First of all I think your friend should be the one asking the question, because some of your recounting of the events are not clear.
I do believe your friend (or you, through their explanation to you) misunderstood about the "warranty" (which you called insurance). The agency (company) does not provide a warranty on a home. An agent may sometimes provide one as a closing gift on a sale, but not on a rental.
Perhaps your friend misunderstood what the agent told him/her, that as an owner he/she could purchase a warranty, but honestly I don't believe any of the warranty companies issue one to the landlord to cover a rental property (I could be wrong however).
But if I understand correctly...
1) The house was listed for sale AND rent through the agent.
2) The house was rented to the tenant, with the agent providing the standard leasing agreement (with an option to buy??)
3) The owner still had the house on the market for sale, even after the lease was agreed to, and then the owner withdrew the "sale" listing agreement and just continued with the rental agreement and the tenant moved in.
4) The original lease is now up for renewal, and the original "rental LISTING agreement" has a clause that if it is re-rented/sold to the same tenant, the owner must pay the agent a commission again. It probably said something like this:
" Should there be a renewal of the lease.......an additional commission of ___ will be payable to the broker by the landlord, at commencent of the new term."
"Should there be a sale or exchange of the property between the tenant and the landlord, a commission of ___ will be due from the owner/landlord at passing of title"
NOT that this is legal advise, but IMHO if #4 applies, then I do believe that your friend owes commission to the agent for the renewal. Your friend entered into a legal contract when he/she signed the rental listing agreement. Withdrawing the "sales" listing does not absolve your friend of their obligation if the agent found a tenant while it was listed for rent and is now renewing the lease with that tenant.
I suggest two things:
First, have your friend call the BROKER/MANAGER of the agency, not the agent, and explain the situation calmly and in detail to see if this can be resolved amicably.
If there is no agreement on how this is to be handled, then have your friend contact an attorney about his/her legal obligation to the agent as far as renewal commission if concerned.
Hope that helps