Zurich-American Ins. Co. v. Eckert

• Decision Date: 08 August 1991
• Docket Number: Civ. A. No. 90-4903.
• Citation: 770 F. Supp. 269
• Parties: ZURICH-AMERICAN INSURANCE CO., et al., Plaintiffs, v. Richard J. ECKERT, Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

770 F. Supp. 269

ZURICH-AMERICAN INSURANCE CO., et al., Plaintiffs, v. Richard J. ECKERT, Defendant.

Civ. A. No. 90-4903.

United States District Court, E.D. Pennsylvania.

August 8, 1991.

Steven L. Smith, Elliott R. Feldman, Cozen & O'Connor, Philadelphia, Pa., for plaintiffs.

Joseph P. Klein, Kevin J. O'Brien, Marks, Kent & O'Neill, P.C., Philadelphia, Pa., for defendant.

MEMORANDUM

RAYMOND J. BRODERICK, District Judge.

The defendant, Richard J. Eckert, filed a motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. The plaintiff, Zurich-American Insurance Company (Zurich) brought this action as the subrogee of Eugene DePaul and Peter DePaul, t/a Wissahickon Park Associates (Wissahickon), seeking to recover for fire damage to Wissahickon which it had paid pursuant to its insurance policy. Zurich claims that it has the right to recover from Mr. Eckert on the ground that he is liable for the damage caused by the fire.

In his motion for summary judgment, Mr. Eckert contends that paragraph 15(f) of his lease with Wissahickon bars Wissahickon's insurer, Zurich, from pursuing its right to subrogation under the insurance policy. Paragraph 15(f) of the lease, reproduced in full below, contains promises by Mr. Eckert and Wissahickon to the effect that any insurance either shall carry concerning the apartment or its contents "shall contain waivers of the right of subrogation." For the reasons stated below, the Court rejects Mr. Eckert's contention that Zurich is unable to pursue its subrogation rights, and will accordingly deny Mr. Eckert's motion for summary judgment.

Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment may be granted when, "after considering the record evidence in the light most favorable to the non-moving party, no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law." Turner v. Schering-Plough Corp., 901 F.2d 335, 340-41 (3d Cir.1990).

The facts concerning which there are no genuine issues may be summarized as follows:

Pursuant to a lease dated October 1, 1987, Wissahickon leased to Mr. Eckert Apartment L-306 of the Wissahickon Park Apartments in Lansdale, Pa.

Paragraph 15(f) of the lease states:

Lessor and Lessee hereby agree that all insurance policies which each of them shall carry to insure the demised premises and the contents therein against casualty loss, and all liability policies which they shall carry pertaining to the use and occupancy of the demised premises shall contain waivers of the right of subrogation against Lessor and Lessee herein, their heirs, administrators, successors, and assigns.

On November 16, 1987, Zurich-American Insurance Company (Zurich) issued a property insurance policy to Wissahickon for the Wissahickon Park Apartments and contents, effective through November 16, 1988. Wissahickon's insurance policy with Zurich contains the following provision relating to subrogation:

D. SUBROGATION

In the event of any payment under this policy, the Company shall be subrogated to all the insured's rights of recovery against any person or organization and the insured shall execute and deliver instruments and papers and do whatever else is necessary to secure such rights. The insured shall do nothing after loss to prejudice such rights.

Mr. Eckert was issued a renter's insurance policy by Metropolitan Insurance Companies (Metropolitan) which contains the following provisions relating to subrogation:

OUR RECOVERY RIGHT

In the event of any payment under this policy, we are entitled to all of the rights of recovery of the person to whom, or on whose behalf, payment was made.

Mr. Eckert's policy with Metropolitan also contains the following provision under a paragraph entitled "Permission Granted to You":

This insurance shall not be affected if you waive in writing prior to a loss any or all right of recovery against any party for loss occurring to property covered in this policy.

A review of the insurance policies presented to the Court in connection with this motion for summary judgment indicates that neither the lessor nor the lessee took any action, pursuant to paragraph 15(f) of the lease, to have their respective insurance policies "contain waivers of the right of subrogation against lessor and lessee."

On August 19, 1988, a fire occurred at the Wissahickon Park Apartments resulting in destruction of and damage to Wissahickon's real and personal property. The fire originated in the apartment of Mr. Eckert. As a result of the fire, Zurich made payments to Wissahickon in excess of $75,000. In its complaint, Zurich seeks to exercise its rights as subrogee of Wissahickon against Mr. Eckert, alleging that he is liable to it for the damages caused by the fire.

In this diversity action, Pennsylvania law is applicable since the insured property is located in Pennsylvania, Mr. Eckert and Wissahickon, to whose rights Zurich seeks to be subrogated, are both citizens of Pennsylvania, and the fire causing the damage for which Zurich claims that Mr. Eckert is liable occurred in Pennsylvania. Pennsylvania is therefore the forum with the most significant interest in the outcome of this litigation and its law will be applied. See Griffith v. United Air Lines, Inc., 416 Pa. 1, 203 A.2d 796 (1964).

As stated above, the issue presented by Mr. Eckert's motion for summary judgment is whether the promise of Wissahickon to have its insurance policy "contain waivers of the right of subrogation against lessor and lessee" bars its insurer, Zurich, from pursuing its subrogation rights under the insurance policy.

The insurance policy, as heretofore pointed out, specifically provides that Zurich "shall be subrogated to all the insured's rights of recovery against any person." Under Pennsylvania law, the right of subrogation is a right based upon considerations of equity and good conscience, the goal of which is "to place the burden of the debt upon the person who should bear it". Allstate Insurance Co. v. Clarke, 364 Pa.Super. 196, 201, 527 A.2d 1021, 1023-24 (1987). "It is a device adopted by equity to compel the ultimate discharge of an obligation by him who in good conscience ought to pay it." Borough of Wilkensburg v. Trumbull-Denton, 390 Pa.Super. 580, 568 A.2d 1325 ...