Donegal Mutual Insurance Company v. Thangavel

Supreme Court of Delaware

Donegal Mutual Insurance Company v. Thangavel

DecidedJuly 18, 2023

Docket379, 2022

StatusPublished

This text of Donegal Mutual Insurance Company v. Thangavel (Donegal Mutual Insurance Company v. Thangavel) is published on Counsel Stack Legal Research, covering Supreme Court of Delaware primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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Donegal Mutual Insurance Company v. Thangavel, (Del. 2023).

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Opinion

IN THE SUPREME COURT OF THE STATE OF DELAWARE

DONEGAL MUTUAL INSURANCE§ COMPANY A/S/O SEAFORD § APARTMENT VENTURES LLC § T/A THE VILLAGES OF STONEY § No. 379, 2022 BROOK APARTMENTS, § § Court Below: Superior Court Plaintiff Below, § of the State of Delaware Appellant, § § C.A. No. S21C-08-013 v. § § SATHIYASELVAM THANGAVEL § and SASIKALA MUTHUSAMY, § § Defendants Below, § Appellees. §

Submitted: April 19, 2023 Decided: July 18, 2023

Before SEITZ, Chief Justice; VALIHURA and TRAYNOR, Justices.

Upon appeal from the Superior Court. AFFIRMED.

Jennifer A. Sutton, Esquire, MARGOLIS EDELSTEIN, Wilmington, Delaware, for Plaintiff Below, Appellant Donegal Mutual Insurance Company.

Wade A. Adams, III, Esquire, Marissa D. White, Esquire, LAW OFFICES OF WADE A. ADAMS, III, Newark, Delaware, for Defendants Below, Appellees Sathiyaselvam Thangavel and Sasikala Muthusamy. SEITZ, Chief Justice:

Under the Sutton rule, landlords and tenants are co-insureds under the

landlord’s fire insurance policy unless a tenant’s lease clearly expresses an intent to

the contrary.1 If the Sutton rule applies, the landlord’s insurer cannot pursue the

tenant for the landlord’s damages by way of subrogation. In this case, the Superior

Court ruled in the tenants’ favor at summary judgment that the Sutton rule applied

because the lease did not clearly express an intent to hold the tenants liable for the

landlord’s damages. We agree and affirm.

I.

Sathiyaselvam Thangavel and Sasikala Muthusamy were tenants who leased

an apartment from Seaford Apartment Ventures, LLC. The complaint filed by

Seaford Apartment’s insurer, Donegal Mutual Insurance Company, alleged that the

tenants hit a sprinkler head while they flew a drone inside the apartment. Water

sprayed from the damaged sprinkler head and caused damage to the apartment

building.

Seaford Apartment filed an insurance claim with Donegal, who paid

$77,704.06 to repair the water damage. Donegal then brought this action against the

tenants through subrogation and alleged that the tenants were negligent and breached

1 Sutton v. Jondahl, 532 P.2d 478, 482 (Okla. Civ. App. 1975). 2 the property’s rules and regulations. Donegal sought to recover the repair costs from

the tenants.

In relevant part, the tenants’ lease provided as follows:

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 . . . .2 (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 . . . .3 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.4 The tenants moved for summary judgment and argued that the law considers

them co-insureds under the landlord’s fire insurance policy absent an express

agreement to the contrary. They relied on a legal defense from the landmark case,

Sutton v. Jondahl. In Sutton, the landlord’s insurer paid for the fire loss caused by

the tenant’s minor son’s unsupervised chemical experiments in the rented home.

2 Corrected App. to Opening Br. at A-017 [hereinafter “A__”] (Compl.). 3 Id. 4 A-020. 3 The Oklahoma Court of Appeals held that the insurer did not have a right to

subrogation because “when fire insurance is provided for a dwelling[,] it protects . . .

the possessory interests of a tenant absent an express agreement by the latter to the

contrary.”5

The Superior Court granted the tenants’ summary judgment motion. It

concluded that the lease in this case was substantially similar to the leases in three

other Delaware cases – Lexington Insurance Co. v. Raboin,6 Deloach v. Houser,7

and State Farm Fire & Casualty Co. v. Lambert8 – all of which found that the Sutton

rule applied and that the leases did not clearly express an intent to the contrary.9

On appeal, Donegal claims that the Superior Court erred because the lease

here is materially different from the leases in the cases noted above. The Seaford

Apartment lease provisions, according to Donegal, show a clear agreement that the

tenants are liable for the water damage they caused. Even if the lease is unclear,

Donegal argues that the case should proceed to discovery if there is any ambiguity

about the parties’ intent about the tenants’ liability.

Our standard of review is de novo.10 “Summary judgment may be granted if

there are no material issues of fact in dispute and the moving party is entitled to

5 Sutton, 532 P.2d at 482. 6 712 A.2d at 1016. 7 2018 WL 5899080, at *2. 8 2017 WL 5593784, at *3 (D. Del. Nov. 21, 2017). 9 Donegal Ins. Grp. v. Thangavel, 2022 WL 4284787, at *2 (Del. Super. Sept. 15, 2022). 10 Lyondell Chem. Co. v. Ryan, 970 A.2d 235, 241 n.14 (Del. 2009). 4 judgment as a matter of law. The facts and all reasonable inferences must be

considered in the light most favorable to the non-moving party.”11

II.

A.

In Lexington, apartment tenants allegedly caused a fire by installing a ceiling

fan in violation of the landlord’s rules and regulations.12 The landlord’s insurer

attempted to recover against the tenant for the landlord’s damages through

subrogation. The Superior Court granted summary judgment to the tenants, which

was affirmed on appeal. The Superior Court held that “fire insurance secured by the

landlord [is] obtained for the mutual benefit of landlord and lessee.”13 Therefore,

“in the absence of an express agreement or provision in the lease that would place

liability on the tenant for the tenant’s negligence in causing the fire, the landlord’s

carrier cannot obtain subrogation against the tenant.”14 The court pointed out that,

practically speaking, tenants contribute to the cost of the landlord’s fire insurance

premiums through their rental payments:

The landlords of course could have held out for an agreement that the tenant would furnish fire insurance on the premises. But they did not. They elected to purchase the coverage. To suggest the fire insurance does not extend to the insurable interest of an occupying tenant is to ignore the realities of urban apartment . . . renting. Prospective tenants

11 Id. at 241. 12 Lexington, 712 A.2d at 1013. 13 Id. at 1015. 14 Id. at 1016. 5 ordinarily rely upon the owner of the dwelling to provide fire protection for the realty (as distinguished from personal property) absent an express agreement otherwise. Certainly it would not likely occur to a reasonably prudent tenant that the premises were without fire insurance protection or if there were such protection it did not inure to his benefit and that he would need to take out another fire policy to protect himself . . .

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