In support of her motion, Ms. Houser relied on Lexington Ins. Co. v. Raboin, 712 A.2d 1011 (Del. Super. Ct. 1998) aff'd, 723 A.2d 397 (Del. 1998), which held that the “trend of modern jurisprudence holds that fire insurance secured by the landlord has been obtained for the mutual benefit of landlord and lessee.” The Lexington court stated that, “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.”

For its part, Cincinnati sought to distinguish Lexington by relying on various lease provisions concerning the tenant's obligation to return the property in good condition, to pay for damages in excess of normal wear and tear, and to pay for any damages to the landlord's property caused by the tenant or the tenant's relatives or guests.

The Trial Court's Decision

The trial court granted Ms. Houser's motion.

In its decision, the trial court stated that the rule adopted in Lexington, referred to as the “Sutton rule” from its namesake decision, Sutton v. Johdahl, 532 P.2d 478 (Ok. Ct. App. 1978), expressed “the better rule that residential tenants should be considered co-insureds under a landlord's policy, absent specific and explicit language shifting the risk of fire loss to the tenant.”

In the trial court's opinion, there were “many sound policy considerations” supporting the Sutton rule: each tenant cannot reasonably be expected to purchase his or her own insurance for damage to a multi-million dollar apartment complex, the tenant's only insurable interest being in his or her own apartment, and landlords were better able to insure the whole premises and pass the cost of such insurance on to all tenants in rent.

The trial court then found “no specific and explicit language” in Ms. Sigvardson's lease sufficient to shift the risk of loss to her. It ruled that each of the provisions relied on by Cincinnati dealt with subjects “far afield of loss caused by fire due to the negligence of the tenant” and “hardly qualif[ied] as an 'express agreement' shifting the risk of fire loss to the tenant.” According to the trial court, the only language cited by Cincinnati that even dealt with fire loss merely set forth Ms. Sigvardson's available remedies to abrogate the lease under the landlord-tenant code in the event of a fire.

The trial court concluded that none of the provisions on which Cincinnati sought to rely satisfied Lexington's mandate that a risk-shifting provision placing the risk of loss by fire to the rental unit or the whole property caused by the tenant's negligence be stated “clearly and unequivocally” in the lease.

The case is Deloach v. Houser, No. N17C-04-045 CEB (Del. Super. Ct. Nov. 9, 2018).

FC&S Legal Comment

There are differences of opinion in the decisions of the various states as to whether the Sutton rule is good policy. See, generally, American Family Mutual Ins. Co. v. Auto-Owners Ins. Co., 757 N.W. 2d 584 (S.D. 2008) (collecting state law cases that have adopted or repudiated the Sutton rule).