INTERPRETING AMBIGUOUS CONTRACT PROVISION IN LEASE

In this case, both parties submitted affidavits of "expert testimony" of how the contract/lease should be interpreted.

BOOSTON LLC v. 35 W. REALTY CO., LLC, 2022 NY Slip Op 32021 - NY: Supreme Court June 27, 2022:

"Discussion

"The proponent of a motion for summary judgment must establish that there are no material issues of fact in dispute and that it is entitled to summary judgment as a matter of law" (Mazurke v Metropolitan Museum of Art, 27 AD3d 227, 228 [1st Dept 2006]). Once a movant makes such a showing, the burden shifts to the opposing party to produce evidentiary proof sufficient to raise an issue of fact (CitiFinancial Co (DE) v McKinney, 27 AD3d 224, 226 [1st Dept 2006]).

A failure to comply with insurance requirements constitutes an incurable and material breach of a lease (Rui Qin Chen Juan v 213 West 28 LLC, 149 AD3d 539 [1st Dept 2017]). At issue here, however, is whether plaintiff complied with the insurance requirements of the Lease, which depends on the interpretation of the relevant Lease provisions.

"It is settled that the interpretation of provisions of a lease are governed by the same rules of construction applicable to other agreements... and in those instances where the intent of the parties is clear and unambiguous from the language employed on the face of the agreement, the interpretation of the document is a matter of law solely for the court" (Horwitz v 1025 Fifth Ave. Inc, 34 AD3d 248, 249 [1st Dept 2006] [internal citations omitted]). A Lease must be read as a whole to give effect to the intent of the parties as expressed therein (Hook Superx, Inc. v Ciampa N Co., 2 AD3d 587, 589 [2d Dept 2003]). Moreover, while an expert may be permitted to explain technical or scientific terms, the court will not consider expert opinion as to the meaning of contractual provisions (Good Hill Master Fund L.P. v Deutsche Bank, 146 AD3d 632, 637 [1st Dept 2017] [finding that trial court properly precluded expert opinion to assist in interpreting section of default credit swap agreements]; Colon v Rent-A-Car Center, Inc., 276 AD2d 58, 61 [1st Dept 2000] [noting that experts are not permitted "to offer opinion as to the legal obligations of parties under a contract"]).

"[W]here there is an ambiguity as to the meaning of a lease prepared by the defendant, the ambiguity should be resolved in favor of the lessee" (Campos v 68 East 86th St. Owners Corp., 117 AD3d 593, 595 [1st Dept 2014] [internal citation omitted]). Moreover, "it is well settled that no additional liability or requirement will be imposed on a tenant by interpretation unless it is clearly within the provisions of the instrument under which it is claimed" (112 West 34th St. Assocs., LLC v 112-1400 Trade Properties, LLC, 95 AD3d 529, 531 [1st Dept 2012], lv denied 20 NY3d 854 [2012] [internal citation omitted]). Furthermore, when a lease is ambiguous and susceptible to different meanings, the court may look to surrounding circumstances to determine the intent of the parties (67 Wall St. Co. v Franklin Nat. Bank, 37 NY2d 245, 248 [1975]). In this regard, "the parties' course of performance under the contract is considered to be the "most persuasive evidence of the agreed intention of the parties" (Federal Ins. Co. v Americas Ins. Co., 258 AD2d 39, 44 [1st Dept 1999]).

Here, with respect to insurance coverage, the Lease states that plaintiff shall provide "[p]ublic liability coverage^[7] against claims for bodily injury or death in amount of $2,000,000.00 in a single limit or under an original policy with an umbrella" (NYSCEF #151, Lease Rider, Art. 9, at 11). It is undisputed that from 2014 to 2019, plaintiff provided general liability insurance coverage of $1,000,000 per occurrence and an aggregate coverage of $2,000,000 and named the defendant as an additional insured. The determination of whether the coverage furnished satisfies plaintiff's obligations under the Lease primarily turns on whether the term "single limit" as used in this provision means "per occurrence" as opposed to in aggregate. In this regard, the Lease does not contain any definition of "single limit," nor is it otherwise clear from other provisions of the Lease or the Rider what the term "single limit" means.

