J-A16024-23
2023 PA Super 252
MUTUAL BENEFIT INSURANCE : IN THE SUPERIOR COURT OF
COMPANY A/S/O MICHAEL SACKS : PENNSYLVANIA
:
Appellant :
:
:
v. :
:
: No. 1340 MDA 2022
CORTNEY KOSER AND MICKAEL :
ABELS :
Appeal from the Order Entered August 26, 2022
In the Court of Common Pleas of Cumberland County Civil Division at
No(s): 2021-08502
BEFORE: PANELLA, P.J., BENDER, P.J.E., and McCAFFERY, J.
OPINION BY BENDER, P.J.E.: FILED DECEMBER 04, 2023
Appellant, Mutual Benefit Insurance Company a/s/o Michael Sacks
(“Mutual Benefit”), appeals from the trial court’s August 26, 2022 order
granting Appellees’, Cortney Koser and Mickael Abels (collectively “Tenants”),
motion for judgment on the pleadings.1 After reviewing this admittedly close
case, we affirm.
On October 22, 2021, Mutual Benefit filed a subrogation action against
Tenants on behalf of its insured, Michael Sacks (“Landlord”), to recover
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1 The record contains a stipulation to amend the caption and original complaint
from “Michael Abels” to “Mickael Abels[,]” the correct spelling. See
Stipulation, 1/26/22. Although the parties and trial court used “Mickael Abels”
in the captions of subsequent filings, it does not appear that this amendment
ever officially occurred. We therefore amend the caption accordingly now.
J-A16024-23
amounts it paid to Landlord for a fire loss purportedly caused by the negligence
of Tenants.2 In more detail, according to the facts alleged in Mutual Benefit’s
complaint, Landlord owned a rental property located at 256 North 21st Street,
Camp Hill, Pennsylvania (the “Subject Property” or “Premises”), at all times
relevant to this lawsuit. Complaint, 10/22/21, at ¶¶ 3, 14. Mutual Benefit
averred that Landlord had a Mutual Benefit Homeowner’s Insurance Policy
(“Policy”) for the Subject Property with a policy period from August 4, 2019
to August 4, 2020, and coverage limits of $200,000.00 for the dwelling and
$140,000.00 for personal property. Id. at ¶ 7. Mutual Benefit relayed that
Landlord leased the Subject Property to Tenants. See id. at ¶ 6.3 Mutual
Benefit stated that, on or about August 3, 2020, while the Subject Property
was under the possession and control of Tenants, a fire erupted in the back
bedroom of the Subject Property and spread throughout the dwelling, causing
significant smoke and fire damage to the dwelling and Landlord’s personal
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2 As will be discussed further infra, subrogation
is an equitable doctrine intended to place the ultimate burden of
a debt upon the party primarily responsible for the loss.
Subrogation allows the subrogee (in this case the insurer) to step
into the shoes of the subrogor (the insured) to recover from the
party that is primarily liable (the third party tortfeasor) any
amounts previously paid by the subrogee to the subrogor.
Professional Flooring Company, Inc. v. Bushar Corporation, 152 A.3d
292, 301 (Pa. Super. 2016) (citations omitted).
3 Mutual Benefit purported to have attached a copy of the lease agreement to
its complaint as an exhibit; however, such an exhibit to the complaint is not
included in the certified record.
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property located on the Subject Property. See id. at ¶¶ 8, 15. According to
Mutual Benefit, a subsequent investigation revealed that Tenants had left a
candle burning in the back bedroom area of the Subject Property and caused
the fire. Id. at ¶ 16. It claimed that, as a direct and proximate result of
Tenants’ failure to extinguish the burning candle and/or monitor it, Landlord
sustained the damages described above. Id. at ¶ 17. Mutual Benefit
conveyed that it later made payments to Landlord pursuant to the Policy,
which was in full force and effect at the time of the fire, in the amount of
$187,477.92 for the damage to the dwelling, and in the amount of $4,144.00
for the damage to Landlord’s personal property. Id. at ¶¶ 9, 19. As a result
of these payments, Mutual Benefit sought subrogation from Tenants. Id. at
¶ 21.
