On October 18, 2019, the Pennsylvania Superior Court issued a decision impacting a Landlord’s ability to collect damages from a negligent tenant. Specifically, the Court ruled against a landlord who was seeking to hold a tenant liable for negligently starting a fire and extensively damaging the landlord’s property.
In Joella v. Cole, a tenant negligently ran an extension cord across the hinges of a cabinet which caused damage to the cord. The damage eventually ignited a fire and caused $180,000 in damage to the property. The landlord’s suit sought to hold the tenant liable pursuant to a subrogation claim. The tenant argued that, under the lease, she was an implied co-insured under the Landlord’s property insurance. As a result, the Court needed to decide how it would analyze subrogation claims when it was ambiguous under a lease that a tenant is a co-insured under a Landlord’s policy.
The Superior Court held that Pennsylvania follows a case-by-case approach to this issue where the Court determines “the availability of subrogation based on the reasonable expectation of the parties as expressed in the lease under the facts of each case.” Here, the lease said that the landlord was to maintain insurance on the building and that the tenant may purchase fire and casualty insurance “to cover their personal possessions, which are not covered by the landlord’s fire insurance.” The court ruled that it was reasonable for the tenant to expect that she was an implied co-insured. Therefore, the landlord was not able to subrogate the claim.
A claim of this size could have a considerable impact on a landlord whether by an increased deductible or insurance rates. If there is language in your lease that is unclear, a court could rule that you are prohibited from subrogating your claim against a tenant that negligently caused damage to the property, such as a fire. Protect your property against the negligence of tenants by reviewing the language in your lease. Tenants are also impacted as they can be held liable for significant damages if the lease is clear that they must maintain their own fire insurance and the tenant does not.
A real estate attorney can help you navigate the language in your lease to make sure you are protected. Contact Stock and Leader’s Real Estate team today.