The fire insurer of a building owner exercised its subrogation rights, in the name of its insured, by suing a tenant allegedly responsible for fire damage to the structure. The insurer sought to recover in excess of $100,000 that it had paid to its insured.

The trial court entered summary judgment for the tenant, finding that the landlord and tenant had agreed to a subrogation waiver under the lease. The court said that, under Georgia law, "....where parties to a business transaction mutually agree that insurance will be provided as part of the bargain, such agreement must be construed as providing mutual exculpation to the bargaining parties who must be deemed to have agreed to look solely to the insurance in event of loss and not to liability on the part of the opposing party."

On appeal, the court was convinced that there had been a waiver of subrogation, under Georgia law, by the parties in the case. Provisions in the lease specifying insurance obligations assumed by the lessor and the lessee were cited. By the terms, the lessor agreed to "....keep the premises insured against loss or damage by fire with extended coverage endorsement in an amount sufficient to prevent Lessor from being a co-insurer...." The lessee agreed to maintain "....such fire and extended coverage insurance on Lessee's personal property and improvements on the premises, in amounts as it may deem advisable...."

The court concluded from the lease provisions and Georgia law that the lessor's insurer could not recover its payment from the lessee. The rights of the insurer could not exceed those of its insured, which replaced its legal avenues of recourse with insurance.

The judgment of the trial court was affirmed in favor of the tenant and against the landlord's insurer.

(MACON-BIBB INDUSTRIAL AUTHORITY, Plaintiff-Appellant v. NORD BITUMI, U.S., INCORPORATED, Defendant-Appellee. United States Court of Appeals for the Eleventh Circuit. No. 95-8371. March 13, 1996. CCH 1996 Fire and Casualty Cases, Paragraph 5657.)