Implied Co-Insured In Indiana Revisited


Can a landlord’s insurer subrogate against a negligent tenant in Indiana?  Before answering, be sure you are aware of recent caselaw in Indiana on the issue.  Indiana Courts have addressed this issue two times, and their recent decision confirms that courts in Indiana are to look at the individual facts of the case and the specific lease provisions for guidance rather than adopting any broad sweeping rule. 

When pursuing subrogation against a negligent tenant, other jurisdictions have adopted one of three approaches.  These include (1) the anti-subrogation approach, which, absent an express agreement, a landlord’s insurer is precluded from filing a subrogation action against a negligent tenant because the tenant is held to be a co-insured along with the landlord under the landlord’s policy.  This approach is also referred to as the implied co-insured doctrine; (2) the pro-subrogation approach, in which subrogation actions by landlords against negligent tenants are permitted unless there is express language in the lease to the contrary; and (3) the case-by-case analysis approach, in which the individual facts of the case are reviewed with particular emphasis on the reasonable expectations and intent of the parties when entering into the lease. 

The first time Indiana courts have reviewed the subrogation issue was in the case of Farm Bureau Mutual Ins. Co. v. Owen, 660 N.E.2d 616, (Ind. App. 1996).  In that case, the Appellate Court did not adopt either an anti-subrogation or pro-subrogation approach, choosing in that case to focus on the lease language.  Interestingly, although the Appellate Court came to their conclusion by reviewing the specific facts of the case and in particular, the lease provisions, the Court noted that it was necessarily not adhering to the case-by-case analysis approach.

More recently, an Indiana Appellate Court was confronted with whether an insurer of a landlord could pursue subrogation against a negligent tenant in the case of LBM Realty, LLC v. Mannia, No. 71A03-1205-PL-231, 2012 WL 6608104, —N.E.2d—(Ind. App. 12/19/12).  The facts of the case involved the negligent disposal of smoking materials on the apartment’s balcony by the tenant and/or guests, which resulted in a fire that caused approximately $745,000.00 in property damage.  The Trial Court dismissed the landlord insurer’s lawsuit on a summary judgment motion by the tenant, applying the anti-subrogation rule and concluding that the tenant was an implied coinsured under the landlord’s policy.  After the case went up on appeal, the Appellate Court reversed and remanded the case back to the trial court level and concluded that Indiana Courts have not adopted any particular approach (either an anti-subrogation approach, a pro-subrogation approach or a case by case analysis approach) in determining whether a landlord’s insurer may maintain a subrogation action against a negligent tenant.  The Appellate Court in this case was again unwilling to adopt a specific approach, as in the Owen case.  However, they concluded Indiana law does not preclude a landlord’s insurer from bringing a subrogation claim against a tenant.  In this case, because the Plaintiff’s Complaint established circumstances in which relief could be granted, the Appellate Court remanded the case back to the Trial Court level for further proceedings.

In summary, it appears that the Appellate Court in this case, although not determinative, concludes that the specific facts of the case, which would include the specific lease provisions and the reasonable expectations of the parties when entering into the lease, should be examined before the Trial Court decides whether a subrogation claim can be made.  Again, although the Appellate Court never states a hard and fast rule, their conclusion is looking more and more like the case-by-case analysis approach.

The Indiana Appellate Court’s decision is yet another reminder that subrogation claims against a tenant should be reviewed with counsel to determine how the jurisdiction where the loss occurred will treat the facts of the particular case at issue. 






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