Farmers & Mechanics Mut. Ins. Co. v. Allen, 14-0967

• Decision Date: 14 October 2015
• Docket Number: No. 14-0967,14-0967
• Court: West Virginia Supreme Court
• Parties: FARMERS & MECHANICS MUTUAL INSURANCE COMPANY, Petitioner v. MARLON ALLEN, SR., individually and as Administrator of the Estate of Marcus Allen, Respondent

FARMERS & MECHANICS MUTUAL INSURANCE COMPANY, Petitioner v. MARLON ALLEN, SR., individually and as Administrator of the Estate of Marcus Allen, Respondent

No. 14-0967

SUPREME COURT OF APPEALS OF WEST VIRGINIA

September 2015 Term

Submitted: September 22, 2015

October 14, 2015

Appeal from the Circuit Court of Mineral County

The Honorable Phillip B. Jordan, Jr., Judge

Civil Action No. 12-C-43

REVERSED

Susan R. Snowden, Esq.

Martin & Seibert, L.C.

Martinsburg, West Virginia

Counsel for the Petitioner

Trevor K. Taylor, Esq.

Taylor Law Office

Morgantown, West Virginia

Counsel for the Respondent

JUSTICE KETCHUM delivered the Opinion of the Court.

JUSTICE DAVIS concurs and reserves the right to file a concurring Opinion.

SYLLABUS BY THE COURT

1. "Where the provisions of an insurance policy contract are clear and unambiguous they are not subject to judicial construction or interpretation, but full effect will be given to the plain meaning intended." Syllabus Point 1, Keffer v. Prudential Ins. Co., 153 W.Va. 813, 172 S.E.2d 714 (1970).

2. A tenant who is neither a named nor definitional insured of a landlord's homeowner's insurance policy is not an insured under the landlord's policy by the mere fact that the tenant may have an insurable interest in the leased property.Justice Ketchum:

Petitioner Farmers & Mechanics Mutual Insurance Company ("F & M") appeals the September 2, 2014, order of the Circuit Court of Mineral County that granted summary judgment in favor of respondent, Marlon Allen, Sr., individually and as administrator of the estate of Marcus Allen ("the estate").

The issue raised in this appeal is whether a landlord's insurer has a right of subrogation against a tenant when the tenant causes damage to the leased premises under the following circumstances: (1) the tenant was not a named or definitional insured of the landlord's policy; (2) the tenant purchased his own renter's insurance after being advised to do so by the landlord; and (3) the lease agreement stated that the tenant was solely responsible for any damage he caused to the subject property.

The circuit court concluded that the tenant was an "equitable insured" of the landlord's insurance policy. It ruled that F & M (the landlord's insurer) could not maintain a subrogation action against the tenant's estate because of its finding that the tenant was an "equitable insured." On appeal, F & M argues that the circuit court erred when it ruled that F & M could not maintain a subrogation action against the estate. Upon review, we agree with F & M and reverse the circuit court's ruling.

I.FACTUAL AND PROCEDURAL BACKGROUND

Michael O'Connor and his adult daughter Shelly O'Connor own real property located at 175 Keys Street in Keyser, West Virginia ("subject property"), astenants in common. In December 2009, Shelly O'Connor entered into a lease-to-own agreement for the subject property with Marcus Allen. The agreement provided that Marcus Allen would pay Shelly O'Connor $625.00 per month for fourteen years, and that

[t]he payment of $625.00 is broken down as follows, $555.00 will go for mortgage, insurance and taxes. $70.00 will go to Shelly O'Connor as interest for each month. The payment will go to [sic] in the bank each month until the house is paid in full. When the mortgage payments are paid in full at First United Bank, Shelly O'Connor will receive all further payments until the house is paid in full, which is $105,300. At that time, only the deed will be given to Marcus Troy Allen as well as changing [sic] homeowner name.

The agreement also stated that "if I [Shelly O'Connor] do not receive the payment in full . . . within 30 days after the due date, Mr. Allen will be evicted[.]" Further, the agreement stated, "[i]f there are any damages made to said house, after Mr. Allen moves in, he is solely responsible." Finally, the lease-to-own agreement described the consequences tenant Marcus Allen would face for causing damage to the property: "if the house is being damaged Mr. Allen will be evicted and have thirty days to get all his belongings out and return the keys to the landlord (Shelly O'Connor)."

Shelly O'Connor purchased a homeowner's insurance policy from F & M covering the subject property. The policy was effective from March 15, 2010, through March 15, 2011. According to Shelly O'Connor's deposition testimony, this policy wasoriginally purchased in 2006 and was renewed on a yearly basis thereafter.¹ Shelly O'Connor was the named insured on the F & M policy. Her father, Michael O'Connor, was named as an additional insured. The policy also contained a "definitions" provision that defined who was covered under the policy. This "definitional insured" provision of the policy states:

DEFINITIONS

A. In this policy, "you" and "your" refer to the "named insured" shown in the Declarations and the spouse of a resident of the same household. "We", "us" and "our" refer to the Company providing this insurance.

