A tenant in an office building hired a janitorial service to clean its carpets. An employee of the cleaning service carried a bucket of soapy water up the stairs, spilled it and fell, suffering serious injuries. The worker sued the tenant, who in turn sued the landlord. Who should pay the worker’s medical bills?
A recent decision by California’s Second District Court of Appeal said that it all depends on the precise wording of the indemnification clause that is commonly found in commercial leases.
In this case the appellate court ruled in favor of the tenant – an unusual outcome, given that commercial leases generally are drafted by, and protect, landlords.
The tenant argued that the landlord should be responsible for the injured worker’s damages, because the fall occurred on the stairs – that is, in the “common area” of the building, not in the tenant’s suite.
The lease, he said, required him to indemnify the landlord (that is, protect it against loss or damages) for injuries that occurred within his suite. Since the worker was injured outside the suite, in the common area of the building, he said, the landlord should be responsible.
The landlord countered that the lease required the tenant to notify it in advance when an outside cleaning service was coming into the building. The building’s engineer testified that he had previously observed the janitorial service using unsafe practices, and had insisted that he be informed before they did such work in the future.
The tenant acknowledged that he had agreed to alert the engineer before work was done, but said he did not know if his office staff had done so this time.
The landlord said that the tenant’s failure to notify it that the janitorial service would be coming, deprived it of the opportunity to ensure that the worker did not have to carry heavy buckets of water up the steps and that the stairs were safe.
The tenant’s failure to comply with this provision of the lease made it at least partially at fault, the landlord said, so it should bear some or all of the expense under the indemnity clause. It asked the trial court to decide how to apportion the costs.
The trial court granted the summary judgment to the tenant, dismissing the landlord’s claim under the indemnification clause of the lease. The tenant was obliged to indemnify the landlord only against claims involving its suite, not the common areas such as the stairs, it ruled.
The landlord appealed the ruling.
The appellate court noted that both sides had agreed that “the lease must be construed as a whole,” rather than focusing exclusively on a single clause.
The wording of the lease included a provision exempting the landlord from all liability for injury to the tenant’s employees or contractors occurring “in or about the Premises,” regardless of cause. It also indemnified the landlord from claims based on conditions “upon the Premises…or from other sources or places.”
An addendum to the lease, signed by both parties, stated that the tenant “shall not employ any service or contractor for services or work to be performed in the Building except as approved by [the landlord.]”
The tenant should be liable, the landlord argued, because the indemnification clause covered claims “arising out of, involving or in connection with” the tenant’s occupancy of the suite.
If this had been a lawsuit involving an insurance company and its insured, the appellate court said, these clauses might well have made the tenant liable.
That’s because California courts have consistently given broad interpretation to such terms as “arising out of” or “arising from” when it comes to insurance contracts.
But that is not the case for other contracts such as a lease, it pointed out. “If one seeks, in a noninsurance agreement, to be indemnified…regardless of the indemnitor’s [here the tenant’s] fault…language on the point must be particularly clear and explicit.”
Where there is any disagreement, it noted, an indemnification clause “will be construed strictly against the indemnitee,” who in this case is the landlord.
The fact that the tenant failed to notify the building engineer in advance about the janitorial service’s arrival might have been a breach of the lease, the judges said, but didn’t affect the issues before the appellate court.
The key issue, the ruling said, was that any connection between the tenant’s use of its suite and the accident on the stairs, in an area over which the tenant had no control, “is too remote to have been within the contemplation of the parties when they entered into the lease.”
For that reason, the appellate court ruled, the trial court was correct in deciding that the tenant does not have to indemnify the landlord.
M. Laurie Murphy