On January 5, 2022, Tenants filed an answer with new matter and a
counterclaim for declaratory judgment. In their answer, inter alia, Tenants
denied that Landlord’s damages were caused as a direct and proximate result
of their failure to extinguish and/or monitor a candle burning in the back
bedroom of the Subject Property. See Tenants’ Answer with New Matter and
Counterclaim, 1/5/22, at ¶¶ 16, 17. Tenants also denied that Mutual Benefit
has a right to bring a cause of action against them, claiming that they are
implied co-insureds on the Landlord’s Policy, and that therefore Mutual Benefit
is unable to pursue subrogation against them. Id. at ¶ 21. Tenants similarly
raised this theory, among other things, in their new matter. Id. at ¶ 35
(“[Mutual Benefit’s] claims are barred to the extent [Tenants] are implied co-
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insureds under the … Policy issued to [Landlord].”). In their counterclaim for
declaratory judgment, Tenants explained that an insurer is unable to recover
against its own insured by means of subrogation, and that — pursuant to the
lease — Tenants reasonably expected to be implied co-insureds under the
Policy for damage to property owned by Landlord. Id. at ¶¶ 49, 55. They
therefore sought a declaration that “(1) [Tenants] are implied co-insureds
under the … Policy purchased and retained by [Landlord]; and (2) [Mutual
Benefit] is preclud[ed] from presenting a subrogation claim against [Tenants]
for the losses allegedly incurred in the fire of August 3, 2020.” See id. at 9-
10. To support their claim, they attached as an exhibit a copy of the lease
agreement. See id. at Exhibit A (“Lease”).
Thereafter, Mutual Benefit filed a reply to Tenants’ new matter and
counterclaim. Among other things, it admitted that the copy of the lease
attached to Tenants’ pleading was a true and accurate copy, but denied that
Tenants are entitled to any relief on their declaratory judgment claim. See
Mutual Benefit’s Reply to Tenants’ New Matter and Counterclaim, 1/25/23, at
¶¶ 40, 53.
Subsequently, on March 16, 2022, Tenants filed a motion for judgment
on the pleadings. There, they again advanced that they were implied co-
insureds on the Landlord’s Policy for damage to any property owned by
Landlord and that, since they were co-insureds, Mutual Benefit is not
permitted to subrogate against them. Tenants’ Motion for Judgment on the
Pleadings, 3/16/22, at ¶ 1. Mutual Benefit then filed a response in opposition,
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and Tenants filed a reply. See Mutual Benefit’s Reply to Tenants’ Motion for
Judgment on the Pleadings, 4/28/22; Tenants’ Reply Brief in Support of Motion
for Judgment on the Pleadings, 5/5/22.
On August 26, 2022, the trial court entered an order and accompanying
opinion, in which it granted Tenants’ motion for judgment on the pleadings.
Based on the lease between Landlord and Tenants, the trial court concluded
that Tenants had a reasonable expectation of being co-insureds on Landlord’s
insurance policy, therefore precluding Mutual Benefit’s subrogation claim.
Specifically, the trial court determined that the lease “effectively provided that
[L]andlord was to be responsible for insurance on the building, and [T]enants
were encouraged to procure separate insurance coverage for property they
owned[,]” and that “[o]ther provisions in the lease merely verbalized the
general rule that[,] as between the parties[,] liability for damage to [the]
leased premises caused by a tenant’s negligence falls upon the tenant[.]” Trial
Court Opinion (“TCO”), 8/26/22, at 7. Mutual Benefit thereafter filed a timely
notice of appeal and complied with the trial court’s order to file a concise
statement of errors complained of on appeal pursuant to Pa.R.A.P. 1925(b).
The trial court indicated in its Rule 1925(a) opinion that it was relying on the
rationale set forth in its earlier opinion accompanying the August 26, 2022
order.
On appeal, Mutual Benefit raises one issue for our review:
Did the trial court err as a matter of law when it granted [Tenants’]
motion for judgment on the pleadings and found that [Tenants]
were implied co-insureds on [L]andlord’s insurance policy, and
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therefore were immune to [Mutual Benefit’s] subrogation suit as
[L]andlord’s insurer, where the lease did not contain language
creating a reasonable expectation that [Tenants] would be implied
co-insureds, and instead contained multiple provisions imposing
liability for any damage to the leased property upon [Tenants]?
Mutual Benefit’s Brief at 4.
In addressing Mutual Benefit’s issue, we remain cognizant of the
following:
Our standard of review of the trial court’s grant of judgment on
the pleadings is de novo and our scope of review is plenary.
Judgment on the pleadings is properly entered where the
pleadings and documents admitted in the pleadings establish that
there are no disputed issues of fact and that the defendant is
entitled to judgment as a matter of law[,] or where accepting the
well-pleaded factual averments of the plaintiff’s complaint as true,
the defendant is entitled to judgment as a matter of law.
Grabowski v. Carelink Community Support Services, Inc., 230 A.3d 465,
470 (Pa. Super. 2020) (internal citations omitted). Further, we acknowledge
that “contract construction and interpretation is generally a question of law
for the court to decide. The legal effect of a contract provision presents a
question of law accorded full appellate review and is not limited to an abuse
of discretion standard.” Joella v. Cole, 221 A.3d 674, 676 n.3 (Pa. Super.
2019) (cleaned up).