. . . .

5. "Insured" means:

a. You and residents of your household who are:

(1) Your relatives; or

(2) Other persons under the age of 21 and in the care of any person named above;

b. A student enrolled in school full time, as defined by the school, who was a resident of your household before moving out to attend school[.]

The F & M homeowner's policy insured the subject property against various perils including risk of loss by fire. The policy did not name the tenant, Marcus Allen, as an insured, a definitional insured, or in any other capacity. Further, F & M was not made aware that the tenant, Marcus Allen, was living in the subject property, nor was it made aware of the lease-to-own agreement that Shelly O'Connor entered into with Marcus Allen.

Shelly O'Connor testified that she advised Marcus Allen to purchase renter's insurance. Marcus Allen thereafter purchased a renter's insurance policy from State Auto Insurance. Marcus Allen's rental insurance policy was effective from March 10, 2010, through March 10, 2011, and provided the following coverage and limits of liability: personal property ($20,000), personal liability ($100,000/each occurrence), loss of use ($6,000), and medical pay to others ($1,000/each person).

On May 6, 2010, Marcus Allen was cooking food on the stove in the subject property when a grease fire ensued. Marcus Allen died in the fire and the property sustained extensive damage. Thereafter, Shelly O'Connor filed an insurance claim under the F & M homeowner's policy. After reviewing the claim, F & M paid its insureds, Shelly O'Connor and Michael O'Connor, for the property damage caused by the fire.²

The decedent's father, Marlon Allen, Sr., individually and in his capacity as the administrator of Marcus Allen's estate, filed a wrongful death claim against Michael O'Connor. This complaint alleged that Michael O'Connor, as landlord, was negligent in failing to have a smoke detector installed in the subject property which resulted in tenant Marcus Allen's death.³ The complaint asserts, "Defendant O'Connor by renting [the] dwelling in question to the decedent assured him that the dwelling was safe, secure and inhabitable." Michael O'Connor filed an answer to this lawsuit. The answer included a counterclaim filed by his insurance company, F & M, asserting a subrogation claim against the tenant's estate for the proceeds F & M paid to Shelly O'Connor following the fire.⁴

The tenant's estate replied to F & M's counterclaim through counsel hired by State Auto (the insurer who provided renter's insurance to the decedent). It filed ananswer to the counterclaim asserting that F & M could not maintain a subrogation claim against the estate, arguing that tenant/decedent Marcus Allen obtained an interest in the F & M policy because a portion of each monthly payment he made to Shelly O'Connor under the lease-to-own agreement went to "mortgage, insurance and taxes." Thus, the estate argued, Marcus Allen was an additional insured under the F & M homeowner's policy, and under established insurance law, F & M could not seek subrogation against its own insured.

On October 8, 2013, F & M filed a motion for summary judgment seeking a ruling that tenant/decedent Marcus Allen was not an insured under the F & M policy. On November 1, 2013, the estate filed a cross-motion for summary judgment arguing that Marcus Allen should be deemed an insured under the F & M policy and, therefore, F & M was prohibited from asserting a subrogation claim against the estate.

The circuit court granted the estate's motion for summary judgment, concluding that tenant/decedent Marcus Allen had an interest in the F & M insurance policy because a portion of his rental payments were allocated to "insurance" pursuant to the lease-to-own agreement. The circuit court did not rule that Marcus Allen was a named, additional, or definitional insured under the F & M policy.⁵ Instead, the circuitcourt concluded that Marcus Allen was an "equitable insured." The circuit court's September 2, 2014, order explains:

As the Court views the facts presented in this case, F & M is not permitted to the equitable remedy of subrogation against Mr. Allen's Estate. As developed during discovery, Mr. Allen had agreed to purchase the insured premises located at 175 Keys Street. The contract between Mr. Allen and Ms. O'Connor required that Mr. Allen pay to Ms. O'Connor $625 every month. From these monthly payments, it was agreed that "$555.00 will go for mortgage, insurance and taxes." Ms. O'Connor testified that pursuant to the contract, she did purchase insurance with Mr. Allen's monthly payments. The insurance that she purchased was the policy provided by F & M. The Court finds that there is nothing equitable about allowing F & M, based upon a policy purchased with Mr. Allen's money, to pursue a subrogation claim against Mr. Allen's Estate to repay it for the loss covered under the F & M policy. . . .

F & M has paid a debt to Ms. O'Connor for the policy covering the property in question. F & M's right to subrogation is to the

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