Travelers Indemnity Co. of America v. Deguise
Annotate this Case
The Travelers Indemnity Co. of America v. Deguise (2005-353); 180 Vt. 214; 914 A.2d 499
2006 VT 87
[Filed 18-Aug-2006]
NOTICE: This opinion is subject to motions for reargument under
V.R.A.P. 40 as well as formal revision before publication in the Vermont
Reports. Readers are requested to notify the Reporter of Decisions,
Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
any errors in order that corrections may be made before this opinion goes
to press.
2006 VT 87
No. 2005-353
The Travelers Indemnity Supreme Court
Company of America
On Appeal from
v. Chittenden Superior Court
Bruce Deguise and Kristy Deguise December Term, 2005
Richard W. Norton, J.
A. Jeffry Taylor, Abatiell Asociates, P.C., Rutland, for
Plaintiff-Appellee.
Paul R. Morwood, South Burlington, for Defendants-Appellants.
PRESENT: Reiber, C.J., Dooley, Johnson, Skoglund and Burgess, JJ.
¶ 1. BURGESS, J. In this subrogation action, plaintiff
("insurer") seeks to recover from defendants ("tenants") the amount it paid
under its fire insurance policy with tenants' landlord as a result of a
fire in tenants' apartment. The superior court granted summary judgment in
favor of insurer, denied tenants' cross-motion for summary judgment,
and-because tenants' negligence and the amount of damages were
uncontested-entered judgment for insurer. Tenants argue on appeal that the
superior court erred in concluding they were not implied coinsureds under
landlord's insurance policy. We affirm.
¶ 2. We review the trial court's grant of summary judgment de
novo, applying the same standard as the trial court. Hardwick Recycling &
Salvage, Inc. v. Acadia Ins. Co., 2004 VT 124, ¶ 14, 177 Vt. 421, 869 A.2d 82. Summary judgment is appropriate where the undisputed facts
demonstrate that either party is entitled to judgment as a matter of law.
V.R.C.P. 56(c)(3).
¶ 3. The undisputed facts can be briefly summarized. Tenants,
pursuant to a written agreement, leased an apartment in the
Northgate/Greenfield Apartments in Burlington from landlord Northgate
Housing Limited Partnership. The apartment is one of several in a
multi-unit building in a multi-building complex. Tenants admitted that, on
January 6, 2002, they emptied smoldering materials from an ashtray into a
trash can or wastebasket, causing a fire that damaged their apartment. As
a result of a claim filed by landlord with insurer, insurer paid $10,711.66
for property damaged by the fire.
¶ 4. The legal question posed by tenants on appeal-whether a
tenant is an implied coinsured under a landlord's fire insurance policy-is
one we recently addressed in another decision, albeit under different
factual circumstances. See Town of Stowe v. Stowe Theatre Guild, 2006 VT
79, ¶ 7 (affirming trial court's conclusion that non-profit theater group
leasing performance space in town building under oral lease was not implied
coinsured under Town's fire insurance policy on the building). As we
stated in Stowe Theatre Guild, an insurer in a subrogation action stands in
its insured's shoes when seeking to recover amounts the insurer has paid
its insured as a result of a third party's tortious conduct. Id. ¶ 5.
Our analysis in Stowe Theatre Guild, as in this case, was guided by our
decision in Union Mutual Fire Insurance Co. v. Joerg, where we concluded
that "a tenant's liability to the landlord's insurer for negligently
causing a fire depends on the intent and reasonable expectations of the
parties to the lease as ascertained from the lease as a whole." Union Mut.
Fire Ins. Co. v. Joerg, 2003 VT 27, ¶ 8, 9, 175 Vt 196, 824 A.2d 586.