This Court has previously confronted the issue of whether a landlord’s
property insurer can file a subrogation action against a tenant that has
negligently damaged the landlord’s property in Remy v. Michael D’s Carpet
Outlets, 571 A.2d 446 (Pa. Super. 1990), and Joella, supra. Because the
parties heavily rely on these cases to support their respective positions, we
examine each of them closely.
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We turn first to Remy. In that case, a tenant’s negligence contributed
to causing a fire to break out in the basement of the tenant’s store, leading to
severe property damage to the landlord’s shopping center. Remy, 571 A.2d
at 448. The landlord’s insurer tried to enforce its subrogation rights against
the tenant, and the tenant argued that the insurer could not do so because
the tenant was an implied co-insured under the landlord’s fire insurance policy.
Id. at 452.
On appeal, in considering whether the tenant was an implied co-insured,
the Remy Court explained that “[s]ubrogation is an equitable doctrine; and,
therefore, equitable principles apply in determining whether subrogation is
available.” Id. (citation omitted). It observed that, “[b]y definition,
subrogation can arise only with respect to the rights of an insured against
third persons to whom the insurer owes no duty. It follows and, indeed, is
now well established that an insurer cannot recover by means of subrogation
against its own insured.” Id. (citations omitted). In assessing whether the
insurer owed a duty to the tenant, the Remy Court opined that the landlord’s
fire insurance policy, as well as the lease agreement between the landlord and
tenant, did not support the conclusion that the tenant was an implied co-
insured under the landlord’s fire insurance policy, stating:
An argument that [the tenant] is a co-insured is not supported by
the terms of [the landlord’s] fire insurance policy. The provisions
of the lease, moreover, did not require … the landlord[] to
purchase fire insurance for the protection of … the tenant. The
lease provisions, however, did require specifically that [the
tenant] purchase and maintain its own liability insurance,
including coverage for property damage. Under these
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circumstances, there is neither rule of law nor principle of equity
which prevents the landlord or its fire insurance carrier from
recovering against a tenant whose negligence has caused fire
damage to the landlord’s premises. [The tenant] did not become
a co-insured with its landlord merely because of lease provisions
requiring the landlord to re-build in the event the demised
premises were destroyed by fire. Neither were the subrogation
rights of the landlord’s fire insurance carrier impaired by the
language of the lease which excused the tenant from liability for
damage by “unavoidable casualty … to the extent that the same
[was] covered by [the landlord’s] fire insurance policy.” The
casualty in this case, as the jury found, was not unavoidable.
Thus, there is here no bar to a third party tort action by [the
landlord] or its fire insurance carrier, which stands in the shoes of
its insured, against [the tenant] for fire damage caused by [the
tenant’s] negligence.
Id. (citation omitted; emphasis and some brackets in original).
Nearly thirty years after Remy was decided, this Court again
encountered the issue of whether a landlord’s insurer could bring a
subrogation action against a negligent tenant in Joella. In Joella, the tenant
of a residential apartment building allegedly caused a fire by negligently using
an extension cord, which resulted in extensive damage to the landlord’s
property in the amount of $180,000.00. Joella, 221 A.3d at 676. The
landlord’s insurance company subsequently brought a subrogation action
against the tenant. Id. at 676 n.1. The tenant was not mentioned in the
landlord’s insurance policy. Id. at 676 n.2. Nevertheless, the tenant filed a
motion for judgment on the pleadings, arguing that — pursuant to the
language in the relevant lease agreement between her and the landlord — the
landlord was required to maintain fire insurance for the tenant’s protection
and that she was, therefore, an implied co-insured under the landlord’s
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insurance policy. Id. at 676. The lease in Joella set forth that the landlord
“shall be responsible for … [i]nsurance on the building only[,]” and provided
that the tenant “has the right to maintain fire and casualty insurance on the
premises to cover their personal possessions, which are not covered by the
[l]andlord’s fire insurance. They can talk to an insurance company concerning
renters [sic] insurance to cover their interests.” Id. (citing paragraphs 10 and
11 of the relevant lease agreement; emphasis omitted). The trial court agreed
with the tenant and granted her motion for judgment on the pleadings, and
the landlord appealed. Id.
