The basic issue raised on the motion by defendant French Institute Alliance Francais NYC ("FIAF") for summary judgment is whether a waiver of subrogation provision in the subject lease bars a claim by the tenant's subrogee for damages that were allegedly caused by the negligence of the owner, not in its capacity as landlord, but rather in its capacity as a fellow tenant of the building.

Plaintiff is an insurer that issued a policy (the "Policy") to Dooney Bourke, Inc. (the "Insured") with respect to space it occupied at 22 East 60th Street in Manhattan.

Said building is owned by FIAF which also occupied space therein for its educational programs. In its amended complaint plaintiff alleges that: it "anticipates paying to the insured in excess of $100,000 in connection with a loss sustained on January 23, 2005 due to a flood caused by a freeze-up of the sprinkler system"(¶ 2); that "[i]n their capacity as an occupier of the premises, (FIAF) did not use reasonable care to protect the property" (¶ 17); and that the "freeze-up and flood" were (among other claims) caused by the negligence of FIAF in "failing to maintain adequate heating in the premises"; "failing to protect against freezing in plenum space due to a lack of heating"; "failing to maintain the sprinkler system located in the premises in a safe fashion to avoid the risk of freeze-ups"; and "failing to properly and adequately supervise the work (of the persons) who maintained, serviced (and) installed the heating and sprinkler and air conditioning systems" (¶ 20).

FIAF contends that plaintiff's claim is barred because: i) the lease between it and the Insured (the "Lease") contained a clause providing for a waiver of subrogation rights; ii) the Policy contained a clause permitting the Insured to waive subrogation; and iii) FIAF also had an insurance policy that permitted a waiver of subrogation rights.

The Lease provides in relevant part:

"9. Destruction, Fire, and Other Casualty: ... Owner and Tenant each hereby releases and waives all rights of recovery ... against the other or any one claiming [*2]through or under each of them by 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. The foregoing release and waiver shall be in force only if both releasors' insurance policies contain a clause providing that such a release or waiver shall not invalidate the insurance."

Paragraph "P" of the "Property Conditions" section of the Policy provides:

"Transfer of Rights of Recovery Against Others to Us

1. If any person or organization to or from whom we make payment under this policy has rights to recover damages from another, those rights are transferred to us to the extent of our payment. ... But you may waive your rights against another party in writing: a. Prior to a loss to your Covered Property."

The liability policy obtained by FIAF provides (p. 24):

"We will waive the right of recovery we would otherwise have had against another person or organization, for loss to which this insurance applies, provided the insured has waived their rights of recovery against such person or organization in a contract or agreement that is executed before such loss."

Here the parties agreed that if the damage to the Insured's premises was due to the fault of FIAF in its capacity as landlord, the waiver of subrogation would bar plaintiff's claim (Tr. pp. 5-6), and that if FIAF were not the landlord of the building the Insured would have a valid claim against it if it were shown that the damages were due to its negligence as a fellow tenant of the building (Tr. pp. 6-7).

"Subrogation, an equitable doctrine, allows an insurer to stand in the shoes of its insured and seek indemnification from third parties whose wrongdoing has caused a loss for which the insurer is bound to reimburse. While parties to an agreement may waive their insurer's right of subrogation, a waiver of subrogation clause cannot be enforced beyond the scope of the specific context in which it appears" [Kaf-Kaf, Inc. v. Rodless Decorations, Inc., 90 NY2d 654, 660 (1997)] (internal citation omitted). See also, Duane Reade v. Reva Holding Corp., 30 AD3d 229 (1st Dept. 2006).

Waiver of subrogation claims are valid "absent any indication of overreaching or unconscionability ... (since)(s)uch clauses are viewed as a device by which the parties merely allocate the risk of liability between themselves to third parties through insurance" [Interested Underwriters at Lloyds v. Ducor's Inc., 103 AD2d 76. 77 (1st Dept. 1984), aff'd. for reasons stated, 65 NY2d 647 (1985)]. In that case, the subject lease contained mutual waivers of subrogation, but the cause of damages to the tenant's premises was a fire at an adjoining building also owned by the landlord. In holding that the waiver of subrogation provision of the lease did not bar the tenant's action against the landlord, the First Department wrote (p. 78):

