Zalma on Insurance
Education • Business
Insurance Claims professional presents articles and videos on insurance, insurance Claims and insurance law for insurance Claims adjusters, insurance professionals and insurance lawyers who wish to improve their skills and knowledge. Presented by an internationally recognized expert and author.
Interested? Want to learn more about the community?
April 08, 2022
Subrogating Insurer Has No More Rights than the Insured

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

Read the full article at https://www.linkedin.com/pulse/subrogating-insurer-has-more-rights-than-insured-zalma-esq-cfe and https://zalma.com/blog plus more than 4150 posts.

Posted on April 8, 2022 by Barry Zalma

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.

In June of 2018 a hailstorm hit Colorado Springs. King Soopers had the roof on its building inspected and concluded that there was no significant damage that would require its replacement. Plaza, however, unbeknownst to King Soopers, decided that the roof needed to be replaced. King Soopers first discovered that Plaza was replacing the roof in November of 2019, when employees noticed workers on the roof. At that time, King Soopers reached out to Plaza to get additional information and learned that the job was already 75% complete. King Soopers expressly inquired into its financial responsibility for the new roof and Plaza informed them that “Tenants will not be billed for this, it’s covered with insurance money from the hail damage claim.” King Soopers was never given notice that the lease required it to pay for the replacement of the roof.

Ultimately Zurich paid for the roof replacements for the Plaza property. The portion of that payment attributable to the King Soopers roof was $902,613.

Zurich sued King Soopers alleging a breach of contract.

SUBROGATION

By paying a debt that rightfully belongs to another, the subrogee has created a windfall for the debtor. Subrogation allows the subrogee to pursue that amount against the rightful debtor, thus eliminating any unjust transfer of responsibility for the debt. A subrogated insurer has no greater rights than the insured, for one cannot acquire by subrogation what another, whose rights he or she claims, did not have.
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.

Substantial performance occurs when, although the conditions of the contract have been deviated from in trifling particulars not materially detracting from the benefit the other party would derive from a literal performance, the defendant has received substantially the benefit he expected.

APPLICATION

Zurich must prove that:

1. a contract existed between King Soopers and Plaza,

2. King Soopers failed to perform its obligation under the contract,

3. Zurich and/or Plaza did perform or had a justification for failing to perform, and

4. Zurich suffered damages as a result.

The first and fourth elements are undisputed here-the parties agree that the lease constitutes a contract between King Soopers and Plaza, and they do not dispute that Zurich paid for the roof which, if there was a breach, constitutes damages. The parties vigorously dispute, however, whether Zurich can demonstrate that the second and third elements are met in this case. Both of those elements turn on the interpretation of the contract, a question of law that this Court is well positioned to address without the presentation of additional evidence.

When the Court interprets a contract, it strives to give effect to the intent of the parties. In this case, the parties strongly disagree about whether the lease required King Soopers to pay for the new roof-it is undisputed that King Soopers did not do so.

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 provided that the Landlord “will not exercise any right or remedy provided for in this Lease or allowed by law (including delivery of a Demand for Payment or Possession or Notice to Quit under the forcible entry and detainer laws) because of any default of Tenant, unless 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, if the default consists of the failure to pay money, or, if the default consists of something other than the failure to pay money, Tenant shall have failed within thirty (30) days thereafter to begin the correction of the default or thereafter fails to actively and diligently and in good faith proceed with and continue the correction of the default until it shall be fully corrected.” (emphasis added)

While notice need not take any particular form, such provisions are intended to provide the allegedly breaching party with an opportunity to investigate the claim and potentially cure the breach.

ZURICH’S ARGUMENT IS CIRCULAR AND ABSURD

he Court was unpersuaded by Zurich’s argument that if this reading of the lease is correct then it, too, would have been entitled to notice of its breach-i.e., 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.

King Soopers did not seek to exercise any remedy under the contract or at law to enforce Zurich/Plaza’s obligation to provide it with notice and time to cure. It did not allege that Plaza somehow defaulted on the lease by failing to notify it. Instead, it simply argues that the failure to provide it with notice precludes Zurich from exercising a remedy against King Soopers.

The Court concluded that Zurich has provided no facts that would permit a reasonable jury to conclude that it complied with the obligation under the lease to notify King Soopers of its default. Because Zurich has failed to do so, King Soopers is entitled to summary judgment in its favor.

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. In this case, had Zurich’s claims personnel read the lease before replacing the roof it would have required the owner to give notice to King Soopers of its obligation. It did not do so and, in fact, the landlord gave notice to King Soopers that it would not bill King Soopers for the roof (a waiver of subrogation that was not discussed by the court). 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, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and [email protected].

