J-A21017-23
2023 PA Super 272
WESTMINSTER AMERICAN : IN THE SUPERIOR COURT OF
INSURANCE COMPANY A/S/O : PENNSYLVANIA
ANDROULLA M. TOFALLI :
:
Appellant :
:
:
v. :
: No. 538 EDA 2023
:
AMY S. BOND A/K/A AMY S. SAFIN :
AND AMY S. BOND A/K/A AMY S. :
SAFIN T/A BLONDIE'S SALON :
Appeal from the Order Entered February 3, 2023
In the Court of Common Pleas of Monroe County Civil Division at No(s):
161-CV-2021
BEFORE: BENDER, P.J.E., DUBOW, J., and NICHOLS, J.
OPINION BY DUBOW, J.: FILED DECEMBER 26, 2023
Appellant, Westminster American Insurance Company (“Insurance
Company”), appeals from the February 3, 2023 order entering summary
judgment in favor of Amy S. Bond (“Bond”) trading as Blondie’s Salon1
(collectively, “Tenants”), in this subrogation action. After careful review, we
reverse.2
The relevant facts and procedural history are as follows. Androulla M.
Tofalli (“Landlord”) owns property located at 501 Sarah Street in Stroudsburg,
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1 The parties and the court also sometimes refer to “Blondie’s Salon” as
“Blondie Salon.”
2 On December 7, 2023, Insurance Company filed an Application for Post-
Submission Communication. We grant Insurance Company’s Application and
accept the post-submission communication as filed.
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Monroe County (the “Property”). Insurance Company issued a fire insurance
policy on the Property to Landlord, which was effective at all relevant times.
Bond operated Blondie’s Salon on the ground floor of the building on the
Property and, in her capacity as the operator of Blondie’s Salon, rented the
ground floor from Landlord pursuant to a written commercial lease
(“Commercial Lease”). Bond also rented and resided in a second-floor
apartment in the building pursuant to a residential lease (“Residential Lease”)
(collectively “the Leases”).
The Leases contained provisions delineating Tenants’ responsibility for
obtaining insurance for personal items. We highlight, however, that these
insurance provisions do not require the Landlord to obtain fire insurance on
the Property.
The Residential Lease provides, in relevant part:
21. Insurance and Release
(A) Tenant understands that Landlord’s insurance does not cover
Tenant, Tenant’s property, or Tenant’s guests. Tenant is advised
to obtain property and liability insurance to protect Tenant,
Tenant’s property, and Tenant’s guests who may be injured while
on the property.
X If checked, Tenant must have insurance policies providing at least
$10,000 property insurance and $100,000 liability insurance to
protect Tenant, Tenant’s property, and Tenant’s guests who may
be injured while on the Property. Tenant must maintain this
insurance through the entire Term and any Renewable Term.
Tenant will provide proof of insurance upon request. Tenant will
notify Landlord within 10 days of changes to or cancellation of
these policies.
(B) Landlord is not legally responsible for injury or damage to
Tenant or Tenant’s guests that occurs on the property.
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(C) Tenant is responsible for any loss to Landlord caused by
Tenant, Tenant’s family or Tenant’s guests, including attorney’s
fees associated with that loss.
Residential Lease, 3/31/18.
The Commercial Lease provides, in relevant part:
18. INSURANCE AND RELEASE: TENANT MUST HAVE
LIABILITY RENTAL INSURANCE
A. Tenants understand that:
1. LANDLORD’S INSURANCE DOES NOT COVER
TENANTS, TENANT’S PROPERTY, OR GUESTS.
2. TENANTS SHALL HAVE FIRE AND LIABILITY
INSURANCE TO PROTECT TENANTS, TENANTS’
PROPERTY, GUESTS, AND BUSINESS INVITEES
WHO ARE INJURED ON THE PROPERTY AND
PROVIDE PROOF OF SAME TO LANDLORD.
B. Landlord is not legally responsible for any injury or
damage that occurs on the property and Tenants agree to
pay any loss or claim, including attorney’s fees that result
from the damage or injury.
C. Tenants are responsible for any loss to Landlord that
Tenants, Tenant[s’] family, guests, or invitees cause.
Commercial Lease, 12/1/09.
Sometime prior to May 10, 2020, Bond began using and remodeling the
attic space of the building even though neither she nor her business had
rented it. Bond removed the door between the attic space and her apartment,
used various electrical power sources, burned candles and sage, and smoked
in the attic.
On May 10, 2020, a fire broke out in the Property resulting in significant
structural damage to the building. Landlord submitted a claim to Insurance
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Company as the Property’s insurer and Insurance Company paid Landlord
approximately $375,872.
On April 11, 2022, Insurance Company filed a Complaint against
Tenants, in the form of a subrogation claim, to recover from Tenants the
amount that Insurance Company paid to Landlord.
On October 25, 2022, Tenants filed a Motion for Summary Judgment.
