Wasko v. Manella

• Decision Date: 08 June 2004
• Docket Number: (SC 16917).
• Court: Connecticut Supreme Court
• Parties: BRIAN WASKO ET AL. v. JAMES MANELLA.

269 Conn. 527

849 A.2d 777

BRIAN WASKO ET AL. v. JAMES MANELLA.

(SC 16917).

Supreme Court of Connecticut.

Argued January 12, 2004.

Officially released June 8, 2004.

Borden, Norcott, Katz, Palmer and Vertefeuille, Js.

Jon Berk, with whom was Erik E. Roberts, for the appellant (substitute plaintiff).

John C. Turner, Jr., for the appellee (defendant).

Opinion

NORCOTT, J.

In this certified appeal, we must determine whether the Appellate Court properly reversed the judgment of the trial court, rendered after a trial to the court, in favor of the substitute plaintiff, Middlesex Mutual Assurance Company (Middlesex).¹ Wasko v. Manella, 74 Conn. App. 32, 44, 811 A.2d 727 (2002). We conclude that the Appellate Court improperly determined that a social guest in a personal residence is immune from liability for negligently caused fire damages in a subrogation action brought by the homeowner's insurance carrier. Accordingly, we reverse the judgment of the Appellate Court.

The opinion of the Appellate Court sets forth the following relevant facts and procedural history of this case. "In 1993, Brian Wasko and Phyllis Wasko, residents of Weston, owned a house on Shore Road in Goshen that they used primarily on weekends and vacations. [The defendant, James] Manella was a friend and business associate of the Waskos who had recently moved to New York City. The Waskos offered to let [the defendant] stay at their house in Goshen on the weekend of February 5, 1993, with the proffered hope that he might be interested in renting or buying it in the future. [The defendant] accepted that offer. While at the house in Goshen, he lit a fire in the fireplace, and, when he was ready to return to New York, he emptied the ashes and embers into a paper bag, which he placed outside on the porch. After he departed, the house caught fire and was substantially destroyed. The fire marshal of the town of Goshen determined that the ashes and embers in the paper bag had caused the blaze.

"The house was insured under a homeowners policy from Middlesex. Pursuant to the insurance policy, Middlesex paid the Waskos $48,500 for the lost personal property and $84,005 for the lost dwelling for a total of $132,505. In October, 1993, the Waskos brought an action against [the defendant] sounding in negligence, recklessness and res ipsa loquitur. In March, 1997, Middlesex was substituted as the real party in interest.

"On April 14, 2000, [the defendant] filed a motion for summary judgment on all counts, of which only the negligence count survived. At that time, [the defendant] argued that Middlesex had no right of subrogation and that a social houseguest should be considered an `implied co-insured' under the policy. The [trial] court was unpersuaded. On October 13, 2000, it held, in a memorandum of decision, that Middlesex could subrogate the Waskos' claim because the homeowners policy did not specify coverage for social guests. In short, [the defendant] was not an insured under the terms of the policy.

"In the subsequent trial to the court on July 24 and 25, 2001, the court found that [the defendant] had been negligent and that his negligence had caused the destruction of the Waskos' house and personal property. The court awarded Middlesex $132,505 in damages." Id., 33-34.

The defendant appealed to the Appellate Court, claiming that the trial court: (1) improperly had found that Middlesex had a right of subrogation against a social guest; (2) improperly had precluded Brian Wasko from testifying as to his understanding of the scope of coverage of his insurance policy; and (3) inaccurately had calculated the replacement value of the personal property. Id., 34-35. Addressing the defendant's first claim, the Appellate Court determined initially that Middlesex's right of subrogation was equitable, and not contractual, in nature. Id., 38. Accordingly, the Appellate Court reviewed DiLullo v. Joseph, 259 Conn. 847, 848, 792 A.2d 819 (2002), in which this court concluded that a landlord's insurer did not have a right of subrogation against a tenant who negligently had damaged the insured property. Applying the reasoning of DiLullo to the present case, the Appellate Court determined that allowing the insurer to pursue a subrogation action against a houseguest would lead to economic waste and would place an even greater "strain on the limits of equity" than the factual situation presented in DiLullo. Wasko v. Manella, supra, 74 Conn. App. 39. Accordingly, the Appellate Court concluded, with one judge dissenting, that "in keeping with DiLullo, subrogation should not be allowed against a houseguest whose negligence causes damage to the property of an insured homeowner." Id., 44.²

