Burst pipes and bad tenants
Andrew Muldowney and Kalynn Tupa entered into a lease with John H. Mihalec for use of a single-family dwelling in Greenwich, Connecticut. During the term of the lease, the tenants left the property for a winter vacation that lasted about two weeks. The tenants were responsible for ordering and paying for fuel for the dwelling’s oil-fueled heating system but had not ensured that the heating system had enough oil to operate for the duration of their absence. While they were away, the oil level dropped too low for the furnace to draw oil, and the heating system stopped working. As a result, the temperature in the dwelling fell, and pipes inside the dwelling froze and burst, causing damage.
The tenants had agreed in the lease to “pay for heating fuel,” to “use all … heating … systems in the [d]welling in a prudent manner,” and not to “[wilfully] or negligently destroy, deface, damage, impair or remove any part of the [d]welling.” The tenants also agreed that they would “not allow the [d]welling to remain vacant for more than fourteen … consecutive days without notifying [the landlord] in advance of the planned vacancy.” The lease required that “[d]uring any such vacancy, [the defendants] agree to maintain the temperature in the [d]welling at not less than [sixty] degrees.”
As for liability for any damage, the tenants agreed to pay the landlord “all lost rent and other damages or costs” incurred by the landlord if the tenants breached any of their promises in the lease. The lease also required the tenants to “hold [the landlord] harmless from any loss or claim arising out of or in connection with [the tenants’] use and occupancy of the [leased] property, including court costs and reasonable attorney’s fees.” Finally, the tenants agreed “to provide and pay for personal liability insurance for [the tenants’] and [landlord’s] mutual benefit in an amount of not less than $1 [million] for bodily injury and property damage in or about the [d]welling” and to “provide [the landlord] with proof of such insurance.”
The repairs for the damage to the dwelling caused by the burst pipes cost $50,960.02. The landlord also claimed $10,342.68 in lost rent. Notwithstanding the tenants’ obligation under the lease to secure insurance, the landlord also secured a policy for the dwelling from Amica Mutual Insurance Company. The policy covered certain occurrences, including losses for water damage. The terms of the policy obligated the landlord to assign to the insurer any rights of recovery the landlord might have against any person for any covered loss.
Amica brought a subrogation action against the tenants to recover sums the insurer had paid the landlord because of the tenants’ actions or omissions. The complaint alleged breach of contract and negligence by the tenants.
The tenants moved to strike Amica’s complaint, arguing that it had no right of subrogation to the landlord’s claims against them. The tenants relied in part on a decision in an earlier case. They contended that the decision adopted a default rule that a landlord’s insurer has no right of subrogation against a tenant for damage to leased property unless the landlord and tenant had reached a “specific agreement” otherwise. According to the tenants, the default rule could be bypassed only if the landlord and tenant had agreed expressly to allow subrogation.
The court denied the motion. The court said that the rule applied only when the lease agreement between the landlord and tenant was silent on whether the tenant would be held liable for damage to the leased premises. Because the lease in this case expressly made the defendants liable for any damage they caused and also specifically instructed them to purchase insurance for the property for this purpose, the court determined that the rule did not apply and did not bar Amica from bringing a subrogation action. The tenants filed an answer, again raising the lack of a specific agreement concerning subrogation as a special defense.
The court referred the matter to an attorney trial referee for fact finding. The referee found that the tenants had breached their obligations under the lease. The referee also determined that the lease established a duty of care owed by the tenants to the landlord. The referee found that they had negligently breached this duty when they failed to ensure that the oil tank had sufficient oil to operate the heating system during their extended absence from the leased property. The referee determined that the tenants’ breach of the lease and negligence were the cause of the landlord’s damages, which were $50,960.02 for repairs to the dwelling and $10,342.68 for lost rent. The referee therefore recommended that the court render judgment in favor of Amica in the amount of $61,302.70.
The court accepted the referee’s report and rendered judgment for Amica. The court rejected the tenants’ special defense concerning the specific agreement requirement. The tenants appealed.
On appeal, the tenants did not contest the referee’s findings or the court’s acceptance of them but instead renewed their argument that the plaintiff could not bring a subrogation action against them. For essentially the same reasons given by the trial court, the appellate court rejected the defendants’ arguments and affirmed the trial court’s judgment. The tenants appealed to the Supreme Court of Connecticut.
The appeal was restricted to this issue: Did the appellate court properly conclude that Amica had a right of equitable subrogation against the tenants under the decision that established the default rule referred to above?
The court pointed out that the tenants had the contractual obligation to secure insurance for the dwelling for the benefit of both themselves and the landlord. For reasons the record did not reveal, the tenants either did not purchase insurance or their policy failed to cover either them or their landlord. The tenants should not have been surprised that the landlord or his insurance company would seek recovery from them given their negligence and breach of the contractual duties to maintain the dwelling generally, to heat the dwelling specifically (including during vacancies), and to secure insurance.
The court held that both the trial court and the appellate court had properly applied the default rule and that allowing subrogation was fair and consistent with the doctrine of equitable subrogation.
Amica Mutual Insurance Company vs. Muldowney-Supreme Court of Connecticut-April 10, 2018-SC19794.