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May a Landlord’s Insurer Pursue A Subrogation Action Against the Landlord’s Own Tenant to Recover Damages Paid Out Pursuant to a Property Policy

Yes….maybe.    Florida Courts, however,  take a “case-by-case approach,”  so the more appropriate answer is “it depends on the facts and the lease.  A recent case out of the Third District Court speaks directly to this issue.

See, https://www.3dca.flcourts.org/content/download/467997/5132326/file/3D17-0690.pdf

In Zurich American Insurance Company v. Puccini, LLC, Zurich sought to recover monies paid to Landlord for fire damage to the insured’s premises.  A fire broke out in the early morning at the Napkin Burge, which was a popular Miami Beach Restaurant.  Zurich paid approximately $2,100,000.00 to its insured who was the owner of the building.  The owner was in privity of contract with the tenant.

The tenant successfully asserted a defense that It was an implied co-insured under the policy in the trial court, which barred the subrogation action when dismissing the matter.

On appeal, the 3rd DCA noted that Courts have taken one of three-(3) approaches in determining whether the landlord’s insurer may pursue a subrogation action:

(1) the approach set forth in Sutton v. Jondahl, 532 P.2d 478 (Okla. Civ. App. 1975), which establishes that a tenant is a coinsured of the landlord—and therefore subrogation is unavailable—absent an express agreement to the contrary;

                       (2) the “anti-Sutton approach,” which provides a presumption in favor of subrogation and permits an insurer to bring a subrogation action against the tenant absent an express or implied agreement to the contrary; or

                       (3) the “case-by-case approach.”

The Court cited precedent out of the 1st DCA, 5th DCA and its owe jurisdiction finding that the “case-by-case approach” had been adopted.   The Court noted that there “there is no presumption in favor of or against subrogation” in a case by case approach.  Rather, “the ‘lease as a whole’ is examined ‘in order to ascertain the intent of the parties as to who should bear the risk of loss for damage to the leased premises caused by the tenant’s negligence.’” Citing, State Farm Fla. Ins. Co. v. Loo, 27 So. 3d 747, 750 (Fla. 3d DCA 2010).

            The Court noted factors to be considered in the  lease as a whole included:

-Whether the lease exculpated the tenant from liability for tenant’s negligence;

-Whether the lease required the landlord to maintain insurance for the benefit of the tenant; or

-Whether the lease shifted to the landlord any loss incurred as a result of the tenant’s negligence

            Assessing the lease as a whole and the factors, the Court found that the parties “did not intend to shift the risk of loss for damage caused by Tenant’s negligence to Zurich, Landlord’s insurer.”  The appellate Court overruled the trail Court and allowed the subrogation action to action by finding the trial court erred in finding the tenant a “co-insured.”

            The dissent adroitly pointed out that the tenant paid “70% of the landlord’s expenses including premiums for all insurance applicable to the building.”   This among other facts demonstrated the parties intent to “parties plainly agreed to shift the risk of fire damage to an insurance company.”


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