The determination of whether a tenant is also a coinsured under the landlord's policy ultimately comes down to the language in the lease and relationship between the parties. In the absence of specific language or a unique relationship, most courts utilize presumptions of whether the party is a coinsured or not. In fact, a majority of jurisdictions have adopted the presumption stated in Sutton v. Jondahl, 532 P.2d 478 (Okla. Ct. App. 1975), that the tenant is presumed as an additional insured under the property insurance policy, thereafter preventing subrogation under the "anti-subrogation rule." This presumption is commonly referred to as the Sutton doctrine.
The Supreme Court of New Hampshire previously adopted the Sutton doctrine in Cambridge Mutual Fire Ins. Co. v. Crete, 150 N.H. 673 (N.H. 2004). There, the tenant negligently started a fire that resulted in significant damage to his unit's building. In adopting the Sutton doctrine, the Supreme Court of New Hampshire followed the reasoning from the Oklahoma Court of Appeals that, " 'basic equity and fundamental justice upon which the equitable doctrine of subrogation is established requires that when fire insurance is provided for a dwelling it protects the insurable interests of all joint owners including the possessory interests of a tenant absent an express agreement by the latter to the contrary.' " Crete, 150 N.H. at 675 (quoting Sutton, 532 P.2d at 482).
Until recently in Ro v. Factory Mut. Ins. Co., No. 2019-0620, 2021 WL 915034 (N.H. Mar. 10, 2021) the Supreme Court of New Hampshire had not addressed whether the presumption would apply to students occupying dormitories of college campuses. In Ro, two students, Ro and Lim, set up a charcoal grill on the platform of Lim's dormitory at Dartmouth College. Id. at *1. Ro was not an occupant of this dormitory, but was an occupant of a different Dartmouth dormitory. Id. One day in October 2016 the grill caused the platform to catch on fire. Id. The fire, water and mitigation efforts by the firefighters caused damage in excess of $4.5 million. Factory Mutual Insurance Company paid insurance proceeds under the terms of the policy with Dartmouth, and then sought subrogation against both Ro and Lim. Id.
In arguing against the presumption of the Sutton doctrine, and differentiating its adoption in Crete, Factory Mutual argued that the students contracted out of the doctrine through their execution of the student handbook, which contained an open flame policy, and further placed the responsibility for the Dartmouth property damage on the negligent students. Id. Factory Mutual also argued that the students' relationship with the college is more akin to a hotel guest, and that the students do not have a possessory interest in the dormitory or the insurance policy. Id. at *3.
Although the Dartmouth College handbook seems to provide language that would impose liability for fire damage on the negligent student(s), the New Hampshire Supreme Court found that this language was insufficient to overturn the Sutton presumption. Id. at *9. The Court stated that Dartmouth must have specifically address the coinsured status in its agreement with the student, and state whether the tenant is to obtain their own fire insurance for the leased premises. Id.
Notwithstanding the handbook, the Court considered several policy considerations in Crete in determining that the students had a possessory interest in the dormitory and the Factory Mutual policy, including: 1) a college student's reasonable expectation that the college has fire insurance to protect college property, noting that the Dartmouth College website represents that "the College insures College-owned property through an 'All-Risk' blanket policy" and that the "[p]erils covered include fire"; 2) the insurer, in setting its premiums, admittedly takes into account that the property will be rented by students, and that the insurer reasonably expects to pay for negligently caused fires; 3) the likelihood that the student indirectly pays a portion of the insurance policy's premium through tuition and/or room and board fees; and 4) the economic waste that would result by requiring each student who resides in the campus residence halls—which were estimated to be more than 3,000 at Dartmouth College—to obtain their own insurance policy on the building which he or she resides. Id. at *6-7. Requiring each student to obtain their own policy would be duplicative, and cause the Dartmouth College dormitories to be vastly over insured. Id. at *7.
In finding that these policy considerations favored Ro as a coinsured, the Court went a step further, and stated that Lim—who was not a resident of this dormitory but of another on campus dormitory—is also considered a coinsured party under the Dartmouth College policy with Factory Mutual. Id. The New Hampshire Supreme Court stated that this extension, although not expressly stated, is also implied in the reasoning in Crete, where the tenant caused the fire outside of his apartment. Id.
It remains to be seen how this case will affect other states that follow Sutton, and its application to college dormitories across the Country. It is likely that this decision and policy considerations will be analyzed in other Sutton jurisdictions. If you have any questions regarding this case, or any other subrogation issues, please feel free to reach out to the subrogation professionals at Butler Weihmuller Katz Craig LLP.
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