Allstate Ins. Co. v. Palumbo

• Decision Date: 12 August 2008
• Docket Number: No. 28409.,28409.
• Citation: 109 Conn.App. 731,952 A.2d 1235
• Court: Connecticut Court of Appeals
• Parties: ALLSTATE INSURANCE COMPANY v. Stephen PALUMBO et al.

952 A.2d 1235

109 Conn.App. 731

ALLSTATE INSURANCE COMPANY v. Stephen PALUMBO et al.

No. 28409.

Appellate Court of Connecticut.

Argued November 27, 2007.

Decided August 12, 2008.

Neil Johnson, Hartford, for the appellant (named defendant).

Jeremiah J. O'Connor, for the appellee (plaintiff).

DiPENTIMA, HARPER and DUPONT, Js.

DUPONT, J.

In this action for equitable subrogation, the defendant Stephen Palumbo¹ appeals from the judgment of the trial court, rendered after a trial to the court, in favor of the plaintiff, Allstate Insurance Company. The defendant claims (1) that an equitable subrogation action brought by the plaintiff could not be maintained against him as the fiance of the plaintiff's insured or as a cohabitant in the home of the plaintiff's insured and (2) that if the action was legally viable, the amount of the judgment was excessive and based on improperly admitted evidence.² We affirm the judgment of the trial court.

The following factual and procedural history is relevant to the issues raised. The trial court found that on January 31, 2002, Lisa Deveau was the owner of certain real property located at 26 Kathy Circle, Coventry. Deveau resided at the premises with her daughter and the defendant. The property was insured by the plaintiff under a homeowner's policy in which Deveau was the named insured. On January 31, 2002, the defendant, a licensed electrician, negligently installed a heat pump and water heating element at the premises, causing a fire that resulted in damage to the structure of the house as well as damage to personal property.

The defendant moved out of the premises in October, 2005. While the defendant resided on the premises, he and Deveau shared expenses, although they had no written or oral arrangement in this regard. The occupants shared the entire house, without any one of them having exclusive use of any particular area. The defendant performed many improvements and maintenance items to the realty as though he were an owner, although he never claimed to own the real estate. The defendant conceded responsibility for the fire that damaged the premises.

The plaintiff, pursuant to its liability insurance policy, expended money as claimed by Deveau, its insured, for the repair of the realty and for the loss of personal property in the amount of $61,493.29. The plaintiff seeks reimbursement from the defendant because the plaintiff was "subrogated to any and all rights and claims which the insured had or has against the defendant to the extent of the payments made to [its] insured as a result of the fire caused by the [d]efendant's negligence."

The defendant, in his amended special defenses, claimed that (1) he was an insured person pursuant to Deveau's policy with the plaintiff and, therefore, was not subject to a negligence action by his insurance company, (2) he and Deveau, his fiancee, were in a landlord-tenant relationship, (3) he was a tenant, (4) he was a lodger and (5) subrogation was not equitable.

The court concluded that the defendant was not an insured under the language of the policy³ and that there was no landlord-tenant relationship between Deveau and the defendant. The court, citing Wasko v. Manella, 269 Conn. 527, 849 A.2d 777 (2004), held that the plaintiff had a cause of action for equitable subrogation against the defendant, noting that "[j]ust as . . . Deveau could have brought an action in negligence against [the defendant], so, too, can [the plaintiff] by virtue of equitable subrogation." Accordingly, the court rendered judgment in favor of the plaintiff in the amount of $61,493.29.

I

The defendant first argues that the court improperly concluded that the plaintiff was entitled to equitable subrogation. Specifically, the defendant argues that the plaintiff is not entitled to equitable subrogation because he was a tenant or a lodger and, under the facts of this case, subrogation would not be equitable. The defendant further argues that even if he is not a tenant within the strict confines of the term, he and Deveau were in a landlord-roomer or landlord-lodger-boarder relationship, which would also fall within the provisions of the landlord and tenant statutes. We disagree.

