Pennsylvania Superior Court Fires up a Case-By-Case Analysis for Landlord-Tenant, Implied Co-Insured Questions

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In Joella v. Cole, 2019 PA Super. 313, the Superior Court of Pennsylvania recently considered whether a tenant, alleged by the landlord’s property insurance carrier to have carelessly caused a fire, was an implied co-insured on the landlord’s policy. The court found that the tenant was an implied co-insured because the lease stated that the landlord would procure insurance for the building, which created a reasonable expectation that the tenant would be a co-insured under the policy. Since the tenant was an implied co-insured on the policy, the insurance carrier could not maintain a subrogation action against the tenant. This case confirms that Pennsylvania follows a case-by-case approach when determining whether a tenant was an implied co-insured on a landlord’s insurance policy.

The Joella case stems from a fire at an apartment building in Northampton County, Pennsylvania. The landlord’s property insurance carrier paid the landlord $180,000 to repair the damages resulting from the fire. In March 2018, the insurer brought a subrogation action against Annie Cole, a tenant in the building, alleging that Ms. Cole’s negligent use of an extension cord caused the fire. Ms. Cole raised the affirmative defense that she was an implied co-insured on the landlord’s insurance policy. The subrogating insurer filed a partial motion for summary judgment seeking to dismiss Ms. Cole’s defense. In response, Ms. Cole filed a cross motion for partial judgment, arguing that because the lease specified that the landlord would maintain fire insurance for the building, there was a reasonable expectation that she would be a co-insured on that policy. The trial court found in favor of Ms. Cole, holding that the landlord’s insurer could not maintain a subrogation action against her because she was an implied co-insured of the landlord’s insurance policy under the terms of the lease. The landlord’s insurer filed an appeal with the Superior Court of Pennsylvania.

The Superior Court noted that the lease agreement included two provisions referencing the landlord’s insurance for the building. The first reference was found in the section regarding utilities and services, and stated that the landlord shall be responsible for “insurance on the building only.” The other section related to property insurance and stated that the tenant’s personal property was not covered by the landlord’s fire insurance. In analyzing the issue, the Superior Court confirmed that Pennsylvania uses the case-by-case approach, based on the reasonable expectations of the parties as expressed in the written lease, to determine if a tenant is an implied co-insured on the landlord’s policy for purposes of subrogation.

Based on the above-referenced provisions in the lease agreement, the court found that it was reasonable for the tenant to expect that she would be a co-insured on the landlord’s policy. The court distinguished this matter from a previous Superior Court case, Remy v. Michael D’s Carpet Outlets, 391 Pa. Super. 436 (1990), where the court found that the tenant was not an implied co-insured for purposes of subrogation. In Remy, unlike in this case, the lease agreement between the parties did not reference any insurance for the building and specifically required the tenant to purchase and maintain its own liability insurance. Here, the court found the terms of the lease imposed a responsibility on the landlord to obtain insurance for the building and created a reasonable expectation that the tenant would be a co-insured on the landlord’s policy.

The Joella court recognized that, in Remy, Pennsylvania adopted the case-by-case approach for determining whether a tenant is an implied co-insured. Thus, Joella confirms that, in Pennsylvania, whether a tenant is an implied co-insured on the landlord’s insurance policy depends on the parties’ reasonable expectations, based on the terms of the lease. Consequently, a subrogation professional analyzing whether a Pennsylvania tenant is an implied co-insured on the landlord’s insurance policy should look closely at the applicable lease’s terms. Where, as here, the lease requires the landlord to purchase insurance on the building, there is a strong likelihood that a Pennsylvania court will conclude that the tenant is an implied co-insured on the landlord’s insurance policy.

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