Subrogation pros and their counsel frequently assess potential recoveries arising from a tenant’s negligence when the landlord is the insured. Pennsylvania’s case-by-case approach warrants some attention here in the HKR Blog.
The Superior Court – Pennsylvania’s intermediate appellate court – shines a light on the topic at least here in the Keystone state. In Joella v. Cole, 221 A.3d 674 (Pa. Super. Ct. 2019), the trial court gave relief to a Tenant, deciding that the Landlord and his property insurer were barred from recovery. The deciding factor for the trial court was language of a lease which indicated the Tenant was an implied co-insured under the Landlord’s fire insurance policy.
The Joella court outlined three (3) stances relative to “landlord v. tenant” subrogation actions: (1) pro-subrogation, (2) anti-subrogation, and, (3) the so-called “case-by-case” analysis. Acknowledging that Pennsylvania follows the case-by-case analysis, the Superior Court advised:
we look[ ] to the circumstances of the particular case and examine[ ] the terms of the landlord’s insurance policy in conjunction with the provisions of the lease….
In sum, any analysis of whether a “landlord v. tenant” subro may survive begins with consideration of the lease, plus the Landlord’s insurance policy. The question is whether there is – or is not — a reasonable expectation by the Tenant that a Landlord will only look to the insurance policy for recovery of damage to a property, even if that damage occurred due to the Tenant’s negligence. In other words, if a reasonable interpretation of a lease indicates that the Tenant is an implied co-insured, then a Landlord’s Insurer may not bring a subrogation action against the Tenant for recovery, if the damage relates to the Tenant’s negligence. The explicit language of the lease becomes determinative of the Tenant’s reasonable expectation as an implied co-insured.