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Connecticut Supreme Court Upholds Subrogation Action Against Guest Starting Fire By Misplacing Fire Place Ashes On Front Porch.
CONNECTICUT SUPREME COURT UPHOLDS SUBROGATION ACTION AGAINST GUEST STARTING FIRE BY MISPLACING FIRE PLACE ASHES ON FRONT PORCH.
In Wasko v. Manella, SC 169917, 269 Conn. 527, was an action to recover for damage sustained by the plaintiffs as a result of the defendant's alleged negligence.
In this appeal, the court had to determine whether the Appellate Court properly reversed the judgment of the trial court, rendered after a trial to the court, in favor of the substitute plaintiff, Middlesex Mutual Assurance Company (Middlesex). The Supreme Court concluded that the Appellate Court improperly determined that a social guest in a personal residence was immune from liability for negligently caused fire damages in a subrogation action brought by the homeowner's insurance carrier. Accordingly, it reversed the judgment of the Appellate Court.
The opinion of the Appellate Court sets forth the following relevant facts and procedural history of this case. "In 1993, Brian Wasko and Phyllis Wasko, residents of Weston, owned a house on Shore Road in Goshen that they used primarily on weekends and vacations. [The defendant, James] Manella was a friend and business associate of the Waskos who had recently moved to New York City. The Waskos offered to let [the defendant] stay at their house in Goshen on the weekend of February 5, 1993, with the proffered hope that he might be interested in renting or buying it in the future. [The defendant] accepted that offer. While at the house in Goshen, he lit a fire in the fireplace, and, when he was ready to return to New York, he emptied the ashes and embers into a paper bag, which he placed outside on the porch. After he departed, the house caught fire and was substantially destroyed. The fire marshal of the town of Goshen determined that the ashes and embers in the paper bag had caused the blaze.
"The house was insured under a homeowners policy from Middlesex. Pursuant to the insurance policy, Middlesex paid the Waskos $ 48,500 for the lost personal property and $84,005 for the lost dwelling for a total of $ 132,505. In October 1993, the Waskos brought an action against [the defendant] sounding in negligence, recklessness and res ipsa loquitur. In March 1997, Middlesex was substituted as the real party in interest.
"On April 14, 2000, [the defendant] filed a motion for summary judgment on all counts, of which only the negligence count survived. At that time, [the defendant] argued that Middlesex had no right of subrogation and that a social houseguest should be considered an 'implied co-insured' under the policy. The [trial] court was unpersuaded. On October 13, 2000, it held, in a memorandum of decision, that Middlesex could subrogate the Waskos' claim because the homeowner’s policy did not specify coverage for social guests. In short, [the defendant] was not an insured under the terms of the policy.
"In the subsequent trial to the court on July 24 and 25, 2001, the court found that [the defendant] had been negligent and that his negligence had caused the destruction of the Waskos' house and personal property. The court awarded Middlesex $132,505 in damages."
The defendant appealed to the Appellate Court, claiming one error that the trial court: improperly had found that Middlesex had a right of subrogation against a social guest. Addressing the defendant's first claim, the Appellate Court determined initially that Middlesex's right of subrogation was equitable, and not contractual, in nature. Accordingly, the Appellate Court reviewed DiLullo v. Joseph, 259 Conn. 847, 848, 792 A.2d 819 (2002) in which this court concluded that a landlord's insurer did not have a right of subrogation against a tenant who negligently had damaged the insured property. Applying the reasoning of DiLullo to the present case, the Appellate Court determined that allowing the insurer to pursue a subrogation action against a houseguest would lead to economic waste and would place an even greater "strain on the limits of equity" than the factual situation presented in DiLullo. Wasko v. Manella, supra, 74 Conn. App. 39. Accordingly, the Appellate Court concluded, with one judge dissenting, that "in keeping with DiLullo, subrogation should not be allowed against a houseguest whose negligence causes damage to the property of an insured homeowner."
The court thereafter granted the Middlesex's petition for certification to appeal limited to the following issue: "Did the Appellate Court properly reverse the decision of the trial court, and extend this court's opinion in DiLullo v. Joseph, [supra, 259 Conn. 847, 792 A.2d 819] in the context of landlord/tenant, by holding that a guest in a personal residence is immune from liability for negligently caused damages in a subrogation action brought by the homeowner's insurance carrier?" Wasko v. Manella, 262 Conn. 942, 942-43, 815 A.2d 674 (2003).
