McEewan v. Mountain Land Support Corp.

• Decision Date: 26 May 2005
• Docket Number: No. 20030898-CA.,20030898-CA.
• Citation: 116 P.3d 955,2005 UT App 240
• Parties: Lloyd McEWAN and Joann McEwan, Plaintiffs and Appellants, v. MOUNTAIN LAND SUPPORT CORP.; and WCI Waste Container, Inc., Defendants and Appellees.
• Court: Utah Supreme Court

Page 955

116 P.3d 955

2005 UT App 240

Lloyd McEWAN and Joann McEwan, Plaintiffs and Appellants, v. MOUNTAIN LAND SUPPORT CORP.; and WCI Waste Container, Inc., Defendants and Appellees.

No. 20030898-CA.

Court of Appeals of Utah.

May 26, 2005.

Terry M. Plant, Plant Christensen & Kanell, Salt Lake City, for Appellants.

Michael W. Homer and Jesse C. Trentadue, Suitter Axland, Salt Lake City, for Appellees.

Before Judges BENCH, GREENWOOD, and THORNE.

OPINION

GREENWOOD, Judge:

¶ 1 Plaintiffs Lloyd and Joann McEwan, as landlords, appeal the trial court's grant of summary judgment in favor of their tenants, Mountain Land Support Corp. (Mountain) and WCI Waste Container, Inc. (WCI), in a subrogation action to recover damages resulting from a fire that destroyed the leased premises.¹ We affirm.

BACKGROUND

¶ 2 Plaintiffs own an industrial building complex known as "Lloyd's of Lindon" (the Complex), located in Lindon, Utah. On January 2, 1999, Defendants leased space (the Premises) in the Complex, which they used to construct and paint large commercial waste containers and trailers.

¶ 3 Plaintiff Joann McEwan drafted the lease agreement (the Lease) between Plaintiffs and Defendants. She prepared the Lease by essentially cutting and pasting the provisions from a form lease on her computer. Among other clauses, the Lease contained two provisions requiring Defendants to obtain casualty and liability insurance for the Premises in the amount of $500,000. Defendants obtained a casualty/liability insurance policy, but did not name Plaintiffs as additional insureds to this policy, as required by the Lease.

¶ 4 On July 17, 1999, a fire ravaged the Complex, causing extensive property damage. The source and cause of the fire is disputed.

¶ 5 Plaintiffs insured the Complex through Travelers Indemnity Company of America (Travelers). Travelers compensated Plaintiffs for the damage to the Complex pursuant to the insurance policy and then filed this subrogation action in Plaintiffs' names. Plaintiffs' complaint consisted of three counts: (1) negligence, (2) res ipsa loquiter, and (3) breach of contract.

¶ 6 Defendants filed two separate motions for partial summary judgment. In their first motion, Defendants claimed that they were entitled to summary judgment on Plaintiffs' negligence and res ipsa loquiter claims because Plaintiffs had no proof that Defendants were negligent or were the proximate cause of the fire, and that Plaintiffs had not met the necessary elements to trigger the doctrine of res ipsa loquiter.

¶ 7 Defendants' second motion for summary judgment challenged Plaintiffs' breach of contract claim. Defendants argued, in relevant part, that: (1) there was no breach of contract because the Lease only required them to maintain liability insurance and casualty insurance for the Premises, not fire/property insurance; and (2) because Plaintiffs maintained fire/property insurance with Travelers, absent an express agreement to the contrary, Defendants were presumed to be coinsureds of Plaintiffs, and thus, Travelers could not recover against them on the subrogation claim.

¶ 8 The trial court granted Defendants' second motion for summary judgment² on the grounds that the Lease

did not require Defendants to maintain property or fire insurance on the premises and that the Lease is not ambiguous with respect to the issue of property or fire insurance. Based upon these findings, the Court further finds that Defendants were co[]insureds of the McEwans and that based upon their status as . . . co[]insureds[,] GNS Partnership v. Fullmer, 873 P.2d 1157 (Utah Ct.App.1994)[,] bars any subrogation claim by Travelers.

ISSUE AND STANDARD OF REVIEW

¶ 9 On appeal, Plaintiffs contend that the trial court erred in granting summary judgment for Defendants and dismissing their subrogation claim. Plaintiffs argue that Defendants were not implied coinsureds of Plaintiffs because the Lease required Defendants to maintain property insurance on the leased premises or was at least ambiguous as to the issue of property insurance.

¶ 10 "On review of a grant of summary judgment, we view the facts, and all reasonable inferences drawn therefrom in the light most favorable to the nonmoving party." GNS P'ship v. Fullmer, 873 P.2d 1157, 1159 (Utah Ct.App. 1994) (quotations and citations omitted). "Because summary judgment is granted as a matter of law, we review the trial court's legal conclusions for correctness, according them no deference." Id. at 1160. Additionally, "[w]e accord [a trial court's] interpretation of [a] contract no deference and review it for correctness." WebBank v. American Gen. Annuity Serv. Corp., 2002 UT 88, ¶ 15, 54 P.3d 1139 (first alteration in original) (quotations and citations omitted).