¶ 5. In Joerg, we held that where the lease required the landlord to
carry fire insurance on the premises, the insurance was for the mutual
benefit of the parties and the tenant was therefore deemed a coinsured and
protected against an insurer's subrogation claim. 2003 VT 27, ¶ 11. While
an express requirement in a lease that a landlord procure insurance is not
necessary to a finding that the parties agreed a tenant would not be
responsible for particular damages covered by insurance, the approach we
adopted in Joerg requires an examination of the lease agreement to
determine whether the terms reflect that landlord intended to limit its own
recovery against tenants, to relieve tenants from their traditional tort
obligations, or to procure insurance for the parties' mutual benefit.
¶ 6. Tenants rely primarily on a lease provision titled "Hazards,"
which states that tenants "shall not undertake, or permit [their] family or
guests to undertake any hazardous acts or do anything that will increase
the development's insurance premiums." (FN1) Tenants argue that while the
provision does not expressly obligate either party to maintain insurance,
the provision sufficiently demonstrates the parties' implied expectation
that landlord would maintain an insurance policy.
¶ 7. The superior court concluded that the "Hazards" provision
neither created an obligation on the part of landlord to procure insurance
nor implied that insurance would be procured for tenants' benefit, and that
other provisions in the lease did not support a conclusion that tenants
would not be held responsible for fire damage. Rather, the court concluded
that any obligation stemming from the "Hazards" provision is on tenants,
not landlord. The court categorized and rejected tenants' argument as
based on an erroneous assumption that any mention of an insurance policy is
enough to create reliance in tenants and a presumption that insurance costs
would be passed on to them.
¶ 8. We agree with the superior court that the mere mention of
insurance in the "Hazards" provision of the lease is insufficient to
overcome other express provisions in the lease that clearly outline
tenants' responsibility to pay for damages caused by their negligence.
Even if tenants might have had a reasonable expectation that landlord would
procure some kind of insurance on the building, there is nothing in the
"Hazards" provision that would lead tenants to expect that the presence of
insurance would relieve them of their responsibility to pay for damages
caused by their negligence. The lease provides that the landlord may
retain tenants' security deposit to the extent necessary to pay for damages
beyond normal wear and tear and also specifies that tenants are
"responsible . . . for paying all charges required by Section 11." Section
11, titled "Damages," provides that "[w]henever damage is caused by
carelessness, misuse, or neglect on the part of the Resident, a member of
the Resident's household, or guests, the Resident agrees to pay . . . [t]he
cost of all repairs . . . [and] [r]ent for the period the unit is damaged,
whether or not the unit is habitable."
¶ 9. Tenants support their argument by citation to United States
Fire Insurance Co. v. Phil-Mar Corp., 139 N.E.2d 330 (Ohio 1956), which,
tenants argue, held a lease provision "similar" to the "Hazards" provision
in the instant case sufficient to deny an insurer's subrogation claim.
Tenants' reliance on Phil-Mar is misplaced. While tenants here rely solely
upon the "Hazards" provision to bar subrogation, the primary question
before the Ohio Supreme Court was whether the surrender clause of a lease,
which excepted "loss by fire" from the lessee's duty to surrender the
premises in good condition at the expiration of the lease, included
circumstances where the fire loss was due to the lessee's negligence. Id.
at 331. The Phil-Mar court also considered a provision that held the
lessee responsible for increased fire insurance premiums if the rate was
increased because of the lessee's occupancy to be indicative of an
understanding that the lessor would look to the insurance for compensation.