A review of New York case law indicates that "single limit," (or "combined single limit") is most often used in the context of automobile insurance where it means that the coverage limit applies to both bodily injury and property damage in contrast to "split limit," which means a separate limit for bodily injury and property damage (Prudential Prop & Cas. Co. v Szeli, 83 NY2d 681, 684 [1994]; Jones v Peerless, 281 AD2d 888, 888 [4th Dept 2001]). Thus, in this context, "single limit" refers to the type of losses covered by insurance as opposed to whether the insurance coverage is on per occurrence basis or for the aggregate of occurrences during a policy period. Moreover, in the general liability context, the term "single limit" has been used together with "per occurrence," which indicates that contrary to the defendant's position, "single limit" is not synonymous with "per occurrence" (see e.g. Great N. Ins. Co. v Interior Constr. Corp., 7 NY3d 412, 416 [2006] [lease provision obligated tenant, "at its own expense, to maintain a comprehensive general liability insurance policy naming [defendant] as an additional insured with coverage to be no less than $5 million `combined single limit per occurrence for bodily injury and property damage liability"] [emphasis added]). And, that the provision permits an alternative for coverage "under an original policy with an umbrella,"^[8] does not support the defendant's interpretation. Thus, at the very least, the Lease's insurance provision is ambiguous as to whether the $2,000,000 coverage requirement refers to per occurrence or aggregate coverage.

To the extent the insurance requirements of the Lease are ambiguous as to whether $2,000,000 means aggregate or per occurrence, the provision must be interpreted in favor of finding that plaintiff complied with the insurance provision of the Lease by providing coverage of $1,000,000 per occurrence and $2,000,000 in aggregate coverage. And, a contrary interpretation which would require plaintiff to provide coverage of $2,000,000 per occurrence would impermissibly add to plaintiff's obligations under the Lease that were not clearly required by its terms (see 151 W. Assoc. v Printsiples Fabric Corp., 61 NY2d 732, 734 [1984] [affirming court order denying landlord a judgment of ejectment based on the "uncertainty" regarding whether an agreement involving tenant's creditors fell within the meaning of term "arrangement" in the lease's bankruptcy clause]; 67 Wall St. Co. v Franklin Nat. Bank, 37 NY2d at 249 [construing ambiguous article of lease in lessee's favor]).

And, significantly, the court's interpretation is consistent with the parties' intent based on their conduct under the Lease in that plaintiff provided insurance coverage in the amount of $1,000,000 per occurrence and $2,000,000 aggregate for five years before defendant objected (see Federal Ins. Co. v Americas Ins. Co., 258 AD2d at 44 ["Generally speaking, the practical interpretation of a contract by the parties to it for any considerable period of time before it comes to be the subject of controversy is deemed of great, if not controlling, influence"]; Kalmon Dolgin Co. v Walnut Lanes, Inc., 27 AD2d 843, 843 [2d Dept 1967] [when record indicates that tenant and its predecessor paid fire insurance premiums for seven years without objection "construction of the lease [consistent with this payment] ... is entitled to great weight because it was made by the parties themselves"]).

Next, to the extent expert evidence may be considered in light of the ambiguity of the contract, the opinion of the defendant's expert is insufficient to raise a triable issue of fact as to the meaning of "single limit" since his opinion is conclusory and unsupported by any authority (see Blonder & Co. Inc v Citibank, N.A., 28 AD2d 180, 183 [1st Dept 2006] [the conclusory affidavit of plaintiff's expert was insufficient to raise an issue of fact as to the interpretation of a letter of credit]).

Accordingly, the defendant's motion for summary judgment is denied except that the second cause of action for a Yellowstone injunction is denied as moot, and plaintiffs cross motion for summary judgment is granted on the first cause of action to the extent of declaring that that plaintiff is not in violation of the insurance requirements of the Lease and that defendant is enjoined from terminating plaintiffs tenancy on this ground."