In this action for property damage resulting from a fire, defendant John Breza is moving for summary judgment dismissing the complaint, and plaintiff opposes the motion. Co-defendants Highland Insurance Group and George Bliss previously settled the claims against them.

The following facts are not disputed. Plaintiff Is-Ila Realty Corp. is the owner of the premises located at 517-519 Broome Street in Manhattan. Pursuant to a lease for the period August 1, 1999 through March 31, 2002, defendants George Bliss and John Breza were "co-tenants jointly and severally" occupying the ground floor space of the premises. The lease provided that the premises were to be used for "Strictly commercial use. Bicycle, skate, and electric vehicle rental and sales only."

On August 5, 1999, a fire occurred in the space occupied by defendants Bliss and Breza. On the day of the fire, plaintiff had a policy of insurance in effect with defendant Highland Insurance Group, which included property coverage for the building with a limit of liability of $400,000. The New York City Fire Department issued a report dated September 5, 2000, stating that the fire was caused by "heat from electrical equipment," and that "Exam. showed that the fire originated on the exterior of the subject's premises, in a bicycle storage lot, approx. 6 feet from the east wall, in an electric pedi-cab, in combustible material 12 volt battery. Fire extended to the pedi-cab, to several adjoining pedi-cabs, and to an outdoor wooden counter. Fire further extended to an exterior storage shed and office, and to the exterior east wall of the building. Fire was thereto confined and extinguished."

In July 2002, plaintiff commenced the instant action, seeking damages in the amount of $212,397.97. The complaint asserts a first cause of action for breach of contract against defendant Highland Insurance, alleging that Highland "offered to pay a sum in full settlement of the plaintiff's claim, far less that the monetary amount of damage and loss of income caused by the fire, and the plaintiff has refused to accept said offer." The second cause of action is a claim for negligence against co-tenants Bliss and Breza, alleging that the fire "was caused wholly and [*2]solely by reason of [their] carelessness and negligence . . . in the maintenance, operation and control of the Property occupied and under their control."

By a Stipulation of Settlement filed on June 28, 2005, the claims against Highland and Bliss were settled, with Highland paying plaintiff $35,000 and Bliss paying plaintiff $12,000. The only remaining defendant, John Breza, is now moving for summary judgment, based upon the waiver of subrogation clause in the parties' lease.

Paragraph 9 of the lease contains a waiver of subrogation provision, which in pertinent part, states as follows:

Nothing contained herein above shall relieve Tenant [Bliss and Breza as co-tenants] from liability that may exist as a result of damage from fire or other casualty. Notwithstanding the foregoing, including Owner's [plaintiff Is-Ila Realty Corp.] obligation to restore under subparagraph (b) above, each party shall look first to any insurance in its favor before making any claim against the other party for recovery for loss or damage resulting from fire or other casualty, and to the extent that such insurance is in force and collectible and to the extent permitted by law, Owner and Tenant each hereby releases and waives all right of recovery with respect to subparagraphs (b), (d) and (e) above, against the other or any one claiming through or under each of them by way of subrogation or otherwise. The release and waiver herein referred to shall be deemed to include any loss or damage to the demised premises and/or to any personal property, equipment, trade fixtures, goods and merchandise located therein.

Pursuant to this waiver of subrogation provision, "each party shall look first to any insurance in its favor before making any claim against the other party for recovery for loss or damage resulting from fire . . . and to the extent that such insurance is in force and collectible . . . Owner and Tenant each hereby releases and waives all right of recovery with respect to subparagraphs (b), (d) and (e) above, against the other or any one claiming through or under each of them by way of subrogation or otherwise" (emphasis added).

It is not disputed that in accordance with the terms of the lease, plaintiff first submitted its claim for its loss resulting from the fire, to its insured, defendant Highland Insurance Group. According to plaintiff, Highland did not offer enough to cover all of plaintiff's alleged damages and loss of income caused by the fire, so plaintiff commenced the instant lawsuit, and eventually settled with Highland, for the total sum of $35,000, which is far less than the $212,397.97 in damages originally sought in the instant action. The issue is whether plaintiff can now recover the balance of its alleged damages from defendant Breza, or whether, under the terms of the wavier of subrogation clause in the lease, plaintiff waived its rights to recover against defendant

Breza, and is limited to recovery from its insurer, regardless of the amount plaintiff received from Highland in settlement of the action.