The court viewed that provision, however, in accordance with the lease as a
whole-including the fact that the "loss by fire" exception in the surrender
clause was "unqualified and unlimited"-to conclude that the purpose of the
"loss by fire" exception was to relieve the lessee from its common law
liability to the lessor for fire loss. Id. at 333. In contrast, the
"Hazards" provision tenants rely on in this case to bar their
responsibility for negligently-caused fire damage expressly relieves a
tenant from payment of rent when the unit is damaged by fire and cannot be
lived in-but only when "the damage is not caused or made worse by the
[tenant]." See supra, ¶ 6, n.1. Hence, there is nothing unqualified or
unlimited in this lease with regard to when the lessee is relieved from
financial responsibility for damages to the leased premises. (FN2)
¶ 10. Tenants also argue that we should be guided by public policy
considerations we discussed in Joerg to conclude that tenants are implied
coinsureds, arguing that landlord here would certainly take its insurance
costs into account when setting rent. See Joerg, 2003 VT 27, ¶ 10
(concluding that, where landlord is obligated to purchase insurance,
landlord would take insurance cost into account in setting rent, and
economic inefficiency of multiple insurance policies would thus be
prevented). Unlike the lease in Joerg, however, this lease does not place
an insurance obligation on landlord. The parties' agreement spans
twenty-one pages with numerous provisions establishing each party's
obligations in great detail. The lease here, in express and unqualified
language, obligates tenants to pay for the damage caused by their
negligence. In reviewing the lease as a whole, we cannot imply from the
provisions that landlord intended to obligate itself to provide insurance
for the benefit of tenants or to relieve tenants from liability for
negligently damaging the leased premises, and we find nothing in the
language of the lease that would reasonably lead tenants to imply a
contrary intent. While public policy considerations are helpful in
balancing the equities of the parties in light of the agreement they
reached, we cannot elevate public policy considerations to override or
contradict the terms of the parties' agreement. It is the role of courts
to enforce the contract the parties made, "not one we wish they made."
Joerg, 2003 VT 27, ¶ 9 (quoting Fairchild Square Co. v. Green Mountain
Bagel Bakery, Inc., 163 Vt. 433, 444, 658 A.2d 31, 38 (1995) (Dooley, J.,
dissenting)).
¶ 11. Finally, tenants claim that the circumstances of this
particular housing development make any subrogation claim by an insurer
inequitable because no one would expect a low-income tenant to purchase
liability insurance. See Norfolk & Dedham Fire Ins. Co. v. Aetna Cas. &
Sur. Co., 132 Vt. 341, 346, 318 A.2d 659, 662 (1974) ("The subrogee must
have clear equity and subrogation is defeated by countervailing
equities."). We first note that tenant's argument that "to hold that
[tenants] agreed to waive the benefit of [landlord's] insurance is
inconsistent with the reality of their circumstances" misconstrues the
relevant "waiver" inquiry. As we have discussed, the first question is
whether the parties' agreement reflects a mutual expectation that
landlord's insurance was procured for landlord's and tenants' mutual
benefit, or whether the landlord waived its right to recover damages from
tenants. See Fairchild Square, 163 Vt. at 436, 658 A.2d at 33 ("Whether
landlord waived its right to recover against tenant for negligently caused
fire damage depends on the intent of the contracting parties as determined
by the terms of the contract.").
¶ 12. Tenants' argument is essentially that other residents in the
apartment complex occupy a government-subsidized apartment (although
tenants do not), and it would be inequitable to expect low-income tenants
to procure their own insurance or to have adequate bargaining power when
negotiating lease agreements. Although tenants advanced this argument
below in their memorandum in support of their motion for summary judgment,
the superior court did not address it. Nonetheless, we cannot conclude
that it is the role of this Court to rewrite the parties' agreement solely
because this landlord rents apartments to persons of low income and
presumably limited ability to bargain on lease terms. The parties here
filed cross-motions for summary judgment, and neither responded to the
other that any facts were in dispute. Tenants' factual statement submitted
with their summary judgment motion contains no facts to indicate the income
or relative bargaining power of these particular plaintiff-tenants. Where
tenants have failed to present any facts in their motion to support their
argument that it would be inequitable to hold them to the terms of their
lease agreement, we decline to consider this argument.
¶ 13. For all the foregoing reasons, we conclude on the undisputed
facts in this record that tenants are not implied coinsureds under
landlord's fire insurance policy. Accordingly, we affirm the superior
court's grant of summary judgment for insurer and its denial of tenants'
cross-motion for summary judgment.
Affirmed.
FOR THE COURT:
_______________________________________
Associate Justice
------------------------------------------------------------------------------
Dissenting
¶ 14. JOHNSON, J. In Union Mutual Fire Insurance Co. v. Joerg, we
declined to adopt a per se rule regarding insurers' subrogation claims
against tenants. Instead, we chose to adopt a "case-by-case approach,"
where the status of the tenant as an express or implied coinsured under the
landlord's insurance policy is "ascertained from the terms of the lease."