Subscribe to Zalma on Insurance at locals.com https://zalmaoninsurance.local.com/subscribe.

Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome.

Write to Mr. Zalma at [email protected]; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com.

Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Interested? Want to learn more about the community?
What else you may like…
Videos
Posts
20 hours ago
Allegations That Establish Breach of a Condition Defeats Suit

Notice of Claim Later than 60 Days After Expiration is Too Late

Post 5089

Injury at Massage Causes Suit Against Therapist

Read the full article at https://lnkd.in/gziRzFV8, see the full video at https://lnkd.in/gF4aYrQ2 and at https://lnkd.in/gqShuGs9, and at https://zalma.com/blog plus more than 5050 posts.

Hiscox Insurance Company (“Hiscox”) moved the USDC to Dismiss a suit for failure to state a claim because the insured reported its claim more than 60 days after expiration of the policy.

In Mluxe Williamsburg, LLC v. Hiscox Insurance Company, Inc., et al., No. 4:25-cv-00002, United States District Court, E.D. Missouri, Eastern Division (May 22, 2025) the trial court’s judgment was affirmed.

FACTUAL BACKGROUND

Plaintiff, the operator of a massage spa franchise, entered into a commercial insurance agreement with Hiscox that provided liability insurance coverage from July 25, 2019, to July 25, 2020. On or about June 03, 2019, a customer alleged that one of Plaintiff’s employees engaged in tortious ...

00:08:31
June 02, 2025
Zalma’s Insurance Fraud Letter – June 1, 2025

ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Posted on June 2, 2025 by Barry Zalma

Post 5087

See the full video at and at

Read the full article and the full issue of ZIFL June 1, 2025 at https://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-06-01-2025.pdf

Zalma’s Insurance Fraud Letter – June 1, 2025

See the full video at https://lnkd.in/gw-Hgww9 and at https://lnkd.in/gF8QAq4d, and at https://zalma.com/blog plus more than 5050 posts.

ZIFL – Volume 29, Issue 11

The Source for the Insurance Fraud Professional

Read the full article and the full issue of ZIFL June 1, 2025 at https://lnkd.in/gTWZUnnF

Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at ...

00:08:42
placeholder
May 30, 2025
Plain Language of Policy Enforced

No Coverage if Home Vacant for More Than 60 Days

Failure to Respond To Counterclaim is an Admission of All Allegations

Post 5085

See the full video at https://lnkd.in/gbWPjHub and at https://lnkd.in/gZ9ztA-P, and at https://zalma.com/blog plus more than 5050 posts.

In Nationwide Mutual Insurance Company v. Rebecca Massey, Civil Action No. 2:25-cv-00124, United States District Court, S.D. West Virginia, Charleston Division (May 22, 2025) Defendant Nationwide Mutual Insurance Company's (“Nationwide”) motion for Default Judgment against Plaintiff Rebecca Massey (“Plaintiff”) for failure to respond to a counterclaim and because the claim was excluded by the policy.

BACKGROUND

On February 26, 2022, Plaintiff's home was destroyed by a fire. At the time of this accident, Plaintiff had a home insurance policy with Nationwide. Plaintiff reported the fire loss to Nationwide, which refused to pay for the damages under the policy because the home had been vacant for more than 60 days.

Plaintiff filed suit ...

00:06:50
May 15, 2025
Zalma's Insurance Fraud Letter - May 15, 2025

ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional

See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.

Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:

Health Care Fraud Trial Results in Murder for Hire of Witness

To Avoid Conviction for Insurance Fraud Defendants Murder Witness

In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...

May 15, 2025
CGL Is Not a Medical Malpractice Policy

Professional Health Care Services Exclusion Effective

Post 5073

See the full video at https://lnkd.in/g-f6Tjm5 and at https://lnkd.in/gx3agRzi, and at https://zalma.com/blog plus more than 5050 posts.

This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.

In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:

Insurance Coverage Dispute:

Travelers issued a Commercial General Liability ...

April 30, 2025
The Devil’s in The Details

A Heads I Win, Tails You Lose Story
Post 5062

Posted on April 30, 2025 by Barry Zalma

"This is a Fictionalized True Crime Story of Insurance Fraud that explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help everyone to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the ­­­Perpetrators than any Other Crime."

Immigrant Criminals Attempt to Profit From Insurance Fraud

People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.

The temptation to do everything outside the law was the downfall of the brothers Karamazov. The brothers had escaped prison in the old Soviet Union by immigrating to the United...

post photo preview
See More
Available on mobile and TV devices
google store google store app store app store
google store google store app tv store app tv store amazon store amazon store roku store roku store
Powered by Locals