Commercial Lease - Material Breach


LNM1, LLC v. TP Properties, LLC, [Ms. 1170708, Nov. 1, 2019] __ So. 3d __ (Ala. 2019). The Court (Mitchell, J.; Parker, C.J. and Wise, Mendheim, and Stewart, JJ., concur; Bolin, Shaw, and Sellers, JJ., concur in the result; Bryan, J., concurs specially) affirms the Hale Circuit Court’s summary judgment in favor of the plaintiff lessor rescinding a commercial lease due to the tenant’s failure to maintain required insurance coverage.

The Court applied settled law that a material breach of contract is one “‘that touches the fundamental purposes of the contract and defeats the objects of the parties in making the contract. ...’” Ms. *16, quoting Sokol v. Bruno’s, Inc., 527 So. 2d 1245, 1248 (Ala. 1988). The tenant argued that its breaches were not material because no claims were made against the lessor during the time the tenant failed to maintain the required liability insurance.

Citing D & D Realty Trust v. Borgerson, 2015 Mass. App. Div. 115 (Mass. Dist. Ct. 2015)(not reported in North Eastern Reporter), the Court rejected this argument, holding that “a tenant’s failure to procure required insurance coverage protecting the landlord is tantamount to playing ‘financial Russian roulette,’ and the fact that no claims were incurred during the period when insurance coverage was lacking ‘does not minimize the seriousness of [the tenant’s] failure to insure.’” Ms. *21. The Court noted that the lessor’s “expert indicated that he was unaware of any insurance that could be obtained to cover retroactively the gaps in coverage created by [the tenant’s] failure to maintain the required coverages.” Ms. *22.

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