## Facts

- Bachner Rental Company, Inc. owned four commercial warehouses and purchased a three-year fire insurance policy from Alaska Insurance Company (AIC) covering all four.
- Bachner later leased one insured warehouse to RCA Alaska Communications, Inc. under a one-year commercial lease.
- The lease required Bachner to obtain and maintain insurance on the leased premises.
- The lease also included provisions making RCA liable for damage arising from its own negligence (and that of its employees) and an indemnity clause for damage caused by RCA.
- A fire occurred while RCA possessed the warehouse, damaging and ultimately destroying it.
- AIC paid Bachner for the covered fire loss and, as Bachner’s subrogee, sued RCA alleging the fire was caused by an RCA employee’s negligence.

## Issues

1. Whether a commercial tenant not named in the landlord’s fire policy is an implied co-insured when the lease requires the landlord to maintain insurance on the leased premises.
2. Whether, if the tenant is an implied co-insured for the covered risk, the landlord’s insurer is barred from subrogation against the tenant for fire damage to the premises.

## Decision

- The Alaska Supreme Court affirmed partial summary judgment for RCA.
- The court held RCA was an implied co-insured under Bachner’s fire policy for purposes of the covered fire loss to the leased premises.
- Because an insurer may not subrogate against its own insured (including an implied co-insured) for the insured risk, AIC’s subrogation claim for fire damage to the building was barred.

## Legal Principles

- Subrogation permits an insurer to assert only the rights the insured could have asserted; the insurer acquires no greater rights than the insured.
- When a lease requires the landlord to obtain and maintain fire insurance on the leased premises, the tenant is ordinarily treated as an implied co-insured for that insured risk, absent clear contractual language placing that insured fire-loss risk on the tenant.
- Lease clauses allocating tenant liability for negligence or providing indemnity are read in context; they do not necessarily authorize recovery for losses the landlord agreed to insure against.
- Allowing subrogation against a tenant treated as a co-insured for the covered risk would defeat the parties’ insurance-based allocation of fire-loss risk reflected in the lease.

## Conclusion

The court held that the lease’s requirement that the landlord carry fire insurance made the tenant an implied co-insured for fire damage to the leased premises, so the landlord’s insurer could not pursue subrogation against the tenant for the covered loss.


Alaska Insurance Co. v. RCA Alaska Communications, Inc., 623 P.2d 1216 (Alaska 1981)