Tenants argued in the motion that Insurance Company’s claims failed as a
matter of law because Tenants are “co-insureds” under the Leases and the
law precludes an insurer from filing a subrogation action against a “co-
insured.” In particular, Tenants relied on Joella v. Cole, 221 A.3d 674 (Pa.
Super. 2019), and argued that since the Leases did not require them to obtain
fire insurance for the Premises, they possessed the reasonable expectation
that they were implied “co-insureds” under Landlord’s fire insurance policy.
On November 28, 2022, Insurance Company filed a response to Tenants’
Motion for Summary Judgment. Insurance Company argued that Tenants
were not “co-insureds” under the Landlord’s fire insurance policy because the
Leases contained no provision requiring the Landlord to obtain fire insurance.
Following consideration of briefs submitted by the parties, on February
2, 2023, the trial court granted Tenants’ motion, entered summary judgment
in their favor, and dismissed the Amended Complaint.
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Insurance Company appealed. Both Insurance Company and the trial
court complied with Pa.R.A.P. 1925.3
Insurance Company raises the following issue on appeal:
Whether a landlord’s fire insurer can bring a subrogation action
against the tenants whose alleged negligence and breaches of the
lease destroyed the demised premises when the landlord’s
insurance policy was silent on the subject and when the leases
stipulated that the landlord was not legally responsible for any
damage to the landlord that the tenants may cause, and that the
tenants were required to maintain fire and liability insurance?
Insurance Company’s Brief at 3.
A.
Insurance Company challenges the entry of summary judgment in favor
of Tenants. Our Supreme Court has clarified our role as the appellate court
as follows:
On appellate review, []an appellate court may reverse a grant of
summary judgment if there has been an error of law or an abuse
of discretion. But the issue as to whether there are no genuine
issues as to any material fact presents a question of law, and
therefore, on that question our standard of review is de novo. This
means we need not defer to the determinations made by the lower
tribunals. To the extent that this Court must resolve a question
of law, we shall review the grant of summary judgment in the
context of the entire record.
Summers v. Certainteed Corp., 997 A.2d 1152, 1159 (Pa. 2010) (citations
and quotation marks omitted).
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3 In its Rule 1925(a) Opinion, the trial court directed us to its February 2, 2023
Order and Opinion for an explanation of its reasons for granting Tenants’
Motion for Summary Judgment and dismissing the Complaint.
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A trial court may grant summary judgment “only in those cases where
the record clearly demonstrates that there is no genuine issue of material fact
and that the moving party is entitled to judgment as a matter of law.” Id.
(citation omitted); see also Pa.R.C.P. 1035.2(1). “When considering a motion
for summary judgment, the trial court must take all facts of record and
reasonable inferences therefrom in a light most favorable to the non-moving
party.” Summers, 997 A.2d at 1159. “In so doing, the trial court must
resolve all doubts as to the existence of a genuine issue of material fact
against the moving party, and, thus, may only grant summary judgment
where the right to such judgment is clear and free from all doubt.” Id.
(citation and internal quotation marks omitted).
B.
We start our discussion with the basic principles supporting a right to
subrogation. “Subrogation is an equitable doctrine intended to place the
ultimate burden of a debt upon the party primarily responsible for the loss.”
Joella, 221 A.3d at 677. An insurance company, however, may not file a
subrogation action against a party to whom the insurance company owes a
duty, such as the insurance company’s own insured. Remy v. Michael D’s
Carpet Outlets, 571 A.2d 446, 452 (Pa. Super. 1990), aff’d sub nom. Kimco
Dev. Corp. v. Michael D's Carpet Outlets, 637 A.2d 603 (Pa. 1993).
Since an insurer may not maintain a subrogation action against its own
insured, we must determine whether Tenants are an insured under the
Landlord’s fire insurance policy. As an initial matter, it is undisputed that
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Tenants are not a named or additional insured under the Landlord’s fire
insurance policy.
Our analysis, however, does not end there because the courts have
created a legal fiction that permits a tenant, for purposes of a subrogation
claim, to be considered a “co-insured” under a landlord’s fire insurance policy
for the property. Courts have considered tenants “co-insureds” under their
landlord’s fire insurance policy if it is reasonable to infer from the lease that
the landlord has communicated to the tenant that the landlord will look to his
fire insurer, and not the tenant, for losses to the property that arise from a
fire. Joella, 221 A.3d at 679. Thus, the analysis of whether a tenant is a
“co-insured” focuses on the terms of the lease. Id.
Under this approach, courts analyze the terms of the lease to determine
“the reasonable expectations of the parties as expressed in the lease
under the facts of each case.” Id. at 678 (emphasis added). In particular,
courts focus on whether the explicit language of the lease is such that it is
reasonable to infer that the landlord communicated to the tenant that the
landlord will obtain fire insurance for the property and the landlord, and not
the tenant, will be responsible for losses to the property as a result of a fire.
Id. at 678. The Superior Court expanded on this concept as follows:
If, 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
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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. at 680 (quoting Rausch v. Allstate Ins. Co., 882 A.2d 801, 816 (Md.
