The Subrogation Strategist

If a fire or flood destroys a high-net-worth client’s fine art collection, an insurer who pays out a claim related to the loss has an incentive to pursue subrogation. This article explores some of the issues an insurer should “canvas” before pursuing subrogation for these types of claims.

Damage to fine art can occur in a number of ways. For instance, fine art may be damaged in a natural disaster - such as a flood or a wildfire. Artwork may also be accidentally damaged because of a transportation-related incident physically damaging the art. In addition, artwork may suffer fire or smoke damage from a fire within a building. Another possibility is that the artwork suffers damage because of renovations either to the insured’s home or a neighboring property. For example, a renovation contractor may damage artwork due to vibrations or leaking water. A construction worker, moreover, may turn with a tool in his hand, or trip and fall, damaging the artwork.Continue Reading

In Westminster Am. Ins. Co. a/s/o Androulla M. Toffalli v. Bond, No. 538 EDA 2023, 2023 Pa. Super. LEXIS 626, 2023 PA Super 272, the Superior Court of Pennsylvania (Appellate Court) recently discussed the impact of silence on the Sutton Rule with respect to the landlord, Androulla M. Toffalli (Landlord), securing insurance. After holding that the tenant, Amy S. Bond (Bond) t/a Blondie’s Salon – who leased both commercial and residential space in the building pursuant to written leases – was not an implied “co-insured” on Landlord’s insurance policy, the Appellate Court reversed the decision of the trial court.

In this case, Bond rented the ground floor of a property located in Monroe County pursuant to a written commercial lease (Commercial Lease) and operated Blondie’s salon out of the leased location. In addition, Bond rented and lived in a second-floor apartment pursuant to a residential lease (Residential Lease). Both leases required the tenants (Tenants) to obtain insurance for personal items. The leases, however, did not require Landlord to obtain fire insurance for the property.Continue Reading

In a matter of first impression, the Supreme Court of Wyoming (Supreme Court), in West American Insurance Company v. Black Dog Consulting Inc., No. S-23-0052, 2023 WY 109, 2023 Wyo. LEXIS 111, examined whether a landlord’s insurer could pursue a subrogation claim against a tenant who caused a fire loss. The Supreme Court, applying a case-by-case approach, found that the insurer could not subrogate against the tenant.

West American Insurance Company (West) insured Profile Properties (Profile), which owned commercial property in Cheyenne, Wyoming. Black Dog Consulting Inc., d/b/a C.H. Yarber (Yarber) leased commercial space from Profile where it operated a metal fabrication business. The lease agreement between Profile and Yarber required Yarber to pay the full expense of Profile’s blanket insurance policy, which included general commercial liability insurance and fire and extended coverage insurance on the building.Continue Reading

In Patton v Pearson, No. M2022-00708-COA-RC-CV, 2023 Tenn. App. LEXIS 231, the Court of Appeals of Tennessee (Court of Appeals) considered whether the lower court erred in dismissing an insurance carrier’s lawsuit against its insured’s tenant for damages sustained in a fire. While the lawsuit was filed in the name of the landlord (i.e., the insured), discovery revealed that the lawsuit was actually a subrogation lawsuit, brought by the landlord’s insurance carrier. The lower court granted the tenant’s motion for summary judgment based on the Sutton Doctrine, holding that the tenant was an implied co-insured under the landlord’s policy. The Court of Appeals affirmed, finding that although the lease agreement did not reference insurance, the Sutton Doctrine applied, which barred the landlord’s carrier from subrogating against the tenant.

The Supreme Court of Illinois (Supreme Court) reversed a 2021 appellate court decision which held that an insurer had to duty to defend the property owner’s tenant following a fire at the property.  In Sheckler v. Auto-Owners Insurance Co., 2022 IL 128012, the state’s highest court ruled that the appellate court’s reliance on Dix Mutual Insurance Co. v. LaFramboise, 597 N.E. 2d 622 (Ill. 1992) was misplaced as the ruling in Dix was limited to a specific set of facts, which did not apply to the current case.Continue Reading