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Sutton Button: Subrogation by Landlord's Insurer Against Tenants

Recently, two more jurisdictions have weighed in on the issue of subrogation involving landlords and tenants. Nebraska reinforced and adopted the Sutton doctrine as applied to residential tenancies.

By David W. Fox | Updated on January 16, 2006

Recently, two more jurisdictions have weighed in on the issue of subrogation involving landlords and tenants. Nebraska reinforced and adopted the Sutton doctrine as applied to residential tenancies. That doctrine holds that a residential tenant is an implied coinsured under the landlord’s policy in the absence of an express provision to the contrary, and bars subrogation by the landlord’s insurer (Sutton v. Jondahl, 532 P.2d 478 [Okla. App. 1975]). In a similar case, an Oregon court did not expressly reject the Sutton rule, but clearly was unwilling to apply a per se rule barring subrogation.

Subrogation is the right of the insurer to stand in the shoes of the insured in order to pursue recovery from any third parties who are legally responsible for the insured’s loss. A defendant in a subrogation action can be any third party who has legal responsibility for the loss. However, not all potential defendants can be named as defendants in subrogation actions. Commonly, an insurer is prohibited from bringing an action against certain defendants on the theory that the potential defendant actually is an insured under the policy, and the insurer cannot subrogate against its own insured under the same policy. There often is variance among different jurisdictions on the issue of whether certain types of individuals and entities are proper subrogation defendants. The most common examples include controversies involving property owners and contractors, and landlords and tenants. These parties are sometimes given the status of implied coinsured.

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