The court had to determine whether the Appellate Court properly extended this court's opinion in DiLullo v. Joseph, supra, 259 Conn. 847, which precluded an insurer from pursuing an equitable subrogation action against a negligent tenant, to a situation involving a negligent houseguest.
Before the trial court, the defendant claimed that equitable considerations should prevent him from being held liable in Middlesex's subrogation action. Specifically, the defendant claimed that, because landlords' insurance companies are precluded from bringing subrogation actions against tenants, and a social houseguest is akin to a tenant, insurance companies similarly should be precluded from bringing subrogation actions against social houseguests. The trial court rejected the defendant's argument. On appeal, however, the Appellate Court noted that "the actual relationship between the insured and the defendant is more compelling than whether the defendant fits into a category of coinsureds, as contractually defined." Wasko v. Manella, supra, 74 Conn. App. 40. Analyzing the defendant's claim further, the Appellate Court concluded that a social guest is akin to a tenant, not for purposes of being a coinsured party under the host's policy, but rather for the purposes of the equity of the situation. More specifically, relying upon the principles of equitable subrogation set forth in DiLullo v. Joseph, supra, 259 Conn. 853-54, the Appellate Court concluded that it would be "inequitable to permit the homeowner's insurer to have a right of subrogation against the homeowner's guest." Wasko v. Manella, supra, 41. This reliance on DiLullo was misplaced.
The Appellate Court noted that the defendant was not a coinsured under the clear and unambiguous terms of the Waskos' insurance policy. Wasko v. Manella, supra, 74 Conn. App. 37. In addition, the Appellate Court noted that this court explicitly declined to adopt the "'implied co-insured'" theory in DiLullo v. Joseph, supra, 259 Conn. 853.
In regard to the first rationale in DiLullo, the court noted that forcing a tenant to carry insurance for the full cost of the building would create economic waste, as it would be duplicative of the insurance carried by the landlord; further, this economic waste would be compounded by the number of tenants in a particular building. In a situation such as the one found in the present case, the insured has a fire insurance policy covering the home. Therefore, if the insured, or another individual covered by the policy, negligently were to burn the home down, that fire insurance policy would cover the loss. The Appellate Court was concerned that giving an insurer a right of subrogation against a negligent guest, who was not covered by the terms of the insured's fire insurance policy, would be "wasteful [in that it would] require that every individual carry insurance on every building he or she enters, if only briefly, to avoid the consequences of a subrogation suit." Wasko v. Manella, supra, 74 Conn. App. 39. This concern was unwarranted, however, because the negligent acts of a social houseguest would already be covered by his or her existing third party liability coverage, such as provided by a homeowner's or renter's insurance policy. Therefore, there is no need for a social houseguest to purchase an additional traveling or temporary first party fire insurance policy on the host's property. The social guest will be covered in the same manner as he or she would be in any other situation where he or she negligently caused injury to another--through traditional third party liability coverage.
Furthermore, as the Appellate Court noted in its opinion, rather than submitting a claim to the insurer, an insured host could proceed directly against the houseguest in an action for negligently caused damages to the insured property. Indeed, that is the exact situation found in the present case--the Waskos instituted the original action against the defendant, and Middlesex was substituted as the plaintiff after paying for the damage to the Waskos' home. If the insured property owner can bring an action to recover for negligently caused damages against the defendant, the court saw no reason why an insurer that pays for the property owner's loss cannot also bring an action against the defendant. Put another way, the court saw no reason why it is equitable to permit a property owner to proceed against a negligent houseguest's current insurance policy, yet it is inequitable to permit an insurance company that has paid out to its insured to proceed against that same policy. See Westchester Fire Ins. Co. v. Allstate Ins. Co., supra, 236 Conn. 372 ("courts should be inclined to extend rather than restrict" subrogation). In either situation, the houseguest's current third party liability insurance coverage will protect against liability, and there is no need for houseguests to obtain the additional policies envisioned by the Appellate Court. Accordingly, there was no significant concern of economic waste in the present case.
