Bryan and Ryan Hilderbrand owned a duplex rental property in southeast Nebraska. Richard and Betty Humlicek were the tenants of unit 1292 of the duplex. The tenants of the other unit, 1282, were not parties to this action.

The lease agreements provided that the tenants would obtain and keep in full force and effect renter's insurance covering their personal property, and that the Hilderbrands “shall obtain and keep in full force and effect…fire and ‘all-risk’ extended coverage insurance for the full replacement value of the improvements located on the Leased Premises with a responsible insurance company or companies.”

The Hilderbrands obtained insurance for the duplex building through Buckeye State Mutual Insurance Company. The two units of the duplex were covered by separate but identical policies. The policies were issued concurrently with the notation that the coverage was for “1/2 of duplex.” The coverage was described as “Dwelling Fire Special” and provided property damage and personal injury liability coverage for the unit covered, as well as coverage for personal property, related private structures, and loss of rent.

In May 2009, a fire damaged both units of the duplex. The fire originated in unit 1292. Richard Humlicek allegedly caused the fire by negligently disposing of smoking materials in the garage attached to unit 1292.

Buckeye paid the Hilderbrands' claims for fire damage to both units. The loss encompassed damage to the building, damage to the Hilderbrands' personal property, and loss of rent.

Buckeye brought suit against Richard Humlicek, seeking a declaration that it was entitled to pursue a subrogation claim against him for payments it made in relation to unit 1282. Buckeye did not pursue a subrogation claim against Humlicek for payments made in relation to unit 1292.

The district court granted Humlicek’s motion for summary judgment and dismissed the action. The court reasoned that, in accordance with a decision in a similar case (Tri-Par Investments), Humlicek was an implied coinsured with the Hilderbrands under both policies covering the two units of the single duplex structure. The court held that an insurer could not subrogate against its own insured. The court also noted that, given the terms of the lease, it was Humlicek’s reasonable expectation that the Hilderbrands would obtain fire insurance for the entire structure.

Buckeye appealed, asserting that the district court erred in (1) failing to overrule Humlicek's motion for summary judgment, (2) ruling that Humlicek was a coinsured with the Hilderbrands under Nebraska law, (3) failing to rule that Buckeye was allowed to subrogate against Humlicek, and (4) denying Buckeye's request for declaratory judgment.

On appeal, the Supreme Court of Nebraska noted: “[U]nder the so-called anti-subrogation rule, no right of subrogation can arise in favor of an insurer against its own insured or coinsured for a risk covered by the policy, even if the insured is a negligent wrongdoer. To allow subrogation under such circumstances would permit an insurer, in effect, to avoid the very coverage which its insured purchased.” The court noted further that the anti-subrogation rule had been extended to “implied coinsureds.”

In Tri-Par Investments, the court said, it adopted a per se rule governing the relationship of a tenant to the landlord’s insurer.

“[W]e held that absent an express subrogation agreement to the contrary, a tenant is conclusively presumed to be an implied coinsured of the landlord's insurance policy. We specifically rejected a case-by-case approach...which would examine the landlord and tenant's intentions as shown by the lease agreement and the surrounding circumstances. Thus, we held that the tenant of a single-family home was an implied coinsured of his landlord's fire insurance policy and that the insurer could not subrogate against the tenant even if he were negligent in starting the fire.”

Based on this precedent, the high court upheld the trial court’s decision and held that Richard Humlicek was an implied coinsured such that the anti-subrogation rule barred recovery.

Supreme Court of Nebraska. Buckeye State Mutual Insurance Company v. Richard Humlicek.