2005)) (emphasis added).
The Superior Court first addressed the applicability of the fiction of a
tenant being a “co-insured” under a landlord’s fire insurance policy in Remy.
In Remy, the Court concluded that the tenant was not a “co-insured” under
the landlord’s fire insurance policy because the lease was silent about
imposing on the landlord the obligation to obtain fire insurance. Remy, 571
A.2d at 452.
In particular, the Remy Court relied upon the facts that (1) the
provisions of the lease did not require the landlord to purchase fire insurance
for the tenant’s protection and (2) the lease specifically required the tenant to
purchase and maintain its own liability insurance, including coverage for
property damage. Id. Thus, to consider the tenant a “co-insured” under the
policy, the court in Remy held that the lease must affirmatively require the
landlord to obtain fire insurance, especially where the lease did require the
tenant to “purchase and maintain its own liability insurance, including
coverage for property damage.” Id.
Applying the fiction of a “co-insured” to different terms in a lease, the
Superior Court in Joella, found that the tenant was a “co-insured” under the
landlord’s fire insurance policy for the property. Joella, 221 A.3d at 680. In
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Joella, the lease between the parties expressly provided that the landlord was
responsible for obtaining and maintaining insurance on the building. Id. The
lease further 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.” Id. (citation omitted).
The Superior Court favorably quoted the trial court’s conclusion that when
both provisions are read together, “the lease creates the reasonable
expectation that Landlord would look only to his insurance policy for
compensation for fire loss [to the property] covered by his policy.” Id. at
680-81. It further concluded that the tenant had a reasonable expectation
that she would be a co-insured under the landlord’s fire insurance policy for
the property and, thus, the landlord’s fire insurer could not file a subrogation
claim against the tenant for losses to the property. Id. at 680.
C.
As noted above, the Leases in this case are silent about the Landlord’s
obligation to obtain fire insurance on the Property and only impose on the
Tenants the obligation to obtain liability insurance and property insurance for
their personal items. The trial court, however, interpreted this silence, and
the obligation on the Tenants to obtain fire insurance for the Tenant’s personal
items, as making the Tenants “co-insureds” under the Landlord’s fire
insurance policy.
In particular, the trial court first acknowledged the absence of a
provision in the Residential Lease and Commercial Lease as requiring the
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Landlord to obtain and maintain fire insurance on the Premises. Trial Ct. Op.,
2/2/23, at 6. The court also acknowledged that the Commercial Lease only
required Tenant to purchase fire insurance “to protect [T]enant, [T]enant’s
property, guests, and business invitees.” Id. Despite the absence of an
obligation for the Landlord to obtain fire insurance on the Premises, the trial
court read into the Leases this obligation on the grounds that the Landlord
and Tenants would not enter into the Leases unless the Leases required the
Landlord to obtain fire insurance on the Premises:
[A] reasonable tenant would not expect that they would be
required to insure the building itself from fire damage based upon
the terms of these leases. It is natural, reading the leases as a
whole, that “Landlord’s insurance” would cover anything not
specifically required of [Appellees]. Any other interpretation
would be that Landlord and [Appellees] agreed to enter into leases
with no fire insurance on the building itself. That is an untenable
position.
Id.
We disagree with this analysis. The trial court has re-written the Lease
by adding a provision that the Landlord is obligated to obtain fire insurance
for the Property. A clear and unambiguous interpretation of the Leases is that
the Leases did not require the Landlord to obtain fire insurance on the
Property. Without a written obligation as a threshold matter, the trial court
erred by concluding that the Lease reasonably communicated to the Tenant
that the Landlord would obtain fire insurance for the Premises and thus, not
look to the Tenants for losses to the Premises from a fire. In fact, a reasonable
interpretation of the Leases is that the Landlord has no obligation to obtain
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fire insurance for the Property and would, in fact, look to the Tenants for any
losses from the fire.
The above-cited authority supports our analysis. The Remy court
explicitly rejected the argument that a tenant can be a “co-insured” when a
lease is silent about a Landlord’s obligation to obtain fire insurance for the
property. Remy, 571 A.2d at 452. Furthermore, the facts of the instant case
are easily distinguishable from Joella where, based on an explicit term of the
lease which imposed on the Landlord the obligation to obtain fire insurance on
the property, it was reasonable for the trial court to conclude that the landlord
had communicated to the tenant that the landlord would look only to his
insurer, and not the tenant, for losses from a fire.
Thus, given the Leases’ silence on Landlord’s obligation to obtain and
maintain fire insurance on the Premises, Tenants had no reasonable
expectation that they were “co-insureds” on the fire insurance policy that the
Insurance Company issued. Accordingly, the trial court erred in concluding
that Insurance Company is precluded as a matter of law from pursuing a
subrogation claim against Tenants and in granting summary judgment in
Tenants’ favor.
Order reversed.
Judge Nichols joins the opinion.
President Judge Emeritus Bender files a concurring opinion.
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Date: 12/26/2023
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