Implied Co-Insured Rule Rejected in Connecticut

The Connecticut Supreme Court recently ruled in Amica Mut. Ins. Co. v. Muldowney, 328 Conn. 428 (2018), that a landlord may pursue claims against a tenant so long as the applicable lease holds the tenant liable for damage caused by the tenant and the lease requires the tenant to obtain liability insurance.  A prior case, DiLullo v. Joseph, 259 Conn. 847 (2002), held that a landlord could not pursue subrogation against a tenant absent a specific agreement to the contrary.  The issue after DiLullo was what constituted “a specific agreement to the contrary.”  Defendants and several court decisions took the position that the lease had to specifically provide that a landlord’s carrier could pursue subrogation against the tenants.  The Amica Mutual decision makes clear that the language in the lease does not have to be that specific.

Some jurisdictions bar subrogation by landlords against tenants under what is called the “implied co-insured” or “Sutton” rule.  Courts in those jurisdictions generally have found that tenants expect that they will be covered under insurance policies purchased by the landlord for the leased property and thus will not be held liable for damage to that property.  The courts have relied upon this expectation to conclude that the tenant is an implied co-insured under the landlord’s policies against whom the landlord’s carrier cannot pursue subrogation.  See Sutton v. Jondahl, 532 P.2d 478, 482 (Okla. App. 1975).

In many jurisdictions that have not adopted the “implied co-insured” or “Sutton” rule, subrogation will be permitted if, from a review of the lease, it is determined that the reasonable expectation of the parties was that the tenant might be held liable for damage to the leased premises.  See Britton v. Wooten, 817 S.W.2d 443 (Ky. 1991); Rausch v. Allstate Ins. Co., 882 A.2d 801 (Md. 2005); Monterey Corp. v. Hart, 224 S.E.2d 142 (Va. 1976).  In these jurisdictions, the Amica Mutual decision will serve as persuasive authority for the type of lease provisions that will permit subrogation claims against tenants.