Appeals court reverses Sompo unit’s win in fire coverage fight

A Michigan Court of Appeals panel Tuesday overturned a Sompo PLC unit’s $1.2 million win in a suit seeking reimbursement for what it paid to a landlord for a fire-damaged industrial building, finding the lease did not expressly require the tenant to obtain fire insurance.

The three-judge panel said in Hastings Mutual Insurance Co. v. Nidec CHS LLC et al. that the lease “undeniably” required the landlord to insure the building, repair and restore the building in case of fire and that the tenant would be the beneficiary of the insurance.

R. Shafer Builder LLC leased a building to Macomb, Michigan-based Nidec for manufacturing heavy-duty coil-handling equipment. The lease said the landlord would invoice the tenant for insurance premiums for the building and that the tenant should obtain its own liability insurance, court records show.

In March 2021, a fire occurred at the building as a result of the spontaneous combustion of improperly discarded rags, causing almost $1.2 million in damage.

Hastings paid the landlord for the damage and sued Nidec in January 2022, seeking to recover the amount it paid on the claim. The insurer asserted claims for breach of contract and negligence.

The trial judge awarded summary judgment to Hastings on the breach of contract claim, finding Nidec breached the lease by engaging in acts that damaged the building and that it did not pay for coverage for fire damage. Nidec appealed that decision to the Michigan Court of Appeals.

Representatives for the parties did not respond to requests for comment.