Insured & Insurer Had no Right Against Tenant for Failure to Provide Notice

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After a hailstorm that impacted a shopping plaza in Colorado Springs where Defendant Dillon Companies, LLC (“King Soopers”) operates a store, the owner of that shopping area, H. Plaza, LLC (“Plaza”) had the roofs of its property examined and ultimately contracted to have the roof replaced. Plaza then sought coverage for the roof from its insurance provider, Plaintiff Zurich American Insurance Co. (“Zurich”). Zurich, acting as the Zurich American Insurance Co., as subrogee of H. Plaza, LLC v. Dillon Companies, LLC, dba King Soopers, Civil Action No. 20-cv-2183-RM-MEH, United States District Court, D. Colorado (March 30, 2022) sued the tenant to recover the amounts paid by Zurich to replace a roof based on King Soopers’ obligations under the lease with H. Plaza, LLC.

BACKGROUND

King Soopers is a tenant in the Plaza property where it has operated a store for almost 20 years. King Soopers and Plaza entered into a detailed, 20-year lease in 2002 that delineated both landlord’s and tenant’s responsibilities for maintenance and insurance coverage, among other things.

SUBROGATION

By paying a debt that rightfully belongs to another, the subrogee has created a windfall for the debtor. 

BREACH OF CONTRACT

As the plaintiff, Zurich must carry the burden of proving a prima facie case. The performance element in a breach of contract action means substantial’ performance.

King Soopers asserts that it was entitled to notice of any breach under the “Default” provisions of the lease, and it argues that it never received any such notice.

The lease required the Landlord shall first have given written notice thereof to Tenant, and Tenant, within a period of twenty (20) days thereafter shall have failed to pay the sum or sums due.

ZURICH’S ARGUMENT IS CIRCULAR AND ABSURD

The Court was unpersuaded by Zurich’s argument, it did not receive notice of its failure to provide notice. This argument is clearly circular and absurd, but it is also unsuccessful for a simple reason.

ZALMA OPINION

Every insurance claim requires a thorough investigation by the insurer to provide the indemnity promised by the policy and to protect the rights of the insurer to pursue a subrogation claim. . Zurich’s failure to protect its rights under the insurance contract, the pursuit of King Soopers in court, asserting a theory of notice that the court concluded was circular and absurd, was a waste of time and money.

(c) 2022 Barry Zalma & ClaimSchool, Inc.

Barry Zalma, Esq., CFE, is available at http://www.zalma.com and [email protected].

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