Travelers Indemnity Co. v. Deguise, No. S1253-04 CnC (Norton, J., Feb.
10, 2005)



[The text of this Vermont trial court opinion is unofficial. It has been
reformatted from the original. The accuracy of the text and the
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STATE OF VERMONT                                    SUPERIOR COURT
Chittenden County, ss.:                         Docket No. S1253-04 CnC



TRAVELERS INDEMNITY CO.

v.

DEGUISE




                                 ENTRY

       Tenants seek to dismiss this subrogation claim filed against them by
landlord’s insurance company for fire damage to their apartment. Tenants
argue that through their lease with landlord, they are implied coinsureds
and are therefore immune from such claims. Union Mutual Fire Ins. Co. v.
Joerg, 

.
        As tenants correctly note, an insurer may not bring a subrogation
action against its own insured or any coinsured—express or implied. 

6. This is due to the equitable nature of subrogation as a theory of
restitution that allows an insurer as a secondary party, who has
compensated the insured, to step into the insured’s shoes and pursue the
primarily liable party. 

words, the insurer takes the place of the
insured, and it which implies that it cannot bring suit against “itself.” Thus
tenants seek to define themselves as coinsured to prevent the insurance
company from subrogating against them.

        In Joerg, the Vermont Supreme Court ruled that if a lease requires
the landlord to carry fire insurance on the leased premises, then such
insurance is for the mutual benefit of tenant and landlord, and tenant is
considered a co-insured. 

In Joerg, this determination was
straightforward as the lease at issue contained an express provision
requiring the landlord to maintain insurance on the premises. 

12
(noting that in the lease at issue “‘the landlord shall be responsible for
maintaining the insurance, taxes and mortgage of the property’”). Tenants
in this case acknowledge, there is no express provision in their lease
requiring landlord to carry fire insurance.

        Instead, tenant’s rely on an interpretation of their lease to imply that
landlord carried fire insurance for tenants’ mutual benefit. The only
guidance the Court offers through Joerg in determining when tenants are
implied coinsured is its rejection of a per-se rule on a tenant’s fire liability
and its adoption of a “case-by-case” approach to determining the effect of
any given lease. 

¶ 7–10. Accordingly, the answer to whether a lease
makes a tenant a coinsured under landlord’s fire insurance policy depends
on the intent of the parties to the lease. If there is evidence that the parties
intended the landlord to insure the property, then it is inferred that such
insurance was for the mutual benefit of the parties. 

Of course, if
there is evidence suggesting that the landlord did not intend to exempt
tenants from liability for fire damage, then the tenants are coinsured under
the policy.
        In their interpretation of the lease, tenants rely on three facts from
the lease and its context. First, they point to paragraph 28, which states that
“The Resident shall not . . . do anything that will increase the
development’s insurance premiums.” Second, they note that the apartments
are made up of several large building in which tenants occupy a small unit.
This building arrangement, they argue, would make individual fire
insurance impossible. Third, the tenants argue that their status as recipients
of Section 8 housing subsidies makes it unlikely that they would be
required to purchase additional insurance on the building.

        There are two problems with a motion to dismiss on these facts.
First, tenants misapprehend the relevant law on the issue of whether a
tenant is an implied co-insured. In every case that this court has found
involving a tenant as an implied co-insured for a fire insurance policy, there
has first been exclusionary language exempting the tenant’s from
responsibility for fire damage. See, e.g., Parson Mfr. Corp. v. Superior
Court, 

, 424 (Cal. App. 1984); United States Fire Ins. Co.
v. Phil-Mar Corp., 

, 332 (Ohio 1956);Rizzuto v. Morris,

, 690 (Wash. App. 1979). These courts have relied almost
uniformly on surrender clauses in the lease that have exempted tenants
from liability for fire damage. Other facts, such as ones the tenants assert
in this motion, have only been used as circumstantial evidence of intent to
bolster the initial conclusion from the exemption clause. As a matter of
law, tenants’ factual allegations do not show that they are exempted from
fire damage in the lease, and they are therefore not exempt from liability as
coinsured parties.

       The second problem with tenant’s motion is that it alleges facts that
go beyond the scope of V.R.C.P. 12(b)(6), on which this motion is
premised. A Rule 12(b)(6) motion is limited to the pleadings and is
designed to test the law of the claim and not the supporting facts involved.
By alleging three additional facts, tenants are moving beyond the law of
Joerg and its cited cases into a factual scenario where the case-by-case
approach might be applied.

       Rule 12(b) does allow a 12(b)(6) motion to be treated as a motion for
summary judgment when “matters outside the pleading are presented to and
not excluded by the court.” Tenant’s arguments fit this description
perfectly. To that end, the court will give the parties 30 days to present all
material, such as affidavits and further briefs, made pertinent by the
previous discussion and the requirements of Rule 56, at which time the
court will rule on this motion for summary judgment.

       Based on the foregoing, defendants’ motion to dismiss is denied.
Parties shall submit pertinent materials for a summary judgment motion in
30 days.

       Dated at Burlington, Vermont________________, 2005.




                                          ________________________
                                          Judge