Buckeye State Mut. Ins. Co. v. Humlicek
| Decision Date | 12 October 2012 |
| Docket Number | No. S–11–796.,S–11–796. |
| Citation | 822 N.W.2d 351,284 Neb. 463 |
| Parties | BUCKEYE STATE MUTUAL INSURANCE COMPANY, appellant, v. Richard HUMLICEK, appellee. |
| Court | Nebraska Supreme Court |
OPINION TEXT STARTS HERE
Syllabus by the Court
[284 Neb. 463]1. Judgments: Appeal and Error. When reviewing questions of law, an appellate court resolves the questions independently of the lower court's conclusions.
2. Subrogation: Words and Phrases. Generally, subrogation is the right of one, who has paid the obligation which another should have paid, to be indemnified by the other.
3. Subrogation: Equity. Subrogation is an equitable principle applied not as a legal right but to subserve the ends of justice and do equity.
[284 Neb. 464]4. Contracts: Subrogation. In terms of the exercise of the right of subrogation, no general rule can be laid down which will afford a test for its application in all cases. The facts and circumstances of each case determine whether the doctrine is applicable.
5. Contracts: Insurance: Subrogation: Equity: Tort-feasors. In the context of insurance, the right to equitable subrogation is generally based on two premises: (1) A wrongdoer should reimburse an insurer for payments that the insurer has made to its insured, and (2) an insured should not be allowed to recover twice from the insured's insurer and the tort-feasor.
6. Contracts: Insurance: Subrogation. Under the so-called antisubrogation rule, no right of subrogation can arise in favor of an insurer against its own insured or coinsured for a risk covered by the policy, even if the insured is a negligent wrongdoer.
7. Contracts: Insurance: Subrogation: Presumptions. Absent an express subrogation agreement to the contrary, a tenant is conclusively presumed to be an implied coinsured of the landlord's insurance policy.
Jarrod P. Crouse and Colin A. Mues, of Baylor, Evnen, Curtiss, Grimit & Witt, L.L.P., Lincoln, for appellant.
Thomas A. Grennan and John A. Svoboda, of Gross & Welch, P.C., L.L.O., Omaha, for appellee.
The owners of a duplex insured a building through two concurrently issued, identical policies—one for each unit. A fire damaged the entire structure, and the insurer paid the owners' claims under both policies. The insurer then brought this action to determine its subrogation rights against the tenant of one of the duplex units, who was allegedly negligent in starting the fire. The insurer concedes that pursuant to Tri–Par Investments v. Sousa,1 the tenant was an implied coinsured under the policy covering the unit he lived in. Therefore, the insurer seeks to recoup payments made for the damage only to the unit the tenant did not live in.
Bryan Hilderbrand and Ryan Hilderbrand own a duplex rental property. Richard Humlicek and Betty Humlicek were the tenants of unit 1292 of the duplex. The tenants of the other unit, unit 1282, are not parties to this action. The lease agreements between the Hilderbrands and the Humliceks provided that the tenants would obtain and keep in full force and effect renter's insurance covering their personal property, but that the Hilderbrands would obtain and keep in full force and effect fire and “all risk” coverage for the property. Specifically, the lease agreement stated that the Hilderbrands “shall obtain and keep in full force and effect ... fire and ‘all risk’ extended coverage insurance for the full replacement value of the improvements located on the Leased Premises with a responsible insurance company or companies.”
The Hilderbrands obtained insurance coverage for the duplex building through Buckeye State Mutual Insurance Company (Buckeye). The two units of the duplex were covered by separate but identical policies. The policies were issued concurrently with the notation that the coverage was for “ 1/2 of duplex.” The coverage in the policies was described as a “Dwelling Fire Special” and included general property damage and injury liability coverage for the unit covered, as well as coverage for personal property, related private structures, and loss of rent.
In May 2009, a fire damaged both units of the duplex. The fire originated in unit 1292. Richard allegedly caused the fire by negligently disposing of smoking materials in the garage attached to unit 1292.
Buckeye paid the Hilderbrands' claims for damages resulting from the fire to both units. Those damages included the damage to the building, damage to the Hilderbrands' personal property, and loss of rent.
