Donegal Insurance Group v. Thangavel

Opinion

SUPERIOR COURT

OF THE

STATE OF DELAWARE

Sussex County Courthouse

ROBERT H. ROBINSON, JR. 1 The Circle, Suite 2 JUDGE Georgetown, DE 19947 Telephone: (302) 856-5264 Submitted: June 15, 2022 Decided: September 15, 2022

Robert C. McDonald, Esquire Marissa D. White, Esquire Jeffrey S. Friedman, Esquire Wade A. Adams, III, Esquire Silverman, McDonald & Friedman Law Offices of Wade A. Adams, III 1010 North Bancroft Parkway, Ste. 22 Christiana Executive Campus Wilmington, Delaware 19805 111 Continental Drive, Suite 309 Attorneys for Plaintiff Newark, Delaware 19713 Attorneys for Defendants

Mark H. Riesenfeld, Esquire Smith & Cohen Law Group 1528 Walnut Street, Suite 400 Philadelphia, Pennsylvania 19102 Attorneys pro hac vice for Plaintiff

Re: Donegal Insurance Group v. Sathiyaselvam Thangavel and Sasikala Muthusamy C.A. No.: S21C-08-013 RHR

Dear Counsel:

Defendants Sathiyaselvam Thangavel and Sasikala Muthusamy (collectively

“Defendants”) were lessees of an apartment owned and managed by Seaford

Apartment Ventures, LLC (“Seaford Apartments”). On December 28, 2019, a fire

suppression sprinkler was activated in Defendants’ apartment—allegedly after a

drone aircraft they were operating inside the apartment damaged the sprinkler—that

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caused extensive water damage. Seaford Apartments filed a claim with its insurance

company, Donegal Insurance Group (“Donegal” or “Plaintiff”), which paid

$77,704.06 to repair the damage. Donegal filed this complaint, as subrogee of

Seaford Apartments, against Defendants, seeking to recover the cost of the repairs.

Defendants have moved for summary judgment. For the following reasons, the

motion for summary judgment is GRANTED.

A. The Parties’ Contentions

Defendants argue that they are entitled to summary judgment under the

Delaware Superior Court’s holding in Lexington Insurance Company v. Raboin,1

which adopted the reasoning of Sutton v. Jondahl.2 Sutton and Lexington hold that

insurance obtained by a landlord is for the mutual benefit of the landlord and tenant,

and that therefore the parties should be considered co-insureds. Unless there is an

express agreement or provision in the lease that would place liability on the tenant,

the landlord’s insurance carrier cannot obtain subrogation against the tenant

(commonly referred to as the “Sutton Rule.”)3

Plaintiff contends that the Sutton Rule does not apply to the present case.

Plaintiff argues that the lease between the Defendants and Seaford Apartments (the

“Lease”) constitutes an express agreement between Seaford Apartments and

1 712 A.2d 1011 (Del. Super. Ct. 1998). 2 532 P.2d 478 (Okla. Civ. App. 1975). 3 Deloach v. Houser, 2018 WL 5899080, at *2 (Del. Super. Ct. Nov. 9, 2018).

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Defendants that makes Defendants liable under the Lease. Plaintiff cites to the

following provision:

12. NO LIABILITY FOR LOSS OR DAMAGE TO TENANTS’ PERSONS OR PROPERTY; INDEMNITY TO LANDLORD.

(a) Tenants agree to be solely responsible for all loss or damages to Tenants or their property or to any other person which may be situated in the Rental Unit and storage area; gross negligence of Landlord, its servant, agents or employees excepted; In addition, Tenants agree to indemnify and save Landlord harmless from any and all loss occasioned by the tenant’s breach of any of the covenants, terms and conditions of the Agreement, or caused by the tenant(s) family, guests, visitors, agents or employees. See § 5309. (b) Tenant agrees to procure and maintain adequate content and liability insurance in an amount not less than $300,000.00 to afford protection against the risks herein assumed….4

The Court requested further argument from the parties as to their interpretation of

another provision in the Lease:

29. TENANT RESPONSIBLE FOR DAMAGES.

Tenant by accepting this agreement covenants and agrees that tenant will be responsible for all damages accidentally, maliciously, intentionally, or negligently caused by the tenant, tenant’s family, guests or invitees to any of the property of the landlord. 5

Plaintiff argues this provision further supports its position. Finally, Plaintiff argues

that, at the very least, the Lease’s language creates ambiguity and a question of fact

that precludes the entry of summary judgment.

4 Defs.’ Mot. Summ. J. Ex. A (the “Lease”).

5 Id.

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B. Standard of Review

Summary judgment may be granted only if, when viewing the facts in the light

most favorable to the non-moving party, there is no genuine issue of fact and the

moving party is entitled to relief as a matter of law.6 When considering a motion for

summary judgment, the Court’s role is to examine the record to determine whether

genuine issues of material fact exist “but not to decide such issues.”7 This Court

“will accept as established all undisputed factual assertions, made by either party,

and accept the non-movant’s version of any disputed facts.”8 “The proper

construction of any contract … is purely a question of law.”9 Delaware courts adhere