On appeal, the Joella Court recognized that, “[i]n a landlord-tenant
relationship, absent a lease provision to the contrary, a tenant is generally
liable in tort to its landlord for damages to the leased property caused by the
tenant’s negligence.” Id. at 677 (citation omitted). Notwithstanding, where
the landlord has procured insurance for its property, the Joella Court
acknowledged that a question arises about whether the property insurer can
file a subrogation claim against a tenant when the tenant negligently caused
damages. Id. To answer this question, the Joella Court referenced Remy,
supra, and ascertained that Pennsylvania applies a case-by-case approach to
determine the availability of subrogation by looking at the circumstances of
the particular case and examining the terms of the landlord’s insurance policy
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in conjunction with the provisions of the lease agreement. Id. at 679.4 It
cited a Minnesota Supreme Court case, which described the benefits of the
case-by-case approach as follows:
Both [insurance law and landlord-tenant] law are grounded in
contractual relationships, making a rule that reaches a result by
examining the parameters of the relationship between an insurer
and insured and a landlord and tenant, as defined in the parties’
respective contracts, superior to one that makes legal
assumptions that do not comport with the parties’ reasonable
expectations. By examining the reasonable expectations of the
contracting parties to determine whether subrogation is
appropriate in a particular case, the case-by-case approach avoids
the legal assumptions of the other approaches, and thus best
effectuates the intent of the parties by eliminating presumptions
altogether. While the case-by-case approach does not provide the
same kind of predictability that accompanies either the pro- or no-
subrogation approaches, the case-by-case method provides more
predictability to parties by simply enforcing the terms of their
contracts.
____________________________________________
4 In comparison to the case-by-case approach, some states employ a pro-
subrogation approach, which allows a landlord’s insurer to bring “a
subrogation claim against a negligent tenant absent an express provision in
the lease to the contrary.” Joella, 221 A.3d at 677. “Courts that have
adopted the pro-subrogation approach emphasize that a tenant has the
responsibility to exercise ordinary care and should not be exculpated from the
consequences of his own negligence unless the landlord and the tenant have
expressly agreed that the tenant will not be held liable for loss resulting from
the tenant’s negligence….” Id. (citations omitted). In contrast, the anti-
subrogation approach applied by some states upholds that, “unless the lease
agreement expressly requires a tenant to procure fire insurance, the tenant is
an implied co-insured of the landlord’s policy.” Id. at 678. The anti-
subrogation approach weighs that “the special relationship between the
landlord and tenant place[s] the tenant in a substantially different position
than a fire-causing third party.” Id. In addition, the anti-subrogation
approach considers that “a portion of the landlord’s insurance premiums are
necessarily paid by the tenant as part of the tenant’s rent, thereby purchasing
their status as a co-insured under the landlord’s policy.” Id.
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Id. at 678-79 (quoting RAM Mut. Ins. Co. v. Rohde, 820 N.W.2d 1, 15
(Minn. 2012)) (footnote and internal citation omitted).
In applying the case-by-case approach to the facts before it, the Joella
Court agreed with the trial court’s analysis that,
[r]eading … paragraphs [10 and 11 of the lease5] together with all
of the other lease provisions, and construing the terms of the lease
against [the l]andlord, the drafter, in order to protect the
reasonable expectations of [the t]enant, the adhering party, we
conclude that it was reasonable for [the t]enant to expect that she
would be a co-insured under the terms of the lease for any
damage caused to the [p]roperty.
Id. at 680 (quoting, with approval, the trial court’s analysis; citation omitted).
The Joella Court approved the trial court’s conclusion that “this [is] the most
reasonable interpretation because a natural reading of the lease supports the
position that everything, except for [the t]enant’s personal possessions, is
covered under [the l]andlord’s insurance policy.” Id. (quoting the trial court’s
opinion; citation omitted).
Moreover, the Joella Court also quoted favorably the following from the
trial court’s opinion:
In Rausch v. Allstate Insurance Co., … 882 A.2d 801, 816 (Md.
2005), the Maryland Court of Appeals stated:
If, under the lease or by some other commitment, the
landlord has communicated to the tenant an express or
____________________________________________
5 These were the paragraphs stating that the landlord “shall be responsible for
… [i]nsurance on the building only[,]” and that the tenant “has the right to
maintain fire and casualty insurance on the premises to cover their personal
possessions, which are not covered by the [l]andlord’s fire insurance. They
can talk to an insurance company concerning renters [sic] insurance to cover
their interests.” Joella, 221 A.3d at 676 (citing the at-issue lease; emphasis
omitted).
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implied agreement to maintain fire insurance on the leased
premises, absent some compelling provision to the contrary,
the court may properly conclude that, notwithstanding a
general “surrender in good condition” or “liability for
negligence” clause in the lease, their reasonable expectation
was that the landlord would look only to the policy, and not
to the tenant, for compensation for fire loss covered by the
policy. That expectation would constitute an implied
commitment in the lease to relieve the tenant of liability to
the extent of the policy coverage and it, too, would therefore
preclude a subrogation claim.
Id. Although Paragraph 8(f) of the lease states that the tenant
shall not negligently damage the premises, that provision does not
impart liability. Even if Paragraph 8(f) of the lease were construed
as a general liability for negligence clause, the language of
Paragraphs 10 and 11 of the lease creates the reasonable
expectation that [the l]andlord would look only to his insurance
policy for compensation for fire loss covered by his policy. See
Rausch, 882 A.2d at 816 (noting that absent some compelling
provision to the contrary and notwithstanding any general
provision imposing liability for negligence, the reasonable
expectation of the parties is that landlord would look only to the
insurance policy for compensation for fire loss); Union Mut. Fire
Ins. Co. v. Joerg, … 824 A.2d 586, 591 (Vt. 2003) (holding that
[the] tenant is an implied co-insured where the lease requires
[the] landlord to carry fire insurance because it is reasonable to
expect that [the] landlord will look only to insurance for loss
coverage[]).
