LBM REALTY, LLC, d/b/a SUMMER PLACE APARTMENTS, an Indiana Corporation, Appellant/Plaintiff,
HILLARY MANNIA, an Indiana resident, Appellee/Defendant
APPEAL FROM THE ST. JOSEPH SUPERIOR COURT. The Honorable David C. Chapleau, Judge. Cause No. 71D06-1105-PL-00110.
ATTORNEYS FOR APPELLANT: CHARLES R. SHEDLAK, Shedlak & Benchik Law Firm LLP, South Bend, Indiana; GEORGE M. FERRETI, Foran Glennon Palandech Ponzi & Rudloff, PC, Chicago, Illinois.
ATTORNEYS FOR APPELLEE: MARK D. GERTH, MICHAEL WROBLEWSKI, Kightlinger & Gray, LLP, Indianapolis, Indiana.
VAIDIK, Chief Judge. FRIEDLANDER, J. and MAY, J., concur.
VAIDIK, Chief Judge
Following a fire in an apartment building owned by LBM Realty LLC d/b/a Summer Place Apartments (LBM), LBM's insurance company Greater New York Mutual Insurance Company (Insurer) filed an insurance subrogation action in LBM's name against LBM's tenant, Hillary Mannia. Mannia filed for summary judgment, urging the trial court to adopt a no-subrogation rule--citing Sutton v. Jondahl, 1975 OK CIV APP 2, 532 P.2d 478 (Okla. Ct. App. 1975), and its progeny as support--which would preclude LBM's complaint against her. The trial court granted summary judgment in favor of Mannia, and LBM now