Renters of a house on a month-to-month basis, with option to purchase, were found by a trial court to be co-insureds under a fire policy carried by the owner on the house, and that subrogation against them by the owner's insurer was, therefore, barred. A written lease had never been negotiated by the parties. Their agreement was strictly oral. The occupants carried a renters policy for their personal property and activities.

The landlord's insurer had brought a subrogation action against the renters after it had paid about $40,000 to its named insured for substantial fire and smoke damage, allegedly caused by negligence of the renters. Upon appeal of summary judgment dismissing the insurer's action against the renters, the North Dakota Supreme Court said:

"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 cited the landmark Sutton v. Jondahl for the quoted conclusion, which it described as "the modern trend of authority." With regard to circumstances akin to those under review, it said: "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 judgment of the trial court 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.)