MSZL&M Property Damage Group Scores Big Win in FilingDeclaratory Judgment Against Tenant to Forestall Subrogation Action Against Landlord

(February 2020) On January 3, 2018 a wet sprinkler line in the attic space of an unoccupied tenancy froze and discharged thousands of gallons of water due to weather conditions that was referenced as a polar vortex. MSZL&M was retained to represent the landlord for a tenant’s loss alleged to be in the millions of dollars. This tenant leased the neighboring space in a strip mall and, for storage, had leased the basement space under the unoccupied space. As a condition of being leased the basement space, the tenant agreed to special verbiage in the lease providing a release in favor of the landlord for all damages to its property stored in the basement.

Upon inspection of the attic space, it was determined that insulation existed between the heated space and the wet sprinkler lines. Unfortunately there was no insulation between the wet sprinkler lines and the underside of the roof. This was, admittedly, a recipe for disaster with a wet sprinkler system. We also discovered that the electric service to this commercial tenancy was disconnected when the tenant vacated, rather than revert back to the landlord’s account, resulting in no heat for the tenancy and a complete lack of any ambient heat rising into the attic space.

Though an attempt was made to negotiate a resolution based upon the lease language that provided for a complete release of the landlord based upon any damage to property within the basement space, our attorneys were met with criticism of our legal position and disregard for our client’s position. Rather than continue with discussions, MSZL&M filed a Declaratory Judgment action which laid out the legal position for our request for judicial declaration that there is no claim and any subrogation action would be moot.

While at administrative conferences with the Court, subrogation counsel threatened to “blow up” the litigation and create chaos with their filing, bringing unrelated and uninterested parties into the suit, and delay the matter until the adjustment of what would be a multi-million dollar first party claim was completed.

Rather than allow this waste of Court resources, the Judge stayed the Declaratory Judgment but confirmed that the declaratory judgment action, having been filed first, would control the case and that any subrogation action would be ancillary so the underlying facts of the Declaratory Judgment. The contract issues would be addressed immediately and the negligence action would be secondary. Rather than overcome the burden of the landlord’s defense, subrogation counsel folded their tent and went home.

Over the last several years, our Property Damage Group has taken aggressive stands on contractual issues, raising them by declaratory judgment when possible and securing dismissals of all claims in every single case. These issues have derived from waivers of subrogation, exculpatory language, and builders risk policies.