the building's tenant, Alaskan General Incorporated
(AGI), to provide liability insurance for the building's premises,
and to name Olympic, the building's owner, as a co-insured on the
policy. Id. at 1009. AGI purchased a liability insurance policy
from Providence Washington Insurance Company (Providence), but
breached its obligation to name Olympic as a co-insured. Id. at
1009-10. A firefighter was later killed while battling a blaze at
the building. Olympic's insurer, Chicago Insurance Company
(Chicago), settled a wrongful death action with the firefighter's
estate, and then commenced an indemnification action against
Providence. Id. at 1010. After concluding that Chicago did not
derive a right of indemnification from the express provisions of
Providence's insurance policy, we held that the implied insured
doctrine did not apply:
[W]e decline to characterize Olympic as an
implied insured. The dispositive distinction
between the present case and RCA is that in
RCA the insurer seeking subrogation had
contractually agreed to insure against loss
due to fire. . . . It is from that context
which we assessed the reasonable expectations
of the parties with respect to fire loss due
to the tenant's negligence. In contrast . . .
Providence did not contractually agree to
insure against risks attributable to Olympic.
Presumably, the premiums charged by Providence
reflected only the risks expressly set forth
in the policy. We cannot say as a general
rule that such premium rates would not vary
were the landlord listed as a named insured.
Id. at 1014.
As Olympic makes clear, if the tenant, rather than the
landlord, purchases insurance, the focus shifts from the reasonable
expectations of the parties to the terms of the policy itself.
Under Olympic, a landlord is a co-insured under a tenant's fire
insurance policy only if the policy expressly so provides. This is
so because the equitable principle underlying the implied insured
doctrine is not applicable when the tenant purchases insurance.
(EN1) We therefore hold that the Bar Club is not an implied co-
insured under Pizza Olympia's fire insurance policy.
The judgment of the superior court is REVERSED and the
case is REMANDED for proceedings consistent with this opinion.MATTHEWS, Justice, concurring.
I agree with the opinion of the court and write
separately only to note an argument that was not presented. Bar
Club did not argue that Great American may not sue it because Great
American is Bar Club's liability insurer for losses arising out of
Pizza Olympia's ownership or use of the leased premises. This
argument seems to me to be both obvious and probably valid. No
implication should be drawn from the court's failure to mention it.
1. The implied insured doctrine rests on the assumption that the
tenant's rent includes the cost of fire insurance:
It has also been noted as well recognized that
the cost of insurance to a landlord for the
value of the risk is made a part of the rental
to be paid by the tenant and, thus, in
practical effect, the tenant pays the cost of
the landlord's fire insurance . . . . Since
the lessee ultimately pays for the insurance
through rent checks, he or she should be able
to benefit from that payment unless the lessee
has clearly bargained away that benefit, it
being the natural expectation of the parties
that they should benefit from what they pay
for. The rule is a common sense approach
which prevents a double recovery for the
landlord or windfall to the insurance company
which would escape liability for protection it
was paid to provide.
49 Am. Jur. 2d, Landlord and Tenant sec. 482 (1995) (footnotes