"A lease should be construed in the light of the legal relationship which the parties, by entering into such an agreement, mutually assume, namely, that of [*3]landlord and tenant, and it is in the context of this limited relationship that a lease's provisions must be read. Throughout the lease and, more particularly, paragraph 9, the parties are referred to exclusively as landlord and tenant. The references to their respective rights, duties and obligations clearly limit the risks to be allocated between them to those which arise out of the landlord's ownership and the tenant's use and occupancy of the demised premises. In fact, the lease explicitly provides that the landlord's duties and obligations terminate upon the sale of the premises. In such circumstances, the new owner would be entitled to the benefit of the waiver of subrogation clause and the former landlord, though a party to the original agreement, could not claim its benefit if a fire, negligently caused, emanated from his adjoining premises and damaged the demised premises, causing the tenant to sustain a loss. We see no reason why he should be in any better position because he is the coincidental owner of the damaged premises .... (I)n executing a form lease agreement (the Real Estate Board of New York Inc.'s standard form of store lease) of which paragraph 9 was an integral part, the natural intendment of the parties was to waive their subrogation rights against each other for risks arising out of the relationship to which they were committing themselves, viz., landlord and tenant, and no other" (internal citations omitted).

It is noted that in that case the dissenting justices in the First Department, in contending that the waiver should have been held applicable, wrote that: "[i]t cannot matter to the tenant whether the landlord owns the whole building, or the whole block, or is only himself a lessee of a portion of the building," and stated that their conclusion was "not affected by the fact that the antisubrogation clause refers to the parties as LANDLORD' and TENANT!'" (pp. 80-81).

Where a party is seeking recovery that is not covered by insurance such as a deductible, "this uninsured segment of loss falls outside the ambit of risk insured against' for purposes of inclusion in the waiver of subrogation clause ... (and) (a)bsent coverage and payment of an insured loss, there is no right to subrogation and, thus, the waiver clause has no application" [The Gap, Inc. v. Red Apple Companies, Inc., 282 AD2d 119, 123 (1st Dept. 2001)]. Similarly, "(w)here a waiver of subrogation clause is limited to a specified type of loss, a subrogation action is barred only to the extent it seeks recovery for those species of losses" [Cresvale International Inc. v. Reuters America, Inc., 257 AD2d 502, 505 (1st Dept. 1999)].

While plaintiff relies heavily on the above discussed decision in the Ducor's case, I find that the holding therein mandates dismissal of the complaint. There the court stated that the determination of the issue as to whether the waiver of subrogation was applicable depended on whether the claim arose "out of the landlord's ownership and the tenant's occupancy of the demised premises" (p. 78), and that such waiver would not be enforced where "the dereliction of duty with which the defendant is charged is completely extraneous to any duty or obligation encompassed by the parties' agreement and the relationship created thereunder" (p. 77). The court ruled that any negligence of the landlord in maintaining an adjoining building is "conduct unrelated to the landlord and tenant relationship" (p. 79), and thus the waiver of subrogation did not apply thereto.

In the case at bar, however, the negligence claimed does relate to obligations created [*4]under the Lease. For example: article 4 requires FIAF to "maintain the public portion of the building, both exterior and interior; article 45-B provides that "[i]n addition to the matters set forth in article 4, Owner shall ... make all repairs to the structure of the Building and any Building systems; and article 30 requires the defendant to "furnish heat to the demised premises."

Here, if the claim resulted from a fire negligently started by FIAF in the premises it occupied or if a flood resulted from a faucet not being turned off in its premises, it could be argued that a claim resulting from that type of negligence was remote and extraneous to the landlord-tenant relationship, and hence not covered by the waiver.

However, the basis of the claim asserted here by plaintiff is "a flood caused by a freeze-up in the sprinkler system" (amended complaint ¶ 2) due to a lack of heat. This is clearly a type of claim that emanates from the landlord-tenant relationship, with the consequence that the waiver of subrogation provisions bars plaintiff's claim. See also, Westchester County Healthcare Corporation v. County of Westchester, 19 AD3d 405 (2nd Dept. 2005); Atlantic Mutual Insurance Company v. Elliana Properties, 261 AD2d 296 (1st Dept. 1999).

In light of the above, the motion of FIAF for summary judgment dismissing the complaint and any cross-claims asserted against it is granted and the Clerk shall enter judgment accordingly, severing the remaining action.

Dated: January 4, 2007_______________

J.S.C.