Joella, 221 A.3d at 680-81 (internal citation omitted; quoting the trial court’s
opinion). Thus, even though the terms of the landlord’s insurance policy did
not mention the tenant, the Joella Court concluded that,
where the lease provision requires [the] landlord to maintain
insurance on the building, we agree with the trial court that based
on the reasonable expectations of the parties as expressed in the
lease, [the t]enant is an implied co-insured under [the l]andlord’s
insurance policy and that [the landlord’s insurer] cannot maintain
a subrogation action against [the t]enant.
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Id. at 681.6
With the foregoing case law in mind, we examine the lease between
Landlord and Tenants.7 In doing so, we note that:
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6 Though not cited by the parties, our research uncovered another case from
our Court — Thomas v. Jones, 2021 WL 462025 (Pa. Super. filed Feb. 9,
2021) — where a landlord’s insurer pursued subrogation against a landlord’s
tenant for damage caused to a landlord’s property from a fire. In Thomas,
the appellant rented a third-floor apartment with a roommate. Id. at *1. The
appellant and his roommate signed a lease that stated the following: “It is
agreed that [the l]andlord is leasing said apartment to [the appellant] & [his
roommate] and they are responsible for acquiring [r]enter’s insurance and
keeping said apartment damage free during the course of this leasing
agreement.” Id. Subsequently, a fire started in the roommate’s bedroom,
causing the property to burn down. Id. While not captioned as a subrogation
action, the landlord’s insurer brought a subrogation action against the
appellant, and a $100,000.00 judgment — representing the policy limits of
the landlord’s insurance on the property — was entered against him. Id. The
appellant appealed, arguing that the word ‘damage’ in the lease is overly
broad and ambiguous. Id. The Thomas Court affirmed the trial court’s
judgment. In doing so, the Thomas Court concluded that the lease’s
language was plain and unambiguous. Id. It also opined that “[a] landlord’s
expectation interest in renting an apartment is that the tenants will surrender
the premises in the same condition as when they took possession. Instead,
[the appellant] returned a charred leasehold and building in need of extensive
restorations. Having contractually assumed responsibility for all the damage
to the apartment during his occupancy, [the appellant] is strictly liable for ‘the
actual loss’ that [the landlord] suffered from the fire.” Id. Importantly,
however, Thomas is an unpublished memorandum and therefore not binding
upon us. See Pa.R.A.P. 126(b) (stating that an unpublished non-precedential
memorandum decision of the Superior Court filed after May 1, 2019, may be
cited for its persuasive value).
7 The Policy between Mutual Benefit and Landlord is not contained in the
record. However, we presume it does not name Tenants as co-insureds, or
waive subrogation, in accordance with our standard of review. See Klar v.
Dairy Farmers of America, Inc., 268 A.3d 1115, 1121 (Pa. Super. 2021)
(“[T]he same principles apply to a judgment on the pleadings as apply to a
preliminary objection in the nature of a demurrer: All material facts set forth
(Footnote Continued Next Page)
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[L]eases are in the nature of contracts and are, thus, controlled
by principles of contract law, including the well settled rules of
interpretation and construction. As in the case of other written
contracts, the purpose in interpreting a lease is to ascertain the
intention of the parties, and such intention is to be gleaned from
the language of the lease. Such intention is not to be determined
merely by reference to a single word or phrase, but rather by
giving every part of the document its fair and legitimate meaning.
Fraport Pittsburgh, Inc. v. Allegheny County Airport Authority, 296
A.3d 9, 15 (Pa. Super. 2023) (internal citations omitted).
The month-to-month lease in the case sub judice contained the following
provisions, in relevant part:
This Lease Agreement (“Lease”) is entered by and between
Michael Sachs [sic] (“Landlord”) and Cortney Koser, Kyleah
Koser,[8] and Mickael Abels (“Tenant”) on 3-9-20 (Date). Landlord
____________________________________________
in the complaint as well as all inferences reasonably deducible therefrom are
admitted as true for purpose of this review.”) (citation omitted); Mutual
Benefit’s Complaint at ¶ 7 (Mutual Benefit’s stating that Landlord procured the
Policy for the Subject Property and specifying the policy period and coverage
limits, but making no mention that Tenants were expressly named as co-
insureds in the Policy or that Mutual Benefit waived any right to subrogation).