Joerg, 2003 VT 27, ¶ 9, 175 Vt. 196, 824 A.2d 586. Here, viewing the
lease as a whole, it appears that both parties to the lease would
reasonably have expected tenants to be coinsureds under landlord's fire
insurance policy. Accordingly, I respectfully dissent.
¶ 15. The majority's summary of the material facts and its statement
of the relevant legal standard are entirely adequate. I take issue only
with its analysis of the lease, which I view as a more unified statement of
the relationship between landlord and tenants than does the majority. As
the majority points out, Joerg contemplates an analysis of the parties'
reasonable expectations, and this analysis must include an examination of
the lease as a whole. See ante, ¶ 5 (stating that "the approach we adopted
in Joerg requires an examination of the lease agreement"). The lease is
instructive of more than the meaning of the clauses highlighted by the
parties and examined by the majority, especially given the lease's
reference to tenants' part ownership of the Northgate development, which
the majority does not consider.
¶ 16. The majority focuses its attention, understandably, on the two
provisions of the lease highlighted by the parties: the "Hazards" provision
that refers to the development's insurance premiums, and the "Damages"
provision that holds tenants responsible for damage caused by their
negligence. My interpretation of these clauses is quite different from the
majority's, as I will explain below, but these clauses are of secondary
importance when the lease is examined as a whole. Instead, my
interpretation begins with the opening paragraph of the lease, which states
in relevant part:
Although the relationship between Owner and Resident at
Northgate/Greenfield Apartments ("Northgate") is that of Landlord
and Resident, the Resident understands that the Residents at
Northgate, through the Northgate/Greenfield Residents' Association
(the "Residents' Association") have substantial say in the
management of Northgate, and that the Residents' Association is a
part owner of the Managing General Partner ("Northgate Housing,
Inc.") of the Partnership which owns Northgate. The Residents'
Association also has the right to elect a number of the Directors
to the Board of Northgate Housing, Inc.
Accordingly, the Resident understands and agrees that he/she
has a special responsibility to assist in and promote the sound
maintenance, operation and financial health of Northgate and the
well being of the Northgate community.
This paragraph, found under the heading, "Parties to this
Agreement,"appears to have at least three purposes. First, in a technical
sense, it recognizes that each resident of the development has an ownership
interest in the development. Second, it notifies new residents of the
existence of a "community" that contains both the development's residents
and its owners, and appears to put the residents and the owners on a more
equal footing than the typical landlord and tenant. Third, it balances the
elevated status of the development's residents with a broad reciprocal duty
of each resident to protect the interests of the community.
¶ 17. Each of these purposes is relevant to the question of
subrogation. This is especially true of the first purpose listed above.
Upon signing the lease, tenants became members of an association that the
lease identifies as a "part owner . . . of the Managing General partner . .
. of the Partnership which owns Northgate." If we take this clause of the
lease seriously, this should end our analysis. The insurance policy at
issue insures landlord Northgate Housing Limited Partnership-i.e., "the
Partnership which owns Northgate." As part owners of that partnership's
managing general partner, the Residents' Association-and, thus, the
development's residents-are also seemingly covered by the insurance policy.
Thus, insurer cannot bring a subrogation action against tenants, as "an
insurer cannot recover by means of subrogation against its own insured."
Joerg, 2003 VT 27, ¶ 6 (quoting Peterson v. Silva, 704 N.E.2d 1163, 1164
(Mass. 1999)).