Buckeye brought suit against Richard, seeking a declaration that Buckeye was entitled to pursue a subrogation claim against Richard for payments made in relation to unit 1282. Buckeye did not pursue a subrogation claim against Richard for payments made in relation to unit 1292.
The district court granted Richard's motion for summary judgment and dismissed the action. The court reasoned that under Tri–Par Investments,2 Richard was an implied coinsured with the Hilderbrands under both policies covering the two units of the single duplex structure. An insurer cannot subrogate against its own insured. The court also noted that, given the terms of the lease, it was Richard's reasonable expectation that the Hilderbrands would obtain fire insurance for the entire structure. Buckeye appeals.
Buckeye asserts that the district court erred in (1) failing to overrule Richard's motion for summary judgment, (2) ruling that Richard is a coinsured with the Hilderbrands under Nebraska law, (3) failing to rule that Buckeye is allowed to subrogate against Richard, and (4) denying Buckeye's request for declaratory judgment.
When reviewing questions of law, an appellate court resolves the questions independently of the lower court's conclusions.3
Buckeye asserts that it should have a right of subrogation against Richard for the payment made to the Hilderbrands for fire damage to unit 1282. Generally, subrogation is the right of one, who has paid the obligation which another should have paid, to be indemnified by the other. 4 Subrogation is an equitable principle applied not as a legal right but to subserve the ends of justice and do equity.5 In terms of the exercise of the right of subrogation, no general rule can be laid down which will afford a test for its application in all cases.6 The facts and circumstances of each case determine whether the doctrine is applicable. 7
In the context of insurance, the right to equitable subrogation is generally based on two premises: (1) A wrongdoer should reimburse an insurer for payments that the insurer has made to its insured, and (2) an insured should not be allowed to recover twice from the insured's insurer and the tortfeasor.8 But under the so-called antisubrogation rule, no right of subrogation can arise in favor of an insurer against its own insured or coinsured for a risk covered by the policy, even if the insured is a negligent wrongdoer.9 To allow subrogation under such circumstances would permit an insurer, in effect, to avoid the very coverage which its insured purchased.10 In addition, the insurer should not be in a situation where there exists a potential conflict of interest which could affect the insurer's incentive to provide its insured with a vigorous defense. 11
The antisubrogation rule has been extended to “implied coinsureds.” 12 In Jindra v. Clayton,13 we held that closely related family members who owned the property in joint tenancy were implied coinsureds under one family member's policy with the insurer covering the property. In Reeder v. Reeder,14 we held that the brother of the homeowner who insured the property was an implied coinsured while residing as a guest in the property until it sold and his own house was built.
We explained in Reeder that whether the insurer could subrogate did not necessarily depend on categorizing the legal relationship of the wrongdoer to the named insured. Nor did it depend on whether the homeowner could sue the wrongdoer for negligent destruction of the property.15 The question was instead whether, under all the circumstances, recovery by the insurer against the wrongdoer would be “in effect” recovery from the insured for the very risk that the insurer agreed to take upon payment of the premium. 16
But in Tri–Par Investments,17 we adopted a per se rule governing the relationship of a tenant to the landlord's insurer. In Tri–Par Investments, we held that absent an express subrogation agreement to the contrary, a tenant is conclusively presumed to be an implied coinsured of the landlord's insurance policy.18 We specifically rejected a case-by-case approach adopted by some other jurisdictions which would examine the landlord and tenant's intentions as shown by the lease agreement and the surrounding circumstances. Thus, we held that the tenant of a single-family home was an implied coinsured of his landlord's fire insurance policy and that the insurer could not subrogate against the tenant even if he were negligent in starting the fire.
We explained in Tri–Par Investments that the per se rule represents the better public policy for the landlord-tenant relationship. First, a per se rule provides legal certainty for tenants.19 If there is a clear subrogation provision in the lease, tenants will be on notice that they must obtain insurance coverage for the realty if they wish to protect themselves from personal liability in the event they negligently start a fire. 20 On the other hand, if there is not such a provision in the lease, then tenants do not need to obtain separate insurance coverage and can rely on the fire insurance obtained by the landlord.21
Second, the per se rule comports with the reasonable expectations of the parties and the current commercial reality. We explained that tenants reasonably expect that the owner of the building will provide fire insurance protection for the realty on both of their behalves. As...
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