Incensed: Can insurer stand in as landlord?
Frank and Leah Harker owned real property in Lebanon, Indiana. The premises were insured under a policy with Hoosier Insurance Company. In June 2013, the Harkers leased the premises to Nicole and Michael Riggs pursuant to a written agreement. Dustin Blevins also resided on the premises during the Riggses’ lease term. On April 22, 2015, the premises sustained $42,497.27 in fire damage after Blevins allegedly left burning incense unattended. The lease provided in part:
- Use and Occupancy. [The Riggses] shall use the Leased Premises only for residential purposes and shall comply with all federal, state and local laws and ordinances. [The Riggses] shall commit no waste thereon, and shall deliver the premises to [the Harkers] at the end of the lease term in as good of condition as when the lease commenced, normal wear and tear excepted …
- Insurance. [The Riggses are] responsible for obtaining fire and extended coverage, including public liability insurance, with [the Harkers] to be listed as an additional insured under the policy.
[The Riggses] shall also be responsible for renter’s coverage on [the Riggses’] own personal property located on the Leased Premises. [The Riggses] shall indemnify and hold [the Harkers] harmless from all claims of third parties for bodily injury, property damage or death arising from [the Riggses’] use or occupancy of the Leased Premises.
After the fire, Hoosier paid $42,497.27 to or on behalf of the Harkers for repairs to the premises.
On April 20, 2017, Hoosier filed a complaint for damages against the Riggses alleging breach of contract. Hoosier alleged that the Riggses had materially breached the lease, causing $42,497.27 in damages. On April 27, 2017, the Riggses moved to dismiss the complaint, arguing that Hoosier was not a “landlord” as defined by Indiana law and therefore was not a “real party in interest” entitled to pursue a breach of contract claim against the Riggses. On May 19, 2017, the court granted the Riggses’ motion to dismiss the complaint. Hoosier appealed.
On appeal, Hoosier argued that the trial court erred in granting the motion to dismiss because, by paying damages to or on behalf of the Harkers, Hoosier became subrogated to the Harkers’ landlord rights, including their right to seek damages from the Riggses for breach of the lease. The Riggses countered that Hoosier’s subrogation claim was appropriately dismissed because Hoosier was not a “real party in interest” pursuant to Indiana law, which provides that “[e]very action shall be prosecuted in the name of the real party in interest.”
Applying the case-by-case approach to addressing subrogation claims of landlords’ insurers against negligent tenants, and on review of the lease to determine the parties’ expectations with respect to liability for damage to the premises, the court stated that it could not say that it appeared to a certainty on the face of the complaint that Hoosier was not entitled to any relief on the related threshold questions of (1) whether the lease manifested the parties’ intent regarding the appropriate party to bear the risk of fire loss; and (2) whether the Harkers’ right to pursue damages for breach of contract from the Riggses inured to Hoosier, such that Hoosier was a real party in interest entitled to pursue subrogation relief.
The court reversed the trial court’s judgment dismissing Hoosier’s subrogation claim and remanded the case for further proceedings.
Hoosier Insurance Company vs. Riggs-Court of Appeals of Indiana-March 7, 2018-No. 06A01-1708-CT-1969.