¶ 18. In my view, we are bound to give as much meaning to this
clause as we give to the two clauses relied upon by the parties and the
majority. First, as I address below, infra, ¶ 23-25, this is a
boilerplate contract that must be construed against its drafter, and it
would hardly be fair to give more weight to language appearing to benefit
landlord than to language benefitting tenants. Second, and more
importantly, landlord's intent in granting the Residents' Association an
ownership interest in the development, as stated in the lease, was in part
to imbue the residents with a sense of their "special responsibility to
assist in and promote the sound maintenance, operation and financial
health" of the development. In other words, the purported ownership
interest is not an empty or symbolic promise of elevated status, but
rather, one side of a bargain between landlord and tenants.
¶ 19. It is in light of this bargain that we should examine the
"Hazards" paragraph of the lease, upon which tenants rely to prove the
reasonableness of their expectation that landlord would look to an
insurance policy for recovery of its costs in case of fire. As the
majority points out, that paragraph does not explicitly require landlord to
carry fire insurance. Instead, it requires tenants to help ensure that the
development's insurance premiums do not increase. This is entirely
consistent with my interpretation of the first paragraph of the lease. It
is the kind of obligation that fits within the residents' "special
responsibility" to the development, and it reinforces the notion that the
residents of the development are members of a cooperative community. The
clause refers to "the development's insurance premiums" (emphasis added).
This is more accurate than calling them landlord's premiums, not only
because the residents are part owners of the development, but also because,
as we stated in Joerg, "the landlord will take the cost of the insurance
into account when setting rent." Joerg, 2003 VT 27, ¶ 10. For both
reasons, each resident of Northgate can be presumed to benefit from lower
insurance premiums, and tenants' responsibility to take care to keep
premiums low can be seen as an obligation to the community as much as an
obligation to landlord.
¶ 20. Thus, it is almost beside the point that a reasonable tenant
would certainly have expected from the lease's reference to the
development's insurance policy that such a policy would exist, and that
landlord would pay the premiums. See Houle v. Quenneville, 173 Vt. 80, 86,
787 A.2d 1258, 1262 (2001) ("In construing contracts, we must conclude that
the parties included provisions for a reason."). Nevertheless, this clause
alone appears sufficient to deny a subrogation claim against tenants. As
the majority points out, "an express requirement in a lease that a landlord
procure insurance is not necessary" to deny a subrogation claim. Ante, ¶
5. In fact, the mere mention of the development's insurance policy
implicates the policy considerations of Joerg's rule to nearly the same
extent as if the lease had expressly stated that that landlord must carry
insurance. (FN3) Joerg presents three public policy reasons for adopting
the rule that a landlord's obligation to carry insurance is "determinative
on the issue of subrogation":
First, if the landlord and tenant agree that one of the parties
will purchase insurance, it is only natural that they assume that
the insurance is for their mutual benefit and that the parties
will look only to the insurance for loss coverage. Second, where
the lease expressly requires the landlord to maintain insurance on
the premises, the landlord will take the cost of the insurance
into account when setting rent. Therefore, since the lessee
ultimately pays for insurance through his rent checks[,] simple
equity would suggest that he be able to benefit from that payment
unless he has clearly bargained away that benefit. Finally, this
rule prevents the economic inefficiency that would result from
having multiple insurance policies-with multiple premiums-on the
same building.
Joerg, 2003 VT 27, ¶ 10 (quotations and citations omitted). I have already
addressed the second policy consideration; the assumption that tenants'
rent incorporates the development's insurance premiums is only strengthened
by tenants' ownership interest in, and "special responsibility" toward, the
development. Moreover, "simple equity would suggest that [tenants] be able
to benefit" from landlord's payment of insurance premiums that tenants were
obliged to keep from increasing. Id.
¶ 21. The first and third policy considerations listed in Joerg are
implicated just as clearly by an explicit reference to a pre-existing
insurance policy as by an explicit requirement that landlord purchase
insurance. It is not difficult to imagine what would have taken place if
tenants had asked about the "Hazards" provision before signing the lease:
tenants would have asked what "the development's insurance premiums"
referred to; landlord's representative would have explained the existing
insurance coverage for the development; and tenants would have concluded
that they did not need to purchase fire insurance, just as they would have
if the lease contained an insurance requirement. Tenants would have been
understandably surprised if the response to their query had been that the
clause actually meant "the development's insurance premiums, if any," and
that the development was not actually insured against fire.
