Duell v. Greater New York Mutual Insurance Co.

The plaintiffs (collectively, landlord) owned a building in Manhattan and leased a portion of the building to an art gallery (tenant). The lease required the tenant to obtain property-damage insurance that named both the tenant and landlord as insureds with $100,000 in coverage. The tenant did not obtain the insurance. While the lease was in effect, water flowed into the art gallery and caused damage. The tenant sued the landlord for negligence in allowing the water to flow into the art gallery. In the negligence action, the landlord’s attorneys (defendants) failed to assert breach of lease as a defense. Also, the landlord’s attorneys mistakenly obtained testimony that the landlord was insured for the tenant’s loss; the landlord was not in fact insured for the tenant’s loss. A jury awarded damages to the tenant, and judgment was entered against the landlord in the negligence action. Subsequently, the landlord sued the landlord’s attorneys for legal malpractice. The court in the malpractice action concluded that the failure by the landlord’s attorneys to assert the breach-of-lease defense could not be malpractice. The court based this conclusion on the court’s belief that even if the tenant had obtained the insurance as required by the lease, the landlord would still be liable for the property loss in a subrogation action brought by the insurance company. The landlord appealed.