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Youell v. Cincinnati Ins. Co., 2018 WL 6816772 (Ind. Ct. App. 2018)

When a landlord’s insurer pays for damage to the leased property caused by the negligence of the tenant, can the landlord’s insurer pursue a subrogation claim against the negligent tenant? Maybe. But as the Indiana Court of Appeals recently held in Youell v. Cincinnati Ins. Co., not if the lease obligated the landlord to insure the property.

In Youell, a fire damaged the leased building, so the landlord made a claim under its property policy. The landlord’s insurer paid the landlord for the damage to the building and then sued the tenant for reimbursement. The tenant moved for judgment on the pleadings, arguing that the insurer had no right to pursue subrogation because the landlord’s agreement to insure the building was an agreement to provide the benefits of insurance not only to itself, but also the tenant. The trial court denied the tenant’s motion, and the tenant appealed.

The Court of Appeals reversed the trial court’s decision and remanded the case with instructions to grant the tenant’s motion. In doing so, the Court of Appeals found that the insurer could not rely on LBM Realty, LLC v. Mannia, 19 N.E.3d 379 (Ind. Ct. App. 2014). Mannia endorsed a case-by-case approach to determining whether a landlord’s insurer can pursue a subrogation claim against a tenant because the lease was “silent” about whether the landlord had to insure the property, so the parties’ reasonable expectations about liability for damage to the property were unclear. Because the lease in Youell explicitly obligated the landlord to insure the building, the Court of Appeals held the lease was “an agreement to provide both parties with the benefits of insurance and expressly allocated the risk of loss in case of fire to insurance.”