Recent Illinois Case Provides Insight on Avoiding Implied Co-Insured Doctrine


tenant.1The Illinois supreme court case Dix Mut. Ins. Co. v. LaFramboise is often used to argue against landlord-tenant subrogation claims in Illinois. Under Dix, tenants are considered co-insureds under a landlord’s property insurance policy by virtue of making rent payments unless the lease clearly says otherwise. Because an insurer can’t pursue subrogation from an insured, Dix is regularly used as a defense to subrogation claims in situations where a tenant negligently damages a landlord’s property.

A recent unpublished opinion from Illinois’ Second District Appellate Court highlights lease terms that may overcome the obstacles to recovery posed by Dix. In Pekin Ins. Co. v. Murphy, the defendant tenants neglected a clogged toilet. The trial flushed the plaintiff’s subrogation lawsuit citing Dix. According to the appellate court, however, the lease “clearly allocated [to the defendants] the risk of water damage caused by defendants’ misuse and neglect of the premises.” The appellate court based its conclusion on clauses in the lease that (1) required the tenants to repair damage to the property resulting from their misuse or neglect and (2) required the tenants to maintain general liability insurance for property damage occurring on the property. Reinstating the plaintiff’s case, according to the court, was “consistent with the notion that subrogation . . . ‘designed to place ultimate responsibility for the loss upon the one on whom in good conscience it ought to fall and to reimburse the innocent party who is compelled to pay.’”

The lesson: be certain to thoroughly review the lease before flushing your next potential subrogation claim against a tenant in Illinois. Pekin v. Murphy illustrates lease language that an Illinois court may find unambiguously defeats the notion that the tenant is a coinsured under a particular lease.

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