See also TCO at 7 (noting that “it is not suggested that the [P]olicy mentioned
[T]enants or that parol evidence would be of benefit in construing or
interpreting the lease”); Tenants’ Brief at 11 n.3 (“No party suggested below
or to this Court that the language of the [P]olicy is relevant to the outcome of
the case at bar.”).
8 Based on the record before us, it is unclear who ‘Kyleah Koser’ is. However,
while her name is listed at the beginning of the lease, she did not sign or initial
the lease agreement, and both Tenants and Mutual Benefit represent that the
lease was only entered into between Cortney Koser, Mickael Abels, and
Landlord. See Complaint at ¶ 6 (“At all times relevant to this lawsuit, …
Cortney Koser and Michael [sic] Abels … leased the Subject Property from
[Landlord].”); Tenants’ Answer with New Matter and Counterclaim at ¶ 6 (“It
is admitted that Answering Defendants leased the [Subject Property] from
[Landlord].”); Tenants’ Motion for Judgment on the Pleadings at ¶ 7 (stating
that on or about March 9, 2020, Cortney Koser and Mickael Abels entered into
(Footnote Continued Next Page)
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and Tenant may collectively be referred to as the “Parties.” This
Lease creates joint and several liabilities in the case of multiple
Tenants. The Parties agree as follows:
PREMISES: Landlord hereby leases the premises located at 256
N. 21st Street … in the City of Camp Hill…, State of Pennsylvania,
(the “Premises”) to Tenant.
***
SECURITY DEPOSIT: At the signing of this Lease, Tenant shall
deposit with Landlord in trust, a security deposit of $540 as
security[9] for the performance by Tenant of the terms under this
Lease and for any damages caused by Tenant, Tenant’s family,
agents and visitors to the Premises during the term of this Lease.
Landlord may use part or all of the security deposit to repair any
damage to the Premises caused by Tenant, Tenant’s family,
agents and visitors to the Premises. However, Landlord is not just
limited to the security deposit amount and Tenant remains liable
for any balance. Tenant shall not apply or deduct any portion of
any security deposit from the last or any month’s rent. Tenant
shall not use or apply any such security deposit at any time in lieu
of payment of rent. If Tenant breaches any terms or conditions
of this Lease, Tenant shall forfeit any deposit as permitted by law.
***
POSSESSION AND SURRENDER OF PREMISES: Tenant shall
be entitled to possession of the Premises on the 1st day of the
Lease Term. At the expiration of the Lease, Tenant shall
peaceably surrender the Premises to the Landlord or Landlord’s
agent in good condition, as it was at the commencement of the
Lease, reasonable wear and tear excepted.
***
DANGEROUS MATERIALS: Tenant shall not keep or have on or
around the Premises any item of a dangerous, flammable or
____________________________________________
a lease agreement with Landlord); Mutual Benefit’s Reply to Tenants’ Motion
for Judgment on the Pleadings at ¶ 7 (admitting that Landlord leased the
property to Cortney Koser and Mickael Abels).
9 The lease also contains a handwritten note in this section that reads “$20
per cat.” Lease at 1.
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explosive nature that might unreasonably increase the risk of fire
or explosion on or around the Premises or that might be
considered hazardous by any responsible insurance company.
***
DAMAGES TO PREMISES: If the Premises or part of the Premises
are damaged or destroyed by fire or other casualty not due to
Tenant’s negligence, the rent will be abated during the time that
the Premises are uninhabitable. If Landlord decides not to repair
or rebuild the Premises, then this Lease shall terminate and the
rent shall be prorated up to the time of the damage. Any
unearned rent paid in advance shall be refunded to Tenant.
MAINTENANCE AND REPAIR: Tenant will, at Tenant’s sole
expense, keep and maintain the Premises in good, clean and
sanitary condition and repair during the term of this Lease and
any renewal thereof. Tenant shall be responsible to make all
repairs to the Premises, fixtures, appliances and equipment
therein that may have been damaged by Tenant’s misuse, waste
or neglect, or that of the Tenant’s family, agents or visitors.
Tenant agrees that no painting will be done on or about the
Premises without the prior written consent of Landlord. Tenant
shall promptly notify Landlord of any damage, defect or
destruction of the Premises or in the event of the failure of any of
the appliances or equipment. Landlord will use its best efforts to
repair or replace any such damaged or defective areas, appliances
or equipment.
***
INSURANCE: Landlord and Tenant shall each be responsible to
maintain appropriate insurance for their respective interests in the
Premises and property located on the Premises. Tenant
understands that Landlord will not provide any insurance coverage
for Tenant’s property. Landlord will not be responsible for any
loss of Tenant’s property whether by theft, fire, riots, strikes, acts
of God or otherwise. Landlord encourages Tenant to obtain
renter’s insurance or other similar coverage to protect against risk
of loss.
