Tenants Who Negligently Cause Fires in Florida Beware: You May Be Liable to the Landlord’s Insurer

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In Zurich Am. Ins. Co. v. Puccini, LLC, 2019 Fla. App. LEXIS 1487, 44 Fla. L. Weekly D 383, Florida’s Third District Court of Appeals considered whether a landlord’s carrier, Zurich American Insurance Company (Zurich), was precluded from pursuing a subrogation claim against the landlord’s tenant, Puccini, LLC (Puccini), for fire-related damages. After the fire, Zurich paid its insured, Lincoln-Drexel Waserstein, Ltd. (Lincoln), over $2.1 million. Zurich then proceeded with an action against Puccini. Puccini filed for summary judgment arguing that it was an additional insured under the Zurich policy. The trial court agreed with Puccini and dismissed the action. Zurich then appealed the case to Florida’s Third District Court of Appeals. Finding that the lease contemplated both liability on the part of the tenant and indemnification in favor of the landlord, the court held that the tenant was not an implied co-insured under Zurich’s policy. Thus, the court allowed Zurich’s subrogation action.

The Sutton Doctrine Extension of the Anti-Subrogation Rule

In the United States, most states have adopted an anti-subrogation rule either by statute or through common law. Under an anti-subrogation rule, an insurer may not pursue its insured for monies paid to the insured. While some states limit their anti-subrogation rule to apply only to the named insured, other states have expanded the rule to include parties listed as additional insureds, and even, in some instances, implied insureds (those parties not specifically listed, but still considered an insured under the applicable policy).

The Sutton Doctrine is a principle that presumes a tenant is an implied insured under the landlord’s insurance policy absent express language to the contrary. Generally, jurisdictions considering whether a tenant is an implied co-insured on a landlord’s policy fall into one of three camps on the issue: (1) those that follow the Sutton Doctrine and apply a presumption in favor of recognizing the tenant as an implied insured; (2) those that apply the anti-Sutton Doctrine and provide a presumption that the tenant is not an implied insured; and (3) those that take a case-by-case approach that examines the whole lease to determine the intent of the parties regarding the tenant’s role as an implied insured.

In Zurich, the Third District Court of Appeals reaffirmed its adherence to the case-by-case approach regarding a tenant’s status as an implied insured. It specifically found that, “courts have no business adding insureds to an insurance policy in order to achieve their perception of good public policy.” In applying the case-by-case approach to the matter before it, the court determined that the parties, through the language of the lease, did not intend the tenant to be an implied insured under the landlord’s policy for the following reasons: (1) the tenant was “fully responsible” for damage caused by fire; (2) the tenant was liable for damages caused by the tenant’s negligence; and (3) the tenant had to hold the landlord harmless for damage claims arising from the actions of the tenant. Accordingly, Zurich was able to move forward with its action against Puccini.

This case serves as a good reminder that, prior to filing suit, subrogation practitioners should be aware of the jurisdiction’s approach to the Sutton doctrine. In addition, practitioners should be aware that the jurisdiction’s approach may require a full review of the applicable lease agreement.

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