ANALYSIS

¶ 11 "The doctrine of subrogation allows an insurer, `having paid a loss resulting from a peril insured against, to step into the shoes of its insured and recoup its losses from a tort-feasor whose negligence caused the loss.'" GNS P'ship v. Fullmer, 873 P.2d 1157, 1160 (Utah Ct.App. 1994) (quoting Board of Educ. v. Hales, 566 P.2d 1246, 1247 (Utah 1977)). "Subrogation is an equitable doctrine, hence, equitable principles apply in determining its availability." Id. (citation omitted). "[I]t is well established that `an insurer may not recover against its own insured, or a coinsured under the policy.'" Id. (quoting Hales, 566 P.2d at 1247).

¶ 12 The fate of Plaintiffs' subrogation claim is controlled by our decision in GNS Partnership. Therefore, we begin our analysis with a review of GNS Partnership to determine whether, as the trial court concluded, it bestows upon Defendants the status of implied coinsureds, thereby barring Plaintiffs' subrogation claim.

¶ 13 In GNS Partnership, the tenant negligently caused a fire in the apartment building in which he lived. See id. at 1159. "The rental agreement between the parties [was] silent on the issues of liability for fire damage and responsibility for fire insurance, and the parties never discussed these issues." Id. However, the landlord insured the apartment building against fire damage. See id. The landlord's insurance company, after compensating the landlord, filed a subrogation action against the tenant. See id. The trial court granted summary judgment for the tenant on the grounds that he was a coinsured under the landlord's fire insurance policy. See id.

¶ 14 We affirmed on appeal, first holding that "a tenant is presumed to be a coinsured of the landlord absent an express agreement between them to the contrary." Id. at 1163. In adopting this presumption, which is consistent with the majority position, we emphasized several persuasive policy reasons gleaned from treatises and cases of our sister jurisdictions. See id. at 1161-64. First, we noted that "the landlord is the party in the best position to assume the responsibility to insure." Id. at 1164 (citing United Fire & Cas. Co. v. Bruggeman, 505 N.W.2d 87, 89 (Minn.Ct.App. 1993)). After all, "[t]o escape the presumption, the landlord may simply by contract require the tenant to provide insurance." Id. A contrary rule, we observed, would defeat the parties' reasonable expectations because

"[p]rospective tenants ordinarily rely upon the owner of the dwelling to provide fire protection for the realty . . . absent an express agreement otherwise. Certainly it would not likely occur to a reasonably prudent tenant that the premises were without fire insurance protection or if there was such protection it did not inure to his benefit and that he would need to take out another fire policy to protect himself from a loss during his occupancy."

Id. at 1161-62 (emphasis omitted) (quoting Sutton v. Jondahl, 532 P.2d 478, 482 (Okla.Ct.App. 1975) (citations omitted)). In addition, "[t]his presumption is the most efficient way to allocate insurance costs." Id. at 1164 (citing Bruggeman, 505 N.W.2d at 89). It would be impractical for apartment dwellers to insure the entire building, yet "redundant for both the landlord and the tenant to insure the same building, especially since the landlord possesses a greater property interest." Id. (citing Aetna Ins. Co. v. Craftwall, 757 F.2d 1030, 1034 (9th Cir. 1985)). "Moreover, fire insurers expect to pay fire losses from negligence and calculate their rates upon that basis." Id. (citing Rock Springs Realty, Inc. v. Waid, 392 S.W.2d 270, 278 (Mo.1965)). Based upon this rationale, we followed our newly adopted presumption to hold that, because the lease was silent regarding responsibility to obtain fire insurance, the tenant was "a coinsured under [the landlord's] fire insurance policy for the limited purpose of defeating subrogation." Id.

¶ 15 Turning to the present case, Plaintiffs assert that the trial court erred in relying on GNS Partnership to grant summary judgment because the Lease was not silent regarding responsibility to obtain insurance, rather, the Lease expressly required Defendants to obtain the relevant insurance on the property or was at least ambiguous regarding insurance requirements. We disagree.

¶ 16 Because the Lease is a contract, we analyze it under well-settled rules of contract interpretation. See Fashion Place Inv., Ltd. v. Salt Lake County, 776 P.2d 941, 943-44 (Utah Ct.App.1989) (analyzing a lease as a contract). "The underlying purpose in construing or interpreting a contract is to ascertain the intentions of the parties to the contract." WebBank v. American Gen. Annuity Serv. Corp., 2002 UT 88 ¶ 17, 54 P.3d 1139. "In interpreting a contract, [w]e look to the writing itself to ascertain the parties' intentions, and we consider each contract provision . . . in relation to all of the others, with a view toward giving effect to all and ignoring none." Id. at ¶ 18 (alterations in original) (quotations and citations omitted). "`If language within the four corners of the contract is unambiguous, the parties' intentions are determined from the plain meaning of the...