¶ 22. In light of tenants' status as part owners of the
development, it is not necessary to explain away the "Damages" clause of
the lease, but it should be pointed out that such a clause does not answer
the question of whether subrogation should be allowed. Joerg holds that a
provision requiring the landlord to carry fire insurance is "determinative"
of that question. Id. Although Joerg does not address circumstances where
a lease contains such a provision, but also contains a provision like the
"Damages" clause here, its unequivocal statement implies that the insurance
provision would control in those circumstances-otherwise, such a provision
would not be "determinative." At least one court adopting the rule we
stated in Joerg has reached the same conclusion. See Rausch v. Allstate
Ins. Co., 882 A.2d 801, 814-16 (Md. 2005) (recognizing Joerg as
representative of the "case-by-case" approach to subrogation, and stating
that when a lease contains both an insurance requirement and a
liability-for-negligence provision, the insurance requirement controls and
blocks subrogation). The Rausch court stated, after adopting our holding
in Joerg:
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 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 816. This statement in Rausch is consistent with our holding in
Joerg and is applicable to the lease at issue here. The "Hazards"
provision is nothing if not an "implied agreement to maintain fire
insurance on the leased premises," and the "Damages" provision is plainly
"a general . . . 'liability for negligence' clause." Id. As Rausch
suggests, the two clauses can be read consistently with one another,
provided that we consider the "Damages" provision as protection for
landlord in case it cannot recover the full costs of repairs through
insurance.
¶ 23. Such a reading is appropriate in light of basic contract
interpretation principles requiring us to construe ambiguities against the
drafter of a contract, especially a contract such as this. We may assume
that this residential lease was not the product of full and fair
negotiation between two parties of similar bargaining power. The reality
for most residential tenants, and particularly tenants in
low-to-moderate-income housing such as the development at issue here, is
that leases are entered into on a "take-it-or-leave-it" basis, and the
tenant typically has neither the opportunity nor the legal sophistication
to bargain for an anti-subrogation clause. Moreover, landlords, especially
those owning large, multi-unit complexes like this one, generally draft
leases with little to no input from the tenants. Therefore, these leases
are essentially contracts of adhesion, as opposed to traditional contracts
resulting from arms-length negotiation among evenly positioned parties.
¶ 24. This assumption is confirmed by the specific circumstances of
this development, where some of the apartments are set aside specifically
for low-income residents who receive government rent subsidies. The lease
itself states that certain of its clauses are required by federal and state
regulation, and that its terms cannot be modified without prior approval by
multiple government agencies, at least with respect to tenants in the
subsidized apartments. The lease tenants signed was not tailored to their
situation. It appears to be the same lease offered to low-income tenants;
some terms apply only to "Section 8 Residents," while others apply to all
residents. Simply put, the tenants signed a boilerplate lease, and we can
assume that there was little or no bargaining about its specific terms.
¶ 25. Under these circumstances, it is only fair that ambiguities
in the lease be resolved against landlord, and thus, against insurer. See
Windsor at Seven Oaks v. Kelly, 448 N.E.2d 251, 253 (Ill. App. Ct. 1983)
("[W]here a landlord has drafted the lease, a court will not impose a
responsibility upon the tenant unless the circumstances and the contract
clearly indicate that the tenant intended to assume such a
responsibility."); see also Garneau v. Curtis & Bedell, Inc., 158 Vt. 363,
367, 610 A.2d 132, 134 (1992) (ambiguity in insurance contract drafted by
party in superior bargaining position must be construed against drafter);
Viles v. Vermont State Colleges, 168 Vt. 459, 462, 724 A.2d 448, 450-51
(1998) (ambiguity in employee benefit plan drafted by party with superior
bargaining power must be construed against drafter). As insurer is
"standing in the shoes" of landlord for these purposes, this presumption
applies just as strongly against insurer. Joerg, 2003 VT 27, ¶ 6
(quotations omitted). This is not, as the majority characterizes it, an
argument that the terms of the contract should not bind tenants. See ante,
¶ 12 ("[W]e cannot conclude that it is the role of this Court to rewrite
the parties' agreement solely because this landlord rents apartments to
persons of low income and presumably limited ability to bargain on lease
terms."). Rather, it is a presumption against the drafter of an ambiguous
contract under circumstances where there is no question as to which party
drafted the contract.