The second rationale in DiLullo v. Joseph, supra, 259 Conn. 851, namely, the lack of expectation of subrogation on the part of a tenant, also is not found in the present situation. In DiLullo, the court endorsed the statement that: "The possibility that a lessor's insurer may proceed against a lessee almost certainly is not within the expectations of most landlords and tenants unless they have been forewarned by expert counseling." Id., 852; R. Keeton & A. Widiss, Insurance Law (1988) § 4.4 (b), pp. 340-41. Contrary to the protestations of the defendant's counsel at oral argument before this court, the court was convinced that social houseguests do not proceed with the same lack of expectations regarding personal responsibility for negligent conduct as do tenants. Put another way, the court believed that most social guests fully expect to be held liable for their negligent conduct in another's home--whether that conduct constitutes breaking the television, causing physical injury, or burning the house down. Unlike tenants, social guests have not signed a contract with the host, they have not paid the host any set amount of money for rent, and, accordingly, they do not have the same expectations regarding insurance coverage for the property as do tenants. In sum, the equitable concerns that led this court to preclude subrogation in the context of landlord and tenant simply are not present in the context of houseguest and host.
A more appropriate source of guidance on the equity involved in allowing subrogation in the present situation is our decision in Westchester Fire Ins. Co. v. Allstate Ins. Co., supra, 236 Conn. 362. In that case, the plaintiff insurance company became obligated to pay uninsured motorist benefits to its insured when the defendant insurance company of the tortfeasor denied coverage. Subsequently, the plaintiff brought an action against the defendant to recover the money that it had paid to its insured. Id. The trial court granted the defendant's motion to strike the plaintiff's complaint, and the plaintiff appealed. As an initial matter, this court determined that the plaintiff was proceeding under the theory of legal or equitable subrogation, because it was "stepping into the shoes of the party it paid in order to recover the payments that it made, and thus to prevent the unjust enrichment of the party whose debt it paid." Id., 367.
The court explained further that in an equitable subrogation matter, "the insurer was not acting as a mere volunteer; rather, it was obligated by a preexisting contract of insurance to pay the losses of its insured. Upon such payment, the insurer became subrogated to any rights that its insured might have had against the party who had caused the loss. The tortfeasor, who was the party primarily liable for the losses sustained by the insured, benefited by the insurer's payment of a debt truly owed by the tortfeasor. The court saw no logical reason to permit a tortfeasor to be unjustly enriched by virtue of having its debt paid by the insurance company of a party who had the foresight to obtain insurance coverage, and thus to escape all liability for its wrongdoing, simply because the insurance company was not permitted to participate in a suit against the tortfeasor in order to recover the money that it had paid to its insured but which was properly payable by the tortfeasor." Id., 372-73 . Accordingly, it overruled Berlinski v. Ovellette, supra, 164 Conn. 482, which had precluded providers of uninsured motorist coverage from bringing subrogation actions against uninsured tortfeasors, and we reversed the judgment of the trial court. Westchester Fire Ins. Co. v. Allstate Ins. Co., supra, 236 Conn. 375.
The court found the reasoning of Westchester Fire Ins. Co. to be particularly instructive to the present case. As discussed previously in this opinion, the Waskos could have pursued their own negligence action against the defendant, rather than submitting and settling their claim with Middlesex. Indeed, as the Appellate Court noted, "one of the benefits of purchasing homeowners insurance is that the insureds need not sue their guests who negligently cause damage, even though they would be within their rights to do so." Wasko v. Manella, supra, 74 Conn. App.; see also Reeder v. Reeder, 217 Neb. 120, 129, 348 N.W.2d 832 (1984) ("it may be presumed that the insured bought this policy so that he would not have to look to his guest for payment in the event of damage caused by the negligent act of the guest").
Precluding an insurer from bringing a subrogation action against a social houseguest who negligently caused a fire that damaged the insured's property could also lead to unjust results. First, it is contrary to the main principle behind equitable subrogation because it "denies the [insurer] the opportunity to compel the ultimate payment of a debt by one who, in justice, equity, and good conscience, should pay it." Westchester Fire Ins. Co. v. Allstate Ins. Co., supra, 236 Conn. 373. Second, it may also encourage insurers to attempt to deny coverage for losses to property they insure, given that the insured party would maintain the right to proceed against the responsible party, while the insurer would not.
The judgment of the Appellate Court was reversed and the case was remanded to that court with direction to consider the defendant's remaining claims on appeal.
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