"As our Supreme Court has explained, [t]he right of [equitable] subrogation is not a matter of contract; it does not arise from any contractual relationship between the parties, but takes place as a matter of equity, with or without an agreement to that effect. . . . The object of [equitable] subrogation is the prevention of injustice. It is designed to promote and to accomplish justice, and is the mode which equity adopts to compel the ultimate payment of a debt by one who, in justice, equity, and good conscience, should pay it. . . . As now applied, the doctrine of equitable subrogation is broad enough to include every instance in which one person, not acting as a mere volunteer or intruder, pays a debt for which another is primarily liable, and which in equity and good conscience should have been discharged by the latter." (Internal quotation marks omitted.) Warning Lights & Scaffold Service, Inc. v. O & G Industries, Inc., 102 Conn.App. 267, 272, 925 A.2d 359 (2007). Equitable subrogation "derives from the equitable principle against unjust enrichment . . . ." (Internal quotation marks omitted.) Id., at 276, 925 A.2d 359. "A claimant who has established an entitlement to restitution by proving the unjust enrichment of the defendant at the claimant's expense is ordinarily entitled to a personal money judgment against the defendant for the amount of the enrichment in money." Restatement (Third), Restitution and Unjust Enrichment, ch. 7, introductory note, p. 117 (Tentative Draft No. 5, March 12, 2007).

Briefly described, this subrogation action involves a paradigm of three participants, the plaintiff insurer, the insured, and a third person who, it is alleged by the insurer, has been unjustly enriched by the payment by the insurer of a claim covered by its contract with the insured that should have been borne by the defendant third person because of his negligence. "[S]ubrogation is a time-honored theory, and insurers who pay a loss are entitled, within the limit of subrogation doctrine, to pursue the actual wrongdoer." 16 L. Russ & T. Segalla, Couch on Insurance (3d Ed.2005) § 222:4.

It is important to establish the relationship between the defendant and Deveau because if the defendant had no monetary obligation arising from that relationship, such as a contract as a boarder-lodger or tenant as he claimed, or arising from his tortious conduct, he would not be unjustly enriched by the plaintiff's payment to Deveau. It is the relationship between the insured and the third person that governs whether the insurer's payment to the insured unjustly benefited or enriched the third person because the duty owed by the third person to the insured establishes whether the former did or did not owe the latter the sum of money paid by the insurer to the insured. The duty owed is usually governed by the expectations of the parties, which may be outlined in an insurance policy or a lease. See Hartford Fire Ins. Co. v. Warner, 91 Conn.App. 685, 692, 881 A.2d 1065, cert. denied, 276 Conn. 919, 888 A.2d 88 (2005).

"The determination of what equity requires in a particular case, the balancing of the equities, is a matter for the discretion of the trial court. . . . In determining whether the trial court abused its discretion, this court must make every reasonable presumption in favor of [the trial court's] action. . . . The manner in which [this] discretion is exercised will not be disturbed so long as the court could reasonably conclude as it did. . . . When the trial court draws conclusions of law from its balancing of the equities, however, our review is plenary. . . . Moreover, we are mindful that [s]ubrogation is a highly favored doctrine . . . which courts should be inclined to extend rather than restrict." (Citations omitted; internal quotation marks omitted.) Wasko v. Manella, supra, 269 Conn. at 542-43, 849 A.2d 777.⁴

Our Supreme Court previously has considered whether to allow an action for equitable subrogation by the insurer against an insured's tenant; see DiLullo v. Joseph, 259 Conn. 847, 792 A.2d 819 (2002); or against an insured's social houseguest.⁵ See Wasko v. Manella, supra, 269 Conn. at 527, 849 A.2d 777. In DiLullo v. Joseph, supra, at 850-51, 792 A.2d 819, our Supreme Court held that "in the absence of an express agreement between the parties covering the question, there is no right of subrogation on the part of a landlord's fire insurer against a tenant of the landlord's premises." The court subsequently held, in Wasko v. Manella, supra, that a right of subrogation exists when a social houseguest negligently causes a fire that damages a host's insured property. It is the defendant's contention that he and Deveau had a landlord-tenant relationship, causing subrogation to be inequitable and barred as a matter of law. See DiLullo v. Joseph, supra, at 850-51, 792 A.2d 819. He further contends that the court improperly found that he was more akin to a social houseguest subject to subrogation pursuant to Wasko v. Manella, supra, at 527, 849 A.2d 777.⁶

"A landlord-tenant relationship, in its most common and traditional form, is one in which there is an oral or written rental agreement between the parties containing the terms and conditions for the use and occupancy of the subject dwelling unit." Rivera v. Santiago, 4 Conn.App. 608, 609, 495 A.2d 1122 (1985). A "landlord" is defined in General Statutes § 47a-1(d) as "the owner, lessor or sublessor of the dwelling unit, the building of which it is a part or the premises." A "tenant" means "the lessee, sublessee or person entitled under a rental agreement to occupy a dwelling unit or premises to the exclusion of others or as is otherwise defined by law." General Statutes § 47a-1(l). A "rental agreement" means "all...