We thereafter granted the Middlesex's petition for certification to appeal limited to the following issue: "Did the Appellate Court properly reverse the decision of the trial court, and extend this court's opinion in DiLullo v. Joseph, [supra, 259 Conn. 847], in the context of landlord/tenant, by holding that a guest in a personal residence is immune from liability for negligently caused damages in a subrogation action brought by the homeowner's insurance carrier?" Wasko v. Manella, 262 Conn. 942, 942-43, 815 A.2d 674 (2003). This appeal followed.

On appeal, Middlesex claims that the Appellate Court's reversal of the judgment of the trial court was improper because the Appellate Court: (1) failed to recognize that the subrogation right being enforced was granted by statute, and not by principles of equity; (2) confused the concept of third party liability coverage protecting an insured from damages caused to another with the concept of first party coverage protecting an insured from damage to their own property; and (3) improperly expanded the analytical framework of DiLullo v. Joseph, supra, 259 Conn. 847, to the facts of the present case. In response, the defendant contends that: (1) Middlesex does not have a statutory right of subrogation; (2) the Appellate Court properly applied DiLullo to the facts of this case; and (3) the Appellate Court properly determined that premiums for temporary fire insurance policies that covered guests during their stay would be difficult to calculate. We agree with the defendant that the Appellate Court properly concluded that Middlesex's right of subrogation was equitable, and not statutory, in nature. We also agree with Middlesex, however, that under the doctrine of equitable subrogation, the Appellate Court improperly extended the analytical framework of DiLullo to the facts of the present case. Accordingly, we reverse the judgment of the Appellate Court.

I

Middlesex first claims that the Appellate Court improperly failed to recognize that the subrogation right being enforced was granted by statute, and not by principles of equity. The defendant contends that the Appellate Court properly concluded that Middlesex's right of subrogation was equitable, and not statutory, in nature. We agree with the defendant.

"The law has recognized two types of subrogation: conventional; and legal or equitable. 73 Am. Jur. 2d 599, Subrogation § 2 (1974 and 1995 Sup.) . . . . Conventional subrogation can take effect only by agreement and has been said to be synonymous with assignment. It occurs where one having no interest or any relation to the matter pays the debt of another, and by agreement is entitled to the rights and securities of the creditor so paid. . . . By contrast, [t]he right of [legal or 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 [legal or 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 [legal or] 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." (Citations omitted; internal quotation marks omitted.) Westchester Fire Ins. Co. v. Allstate Ins. Co., 236 Conn. 362, 370-71, 672 A.2d 939 (1996).

Under this legal framework, the Appellate Court noted that "[a]t first blush," this case would appear to involve conventional subrogation, due to the insurance contract between the Waskos and Middlesex. Wasko v. Manella, supra, 74 Conn. App. 36-37. Upon further analysis, however, the Appellate Court concluded that "[t]he contract . . . is not the source of the right, but rather is a reference to those rights that may exist at law or in equity." Id., 37. We agree with this conclusion. As we stated in Westchester Fire Ins. Co. v. Allstate Ins. Co., supra, 236 Conn. 372, insurers that are obligated by a preexisting contract to pay the losses of an insured proceed in a subsequent action against the responsible party under the theory of equitable subrogation, and not conventional subrogation. See also DiLullo v. Joseph, supra, 259 Conn. 853 (equitable principles used to address fire insurance company's claimed right of subrogation against negligent tenant); Hanover Ins. Co. v. Fireman's Fund Ins. Co., 217 Conn. 340, 344, 586 A.2d 567 (1991) (affirming trial court's finding that equitable subrogation action by insurance company was untimely). This is because the insurer, as well as the insured, has a preexisting financial interest in the outcome of the litigation. Westchester Fire Ins. Co. v. Allstate Ins. Co., supra, 372; Berlinski v. Ovellette, 164 Conn. 482, 496, 325 A.2d 239 (1973) (MacDonald, J., dissenting), overruled, Westchester Fire Ins. Co. v. Allstate Ins. Co., supra, 364. In sum, while "[a] right of true [equitable]...