November 10, 2015

In the case entitled “Great Northern Insurance Company v. Interior Construction Corp., et al,” 7 N.Y.3d 412 (2006), the court narrowly construed the indemnification provision in a commercial lease.

New Water Street Corporation (the Landlord) leased a portion of the 28th floor of 55 Water Street, New York, New York, to Depository Trust & Clearing Corporation (the Tenant). The lease required the Tenant to indemnify Landlord as follows:

“Tenant shall indemnify and hold harmless Landlord … from and against any and all claims arising from or in connection with (A) the conduct or management of the Premises or of any business therein, or any work or thing whatsoever done, or any condition created (other than by Landlord) in or about the Premises during the term of this Lease …; (B) any act, omission or negligence of Tenant or any of its subtenants or licensees … or contractors; (C) any accident, injury or damage whatsoever (unless caused solely by Landlord’s negligence) occurring in, at or upon the Premises; and (D) any breach or default by Tenant in the full and prompt payment and performance of Tenant’s obligation under this Lease ….”

Tenant hired Interior Construction Corporation (“Contractor”) to renovate a portion of the premises. As part of the renovations, Contractor hired a subcontractor to work on an existing sprinkler system. During construction, a flood occurred, causing property damage to the premises of Neuberger & Berman, LLC (“Neuberger”), a tenant on the 27th floor. Great Northern Insurance Company (“Great Northern”), Neuberger’s insurance company, commenced a subrogation action to recover the monies it had paid to Neuberger on its property damage claim.

During settlement negotiations, it was determined that Landlord had been 90% at fault for the property damage and Tenant’s subcontractor was 10% at fault. Therefore, Landlord was not “solely” liable.

The Court held that the Indemnification provision in the Lease was unambiguous and enforceable, requiring Tenant to indemnify Landlord from and against any claims arising in connection with any work performed on the premises “unless caused solely by Landlord’s negligence.”

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