¶ 26. In sum, the lease contains: (1) a provision making tenants
part owners of the development and, thus, part owners of the development's
insurance policy; and (2) a provision containing at least an "implied
agreement to maintain fire insurance on the leased premises," accompanied
by an obligation on behalf of tenants to protect against an increase in the
premiums of that insurance. Rausch, 882 A.2d at 816. To conclude that
this lease does not implicate the holding of Joerg, we must first either
repudiate or minimize the policy considerations contained in that case. We
must then ignore what the lease plainly states about tenants' ownership
interests, as well as what it encourages tenants to conclude about the
development's insurance policy. We must do both of these things despite
the relevance of public policy concerns to this question of equity, and
despite our longstanding rule that contracts of adhesion are interpreted
against their drafters. Although it may seem counterintuitive to relieve
tenants from their admitted personal responsibility for the damage they
caused, "[w]e should enforce the contract that was made, not one we wish
they made." Joerg, 2003 VT 27, ¶ 9 (quoting Fairchild Square, 163 Vt. at
444, 658 A.2d at 38 (1995) (Dooley, J., dissenting)). I would deny
insurer's subrogation claim. I am authorized to state that Justice
Skoglund joins in this dissent.
_______________________________________
Associate Justice
------------------------------------------------------------------------------
Footnotes
FN1. The full provision reads as follows:
The Resident shall not undertake, or permit his/her family or
guests to undertake any hazardous acts or do anything that will
increase the development's insurance premiums. If the unit is
damaged by fire, wind, or rain to the extent that the unit cannot
be lived in and the damage is not caused or made worse by the
Resident, the Resident will be responsible for rent only up to the
date of the destruction. Additional rent will not accrue until
the unit has been repaired to a livable condition.
FN2. The dissent interprets the lease agreement differently, based in
large part on its conclusion that a provision in the lease conveys
an "ownership interest" to tenants through their participation in
a "Residents' Association," an argument not raised below or argued
by tenants. See post, ¶ 15. The particular clause referenced
by the dissent appears to relate to the tenants having a voice in
the governance and management of the apartments, rather than the
tenants' actual ownership of or equity interest in the building.
Notwithstanding the language in that provision imparting some
co-responsibility of tenants to the community, this
co-responsibility is not inconsistent with a tenant's liability
for negligent damage to the building. We disagree that this
provision renders the damages provision of "secondary importance."
Post, ¶ 16. The "ownership" provision is not relevant to the
inquiry here, which is whether, through the terms of the lease,
the landlord is deemed to have waived tenants' common law
liability for negligently causing fire damage to the building. We
do not find the alleged "ownership" provision to create any
ambiguity in the lease on this issue.
FN3. It is important to keep in mind that subrogation is an equitable
doctrine based on principles of restitution and unjust enrichment.
Id. ¶ 6. "The legal principle of subrogation is a fluid concept
depending upon the particular facts and circumstances and based on
natural justice of placing the burden of bearing a loss where it
ought to be, without the form of a rigid rule of law." 16 L. Russ
& T. Segalla, Couch on Insurance § 222:24, at 222 55 (3d ed. 2000)
(cited with approval in Nationwide Mut. Fire Ins. Co. v. Gamelin,
173 Vt. 45, 52, 786 A.2d 1078, 1084 (2001)). As such, in contrast
to the limited role of public policy in the interpretation of a
run of the mill contract, the policy considerations underpinning
our decision in Joerg are critically important to any
interpretation of a lease in a subrogation action. A decision on
a question of equity that runs counter to the demands of public
policy is a contradiction in terms.
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