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Rausch v. Allstate Insurance Co.9/8/2005
on appeal, thus leaving the case as one between the insurer and the tenant. The court treated the insurer as a subrogee, although it is not clear whether there was a subrogation clause in the policy, and, with a rhetorical flourish reminiscent more of lyrical poetry than stodgy equity jurisprudence, characterized subrogation as "begotten of a union between equity and her beloved - the natural justice of placing the burden of bearing a loss where it ought to be." Id. at 481-82. In that regard, and without citing any authority whatever, the court concluded:
"Under the facts and circumstances in this record the subrogation should not be available to the insurance carrier because the law considers the tenant as a co-insured of the landlord absent an express agreement between them to the contrary, comparable to the permissive-user feature of automobile insurance."
Id. at 482.
That principle, the court added, was derived "from a recognition of a relational reality, namely, that both landlord and tenant have an insurable interest in the rented premises - the former owns the fee and the latter has a possessory interest." Id. at 482. Here, the court said, the landlords purchased fire insurance "to protect such interests in the property against loss from fire" and that "the premium paid had to be considered in establishing the rent rate on the rental unit." Id. From that, the court concluded that "the tenant actually paid the premium as part of the monthly rental." Id. Based on its own ex cathedra assumption of the "realities of urban apartment and single- family dwelling renting," the court determined that tenants "rely upon the owner of the dwelling to provide fire protection for the realty (as distinguished from personal property) absent an express agreement otherwise" and that " asic equity and fundamental justice upon which the equitable doctrine of subrogation is established requires that when fire insurance is provided for a dwelling it protects the insurable interests of all joint owners including the possessory interests of a tenant absent an agreement to the contrary." Id. at 482. Upon that determination, the court held that " he company affording such coverage should not be allowed to shift a fire loss to an occupying tenant even if the latter negligently caused it." Id. (citing New Hampshire Ins. Co., supra, 404 P.2d at 674).
As a final comment, the court observed that the failure of the pleadings and the evidence to show that the insurer even had a right of subrogation against the tenant furnished another reason why it was error to instruct the jury to return a verdict for the insurer unless the tenant proved that he was not negligent. With that, the court remanded the case for a new trial.
Though the ultimate conclusion in Sutton was based, to some extent, on the court's perception of the tenant's expectations under the lease, the case has been treated as establishing at least a presumption, if not a per se rule, that, absent an express agreement in the lease to the contrary, landlord and tenant are co-insureds under a landlord's fire insurance policy, and, as a result, the insurer has no right of subrogation against the tenant to recover amounts paid on the policy by reason of a fire loss, even if caused by the negligence of the tenant. Several courts have followed the rigid approach taken by the Oklahoma intermediate appellate court, although not necessarily the rationale for that approach. See DiLullo v. Joseph, 792 A.2d 819 (Conn. 2002); Lexington Ins. Co. v. Raboin, 712 A.2d 1011 (Del. Super. 1998); North River Ins. Co. v. Snyder, 804 A.2d 399 (Me. 2002); Peterson v. Silva, 704 N.E.2d 1163 (Mass. 1999); United Fire & Cas. Co. v. Bruggeman, 505
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