The resolution of this issue hinges on the meaning of the word "collectible" as used in the waiver of subrogation clause, since the parties agreed to waive any claims as against each other "to the extent such insurance is in force and collectible." When the Appellate Division First Department was presented with this issue, it determined that an insured's "deductible does not fall within the category of insurance that is in force and collectible' and is therefore outside the ambit of the waiver of subrogation clause" (emphasis added). Gap, Inc. v. Red Apple [*3]Companies., 282 AD2d 119, 124 (1st Dept 2001). Reasoning that while plaintiff obtained insurance coverage for the fire loss in question, it limited its coverage by assuming a $1 million deductible, the Appellate Division held that "this uninsured segment of loss falls outside the ambit of risk insured against' for the purposes of inclusion in the waiver of subrogation clause" (emphasis added). Id at 123 (quoting Federal Insurance Co. v. Honeywell, Inc., 243 AD2d 605 (2nd Dept 1997). The First Department also cited the Court of Appeals decision in Kaf-Kaf, Inc. v. Rodless Decorations, Inc., 90 NY2d 654 (1997), which held that although the plaintiff tenant could have invoked the property damage provision in the lease "to collect any portion of its damages not covered by insurance, here the insurance policy covered all of Kaf-Kaf's damages." Id at 661. Similarly, in Federal Insurance Co. v. Honeywell, Inc., the Appellate Division Second Department held that the waiver of subrogation clause barred plaintiff from seeking the amount covered by the insurance policy, but did not bar plaintiff from seeking return of the $55,000 deductible that was not covered by the insurance policy. Id at 606.

In the instant action, the record neither shows nor suggests that the any portion of the loss for which plaintiff seeks recovery is outside the scope of plaintiff's insurance policy with Highland, i.e. an uninsured deductible as in authorities cited above. Therefore, based upon the reasoning in those authorities, plaintiff's loss is clearly covered by insurance and "collectible," as plaintiff had a policy with Highland that provided property coverage for the building up to $400,000. See Kaf-Kaf, Inc. v. Rodless Decorations, Inc., supra; Gap, Inc. v. Red Apple Companies., supra; Federal Insurance Co. v. Honeywell, Inc. The fact that plaintiff settled with Highland for far less than the policy limit cannot not alter this conclusion, as under the waiver of subrogation clause in the lease, plaintiff gave up its right to seek recovery against defendant Breza, with the idea that plaintiff would first look to its own insurance. While plaintiff could freely choose the option of settling with its insured for any amount agreed upon, plaintiff cannot use such settlement to invalidate unilaterally its wavier of subrogation agreement with defendant, and seek recovery against defendant for the balance of the loss covered by insurance. Such result would essentially render meaningless the parties' waiver of subrogation, which was intended to "reflect the parties' allocation of the risk of liability between themselves to third parties through the device of insurance." Liberty Mutual Insurance Co. v. Perfect Knowledge, Inc., 299 AD2d 524, 526 (2nd Dept 2002); see also Gap, Inc. v. Red Apple Cos., supra at 124.

Thus, as plaintiff's claim against defendant Breza is barred by the waiver of subrogation clause in the lease, defendant Breza is entitled to summary judgment dismissing the complaint as against him.

Accordingly, it is hereby

ORDERED that defendant John Breza's motion for summary judgment is granted, and the complaint is dismissed as against defendant John Breza, and the Clerk is directed to enter judgment accordingly; and it is further

ORDERED that in view of the stipulation discontinuing the action as against defendant Highland Insurance and defendant George Bliss, this action is finally disposed in its entirety.

DATED: March 14, 2006ENTER:

/s

___________________________

J.S.C.