***
ENTIRE AGREEMENT: This Lease constitutes the entire
Agreement between the Parties and supersedes any prior
understanding or representation of any kind preceding the date of
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this Agreement. There are no other promises, conditions,
understandings or other Agreements, whether oral or written,
relating to the subject matter of this Lease. This Lease may be
modified in writing and must be signed by both Landlord and
Tenant.
***
INDEMNIFICATION: To the extent permitted by law, Tenant will
indemnify and hold Landlord and Landlord’s property, including
the Premises, free and harmless from any liability for losses,
claims, injury to or death of any person, including Tenant, or for
damage to property arising from Tenant using and occupying the
Premises or from the acts or omissions of any person or persons,
including Tenant, in or about the Premises with Tenant’s express
or implied consent, except Landlord’s act or negligence.
Lease at 1, 2, 3, 4, 5.
On appeal, Mutual Benefit argues that the lease does not create a
reasonable expectation that Tenants will be implied co-insureds under the
Policy. Mutual Benefit’s Brief at 18. To begin, it contends that Pennsylvania
does not follow the anti-subrogation approach. While it concedes that the
lease requires Landlord to maintain fire insurance on the Premises, it insists
that the inquiry does not end there. Id. Mutual Benefit posits that, "[i]f the
mere existence of such a provision were the end of the inquiry, Pennsylvania
would fall into the category of states that apply the bright-line anti-
subrogation approach….” Id. (citations omitted); see also footnote 4, supra
(quoting Joella and describing the anti-subrogation approach as espousing
that, “unless the lease agreement expressly requires a tenant to procure fire
insurance, the tenant is an implied co-insured of the landlord’s policy”).
Instead, Mutual Benefit says, “even if the landlord is required by the lease to
insure the property, Pennsylvania courts must perform a case-by-case inquiry
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into the reasonable expectations of the parties about whether the tenant
would be an implied co-insured under the landlord’s insurance policy, based
upon the language of the lease agreement itself.” Mutual Benefit’s Brief at
18-19 (citing Joella, supra).
Next, unlike the lease in Joella, Mutual Benefit argues that the lease in
this matter required both parties to maintain insurance for their respective
interests. It contends that the Joella lease “required the landlord to insure
the building, but only permitted the tenant to insure her personal property.
In contrast, the [l]ease between [Landlord] and … [Tenants] requires both the
landlord and the tenants to each maintain insurance for two separate
interests: the [P]remises, and the property located therein.” Id. at 19-20
(citations omitted; emphasis in original). See also Lease at 4 (“Landlord and
Tenant shall each be responsible to maintain appropriate insurance for their
respective interests in the Premises and property located on the Premises.
Tenant understands that Landlord will not provide any insurance coverage for
Tenant’s property. Landlord will not be responsible for any loss of Tenant’s
property whether by theft, fire, riots, strikes, acts of God or otherwise.
Landlord encourages Tenant to obtain renter’s insurance or other similar
coverage to protect against risk of loss.”). Mutual Benefit reads the lease’s
‘Insurance’ provision to require Tenants to purchase liability insurance for
damage to the Premises, explaining:
[T]he language of the lease requires each party to insure their
respective financial interests in both the [P]remises and the
property, by purchasing “appropriate insurance.”
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The use of the phrases “respective interests” and “appropriate
insurance” contemplate that [L]andlord and Tenants have
differing financial interests in the [P]remises and the personal
property inside it, which may require them to purchase different
kinds of insurance. As … Tenants do not own the building, their
financial interest in the [P]remises requires them to purchase
liability insurance, and their financial interest in the personal
property requires them to purchase first-party property insurance.
[L]andlord’s financial interest in the [P]remises and the property
requires him to purchase first-party property damage insurance
for … both the building and its contents, as well as liability
insurance for the [P]remises.
Mutual Benefit’s Reply Brief at 6-7 (emphasis in original). Because the lease
affirmatively imposes insurance obligations on Tenants, Mutual Benefit asserts
that this case is more akin to the facts of Remy, where the court determined
that the tenant was not an implied co-insured. See Mutual Benefit’s Brief at
20-21.
Finally, Mutual Benefit advances that, based on other provisions in the
lease, Tenants could not have reasonably expected that Landlord’s recovery
would be limited to the Policy in the case of damage to the Premises. Id. at
22. Mutual Benefit avers that the lease in this case “contains more than a
‘general liability for negligence clause’ such as was included in the Joella
lease.” Id. at 21. In support, Mutual Benefit points to multiple provisions in
the lease that purportedly set forth that Tenants will be liable for any damage
they cause to the Subject Property:
The “Security Deposit” paragraph of the lease requires the tenant
to make a $540 security deposit, but explicitly states that …
“Tenant remains liable for any balance.” The “Maintenance and
Repair” paragraph requires the tenant to “make all repairs to the
Premise[s], fixtures, appliances and equipment therein that may
have been damaged by [T]enant’s misuse, waste or neglect….”
