Renters Coinsured on Owner’s Policy; Not Subject to Subrogation

Homeowners	Renters
Fire	No lease agreement

A trial court ruled that tenants renting a house month-to-month with an option to buy were co-insureds under the owner's fire insurance policy, preventing the insurer from seeking subrogation against them. The parties had no written lease; their agreement was solely oral. The tenants maintained a renters insurance policy for their personal belongings and activities.

The landlord's insurer filed a subrogation lawsuit against the tenants after paying approximately $40,000 to its named insured for significant fire and smoke damage, allegedly caused by the tenants' negligence. When the appeal of the summary judgment dismissing the insurer's claim against the tenants was made, the North Dakota Supreme Court stated:

"The dispositive issue in this case is a question of law: Whether a tenant is an implied Coinsured on a landlord's fire insurance policy as a matter of law, absent an express agreement to the contrary. If a tenant is a Coinsured under the policy, subrogation is unavailable."

The high court referenced the landmark Sutton v. Jondahl case for the conclusion it quoted, calling it "the modern trend of authority." Regarding situations similar to those being examined, it stated: "This principle is derived from a recognition of a relational reality, namely, that both landlord and tenant have an insurable interest in the rented premises--the former owns the fee and the latter has a possessory interest....”

"To suggest the fire insurance does not extend to the insurable interest of the occupying tenant is to ignore the realities of urban apartment and single-family dwelling renting....”

"The company affording such coverage should not be allowed to shift a fire loss to an occupying tenant even if the latter negligently caused it.... For to conclude otherwise is to shift the insurable risk assumed by the insurance company from it to the tenant--a party occupying a substantially different position from that of a fire-causing third party not in privity with the insured landlord." (See Sutton v. Jondahl, 532 P.2d 478 Okla. Ct. App. 1975.)

The trial court's judgment was affirmed in favor of the renters and against the landlord's insurer.

Community Credit Union Of Rockford, ND, Plaintiff, Appellant v. Homelvig ET UX., Defendants, Appellees. North Dakota Supreme Court. Civil No. 020001. July 28, 1992. CCH 1992 Fire and Casualty Cases, Paragraph 3849.