SIGNIFICANT OTHER NOT SUBJECT TO SUBROGATION

Homeowner	Subrogation
Insureds	Household Member

On January 31, 2002, a fire caused significant damage to a house owned by Lisa Deveau (Deveau). At the time of the fire, Deveau shared her home with her fiancé, Stephen Palumbo (Palumbo). Palumbo had moved in with Deveau shortly after she bought the house, about two and a half years before the fire.

The couple shared all household expenses equally, including homeowners insurance. Palumbo would give Deveau cash or checks to cover his share, and Deveau paid the bills.

Deveau was the only named insured under an Allstate Insurance Company (Allstate) homeowners policy covering the house. The policy listed Deveau as the insured, but the couple believed that Palumbo would also be covered because he was Deveau’s fiancé and a cohabitant of the house, as well as because he contributed towards the homeowners’ premium.

Palumbo made numerous improvements to Deveau’s property, including installing a water heater. After the fire, it was determined that the water heater had been installed incorrectly, and that this improper installation caused the fire.

Allstate eventually paid Deveau $62,615.25 to cover her expenses and damages. The insurer then filed an equitable subrogation lawsuit against Palumbo, claiming it was entitled to reimbursement because Palumbo’s negligence had caused the fire.

The lower and appellate courts ruled in favor of Allstate. The Connecticut Supreme Court then certified the case for appeal.

The court started its review by recognizing that the lower court focused heavily on the nature of Deveau and Palumbo’s relationship. It pointed out that their relationship was more than just that of host and social houseguest or landlord and tenant. However, the court also observed that the trial court did not consider whether it would be unfair, given the circumstances, to permit subrogation. Furthermore, it explained that neither Deveau nor Palumbo would have reasonably expected Deveau to sue Palumbo for negligence.

Although Deveau did not explicitly inform Palumbo that she was obtaining the insurance for both her and his benefit, she consistently accepted his contributions toward the premium payment. The court noted that “[c]ourts have long recognized that where one party has agreed with another to obtain insurance for their mutual protection, the insurer will not be allowed to recover its losses from the noninsured party by means of subrogation or indemnity.” It then concluded that the “totality of the circumstances” weighed against subrogation.

The Supreme Court overturned the Appellate Court’s decision and sent the case back to them, directing the trial court to reverse its judgment and enter judgment in favor of Palumbo.

Allstate Insurance Company vs. Palumbo-No. 18276-Supreme Court of Connecticut-May 18, 2010-994 Atlantic Reporter 2d 174