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Current Developments in the Commercial Divisions of the
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Posted: April 7, 2015

No Yellowstone Injunction Where Default Not Curable

On March 24, 2015, Justice Ritholtz of the Queens County Commercial Division issued a decision in NY Great Stone Inc. v. Two Fulton Sq. LLC, 2015 NY Slip Op. 25090, denying a Yellowstone injunction.

In NY Great Stone Inc., the plaintiff sought a Yellowstone injunction in response to a notice to cure defects that included the failure to maintain liability insurance. The court refused to issue the injunction, explaining:

Yellowstone injunctions are routinely granted to avoid forfeiture of a commercial tenant’s interest prior to a determination of the merits. A tenant must demonstrate the existence of a commercial lease, receipt of a notice of default, a timely application for a temporary restraining order and the desire and ability to cure the alleged default.

. . .

Essential to obtaining a Yellowstone injunction is a demonstration by movant that it desires and has the ability to cure the alleged default. In the instant case, the subject lease and rider impose an obligation on the tenant to procure and maintain general liability insurance from the commencement of the lease throughout the term of the tenancy that names the landlord as an additional insured. Plaintiff has annexed a Certificate of Liability Insurance dated December 2, 2014 which provides coverage effective April 7, 2014 to April 7, 2015 and indicates defendant is an additional insured. Notwithstanding defendant’s contention that the failure to deliver actual insurance policies rather than a certificate is also a violation of the lease, plaintiff’s submission is clearly inadequate to evidence the maintenance of insurance coverage during the entire term of the lease which commenced on March 10, 2011.

A tenant’s failure to maintain insurance constitutes a material default of the terms of the lease. A default of this type is incurable as a prospective insurance policy does not protect a landlord against unknown claims that might arise during the period in which no coverage existed. Although plaintiff points to that portion of the notice to cure which directs it to obtain general public liability insurance, it does not alter the specific terms of the lease which require insurance be maintained from the inception of its tenancy.

(Internal quotations and citations omitted) (emphasis added). This decision highlights the importance of maintaining proper insurance. According to this decision, that failure is a default that cannot be cured.

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