An Insured In-Part: Michigan Court Holds That Tenant Is an Implied Co-Insured on Landlord’s Property Insurance Only With Respect to the Leased Premises

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In Westfield Inc. Co. v. Ritcher, No. 20-CV-12692, 2021 U.S. Dist. Lexis 94926, the United States District Court for the Eastern District of Michigan considered whether a residential tenant was an implied co-insured on the landlord’s insurance policy, and thus shielded from a subrogation claim brought by the landlord’s carrier for fire damage caused by the tenant’s negligence. The court found that the tenant was an implied co-insured on the landlord’s insurance policy, but only with regards to the apartment that the tenant leased. The tenant was not shielded from claims for damage to the rest of the building, the contents of other residents and the landlord’s rental loss income.

The Ritcher case arises from a fire at a duplex caused by the second-floor tenant, Jennifer Ritcher (Ms. Ritcher), who left a teapot on an active stove burner. The landlord resided in the first-floor apartment and submitted a claim to Westfield Insurance Company (Insurer), the property casualty insurance carrier for the property. After making payments to the landlord, Insurer filed a subrogation lawsuit against Ms. Ritcher for negligently leaving a stove burner on unattended. Ms. Ritcher filed a motion for summary judgment on grounds that Insurer had no cause of action against a tenant whose negligence causes property damage to the leased premises. Ms. Ritcher relied on New Hampshire Ins. Grp v. Labombard, 399 N.W. 2d 527 (Mich. Ct. App. 1986), where the Court of Appeals of Michigan held that a tenant has a reasonable expectation that rental payments will be used to cover the landlord’s ordinary expenses, including insurance premiums, and that absent express language in the lease to the contrary, the tenant has no duty to the landlord’s carrier which would support a negligence claim for damages.

Insurer acknowledged that under Labombard, Ms. Ritcher cannot be liable for damage to the apartment that she leased. However, Insurer argued that Ms. Ritcher can still be held liable for the damage to the first floor, the landlord’s personal property and rental income loss incurred while the repairs were made. The court agreed with Insurer, finding that the precedent set forth in Labombard only protects the tenant from a subrogation claim for damage to the leased premises. While Insurer’s complaint did not specify which portion of the damages related to areas outside the defendant’ apartment, the court found that it was apparent that at least some portion of the damages were not barred by the precedent regarding the implied co-insured doctrine. The court granted the defendant’s summary judgment motion with respect to the damage to Ms. Ritcher’s apartment, but denied the motion to the extent of the damages beyond the apartment she leased.  

The Ritcher case confirms that, in Michigan, the implied co-insured doctrine does not bar a landlord’s carrier from subrogating against a residential tenant for damages outside the leased portion of the building. While the court acknowledged that the implied co-insured doctrine applies to the leased premises, it limited to doctrine to the portion of the building that was being leased. It is critical for subrogation professionals handling losses in Michigan to be aware that a landlord’s carrier may be able to pursue a residential tenant for negligence for damages beyond the leased portion of the building.

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