“to an objective theory of contracts, the contract’s construction should be that which

would be understood by an objective, reasonable third party.”10 Summary judgment

is appropriate in contract disputes where the language at issue is clear and

unambiguous and not subject to multiple interpretations.11 Ambiguity exists only if

the disputed language is “fairly or reasonably susceptible to more than one

6 Moore v. Sizemore, 405 A.2d 679 (Del. 1979); Super. Ct. Civ. R. 56. 7 Merrill v. Crothall-Am., Inc., 606 A.2d 96, 99-100 (Del. 1992). 8 Id. 9 Rhone-Poulenc Basic Chemicals Co. v. Am. Motorists Ins. Co., 616 A.2d 1192, 1195 (Del. 1992). 10 Leaf Invenergy Co. v. Invenergy Renewables LLC, 210 A.3d 688, 696 (Del. 2019); see also GMG Cap. Inv., LLC v. Athenian Venture P’rs I, L.P., 36 A.3d 776, 780 (Del. 2012) (“Contract terms themselves will be controlling when they establish the parties’ common meaning so that a reasonable person in the position of either party would have no expectations inconsistent with the contract language”). 11 GMG Cap. Inv., LLC, 36 A.3d at 783.

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meaning.”12 The Court’s function in construing a lease is to ascertain and give effect

to the mutual intention of the parties as manifested by its terms.13 As with all

contracts, this Court should give effect to all of its provisions if possible.14

C. Discussion

I find that the language in Paragraphs 12 and 29 of the Lease is substantially

the same as the language of the leases considered in Lexington,15 Deloach v.

Houser,16 and State Farm Fire & Casualty Company v. Lambert.17 In each of these

cases, the trial court rejected the insurer’s argument that the lease contained an

express agreement placing liability for damage on the tenant and found that the

Sutton Rule controls.

In the present matter, the Lease must be considered in its entirety and

particular provisions should not be considered in isolation. As in Lexington, the

12 Alta Berkeley VI C.V. v. Omneon, Inc., 41 A.3d 381, 385 (Del. 2012). 13 Schwartzman v. Weiner, 319 A.2d 48, 51–52 (Del. Super. Ct. 1974). 14 Roffman v. Wilm. Hous. Auth., 179 A.2d 99, 102 (Del. 1962). 15 The court quoted the lease as follows: “Resident agrees to indemnify and save Owner harmless from any and all loss occasioned by Resident’s breach of the covenants, terms and conditions of this general agreement or caused by his family, guests, visitors, agents or employees. Resident is required to furnish insurance coverage on all personal property within the leased premises and public areas of this community, at the expense of the Resident.” 712 A.2d 1011, 1013 (Del. Super. Ct. 1998). 16 “To distinguish the Lexington holding, [Plaintiff] directs the Court to various lease provisions concerning the tenant’s obligation to return the property in good condition, to pay for damages in excess of normal wear and tear, and to pay for any damages to the landlord’s property caused by the tenant or his relatives or guests.” 2018 WL 5899080, at *1 (Del. Super. Ct. Nov. 9, 2018). 17 The court noted the following language in the lease: “[T]he tenant will be responsible for damages to the unit and premises, other than normal wear and tear” and “repair of tenant-caused damages must be completed by the owner at the expense of the tenant.” 2017 WL 5593784, at *3 (D. Del. Nov. 21, 2017).

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Lease contemplates an allocation of risk between the landlord and tenant. The Lease

requires the tenant to pay a security deposit and to obtain and maintain insurance for

personal property and liability of at least $300,000.00. In Lexington, the Superior

Court expressly addressed whether a tenant is an implied co-insured under the

landlord’s fire insurance policy for purposes of a subrogation action by the

landlord’s insurance carrier against a residential tenant.18 The Superior Court

determined that, absent some clearly expressed intent in the lease to the contrary,

tenants are considered co-insureds for the purposes of preventing subrogation even

where the tenant’s alleged negligent conduct caused the loss.19 There is no ambiguity

in the language of the Lease.

I note that the important policy considerations underlying the Sutton Rule

apply in the present case. For example, the Lexington decision referenced the

landlord’s “generally dominant relationship over the residential tenant, the typical

assignment of risk of loss for fire, the practical effect that rental payments contribute

to the cost of the landlord’s fire insurance premiums, the mutual benefits derived by

the parties from dividing respective liabilities, and the efficiency of not carrying

duplicative insurance coverage on the same property.”20 Here, the possible damage

caused by fire and water are similar in nature, such that the Sutton Rule can be

18 712 A.2d at 1014. 19 Id. at 1017. See also Deloach, 2018 WL 5899080, at *1. 20 712 A.2d at 1016.

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extended to water damage. Those policy considerations are echoed in Deloach,

where the Superior Court noted the following important policy considerations: “each

tenant cannot reasonably be expected to purchase their own insurance for damage to

a multi-million dollar apartment complex, the tenant’s only insurable interest being

in his own apartment, and landlords are better able to insure the whole premises and

pass the cost of such insurance on to all tenants in rent.”21

I find the language of the Lease in the present case is substantially similar to

the language of the leases in Lexington, Deloach, and Lambert, and that the Sutton

Rule applies. Plaintiffs have not cited—and cannot cite—to language in the Lease

that differentiates this Lease from the leases in similar Delaware cases. Therefore,

Defendants’ Motion for Summary Judgment is GRANTED.

IT IS SO ORDERED.

Sincerely,

Robert H. Robinson, Jr. Judge

21 2018 WL 5899080, at *1.