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The lease further requires that … Tenants “indemnify and hold
Landlord and Landlord’s property, including the Premises,” free
from liability or damage to [sic] property arising from … Tenants’
acts or omissions.
Additionally, the lease explicitly prohibits the use of flammable
materials, and specifically provides that if the [P]remises are
damaged or destroyed by fire, rent will only be abated if the fire
was “not due to Tenant’s negligence.”
These provisions of the [l]ease, read together, do not create any
reasonable expectation on the part of … Tenants that [Landlord’s]
recovery in the case of damage to the [Premises] would be limited
to the [P]olicy. Rather, the most reasonable and natural reading
of the lease is that [Landlord] could seek to recover from …
Tenants for any damage to the [Premises] arising from their
occupancy of the [Premises], and that … Tenants were responsible
for maintaining insurance to protect their interests — both in the
[P]remises and in their personal property.
Id. at 21-23.
After careful review and much deliberation, we determine that no relief
is due. Initially, we read the lease to require Landlord to insure the Premises
and his personal property located on the Premises, and for Tenants to insure
their personal property located on the Premises. We reject Mutual Benefit’s
argument that Tenants were obligated to maintain liability insurance for
damage to the Premises. As Tenants discern:
[I]n a strained construction of the lease, [Mutual Benefit] argues
that because the lease requires the parties to insure “their
respective interests in the Premises and property located on the
Premises,” the lease somehow required [Tenants] to insure the
building. This argument entirely disregards the fact that the
parties were to insure “their respective interests.” [Tenants] had
no interest in the real property to insure, and obviously were not
required to insure the building.
Apparently recognizing this, [Mutual Benefit] strains further,
contorting the term “interest” to mean [Tenants’] “interest” in
protecting themselves from liability to [L]andlord in the event they
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caused damage to [L]andlord’s property. Of course the “interest”
to be insured is the premises and property, and not the desire to
protect oneself from liability. … [T]his clause is only reasonably
read to require first party property insurance, and cannot be
construed to somehow actually require liability insurance.
Tenants’ Brief at 20-21 (emphasis in original). We agree.
Although the lease obligated Tenants to insure their personal property
and for Landlord to insure the Premises and his personal property, Mutual
Benefit is correct that the inquiry does not end here in our case-by-case
jurisdiction. Reading the lease in its entirety, we must determine if it is
reasonable for Tenants to believe that Landlord would look only to his Policy
for compensation for losses caused by the fire. While this is a close question,
we conclude that such an expectation is reasonable.
We reiterate that, in Joella, the Joella Court endorsed the view that,
[i]f, under the lease or by some other commitment, the landlord
has communicated to the tenant an express or implied agreement
to maintain fire insurance on the leased premises, absent some
compelling provision to the contrary, the court may properly
conclude that, notwithstanding a general “surrender in good
condition” or “liability for negligence” clause in the lease,
their reasonable expectation was that the landlord would look only
to the policy, and not to the tenant, for compensation for fire loss
covered by the policy. That expectation would constitute an
implied commitment in the lease to relieve the tenant of liability
to the extent of the policy coverage and it, too, would therefore
preclude a subrogation claim.
Joella, 221 A.3d at 680 (quoting trial court’s opinion reliance on Rausch,
supra; emphasis added). As a result, despite the lease in Joella stating that
the tenant ‘shall not negligently damage the premises,’ the Joella Court still
determined that the lease created a reasonable expectation that the landlord
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would look only to his insurance policy for compensation for covered fire loss.
Id. at 680-81.
In this case, we deem the other provisions in the lease between Landlord
and Tenants akin to the general “surrender in good condition” or “liability for
negligence” clauses referenced in Joella. While some provisions in the lease
do generally impose liability on Tenants for damages they cause to the
Premises, none of the provisions are compelling enough to us to override
Tenants’ expectation that — since Landlord had agreed to be responsible for
maintaining insurance on the Premises and his personal property — they
would be protected by the Landlord’s Policy in the event a candle they left
burning started a fire, causing extensive damage to the Premises.
Based on the foregoing, we conclude that the trial court properly granted
Tenants’ motion for judgment on the pleadings. Landlord agreed to provide
fire insurance for the Premises and his personal property. Under the lease, it
was reasonable for Tenants to expect that Landlord would look only to the
Policy for compensation for fire loss covered by the Policy. We therefore
concur with the trial court that Tenants are implied co-insureds under the
Policy, and Mutual Benefit is precluded from presenting a subrogation claim
against them.
Order affirmed.
President Judge Panella joins this opinion.
Judge McCaffery concurs in the result.
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Judgment Entered.
Benjamin D. Kohler, Esq.
Prothonotary
Date: 12/04/2023
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Mutual Benefit Ins. v. Koser, C. and Abels, M.
Combined Opinion