TENANTS PROTECTED FROM SUBROGATION
Sathiyaselvam Thangavel and Sasikala Muthusamy leased an apartment from Seaford Apartment Ventures, LLC. Seaford Apartment filed a claim with Donegal, its insurer, which paid $77,704.06 for property repairs. The damage was caused by tenants flying a drone inside their apartment. It hit and damaged a sprinkler head. The resultant release of water damaged the apartment building. Donegal sought to recover the repair costs from the tenants via subrogation. The insurer alleged that the tenants were negligent and breached the property’s regulations.
The tenants moved for summary judgment, relying on the “Sutton Rule” (please see note below). A Delaware superior court ruled in the tenants’ favor. It found that the Sutton rule applied because the lease did not clearly express an intent to hold the tenants liable for the damages. Donegal appealed.
On appeal, Donegal claimed that the superior court erred because the applicable lease was materially different from the leases in previous cases. The Seaford Apartment lease provisions, according to Donegal, showed a clear agreement that the tenants were liable for the damage they caused. Even if the lease was unclear, Donegal argued that the case should proceed to discovery if there was any ambiguity about the parties’ intent with respect to the tenants’ liability.
The superior court found that paragraphs in the Seaford Apartment lease did not clearly express an intent that the tenants were responsible for the water damage in this case. The court of appeals affirmed the superior court’s judgment.
Note: Applicable in various states, the “Sutton Rule” treats landlords and tenants as co-insureds under fire policies, so subrogation can’t be pursued. In some jurisdictions, the rule can be voided if a rental or lease agreement contains specific language permitting tenants to be held responsible for damage caused by their negligence.
Thangavel and Muthusamy v. Donegal Mutual Insurance Company—Superior Court of the State of Delaware—July 18, 2023—No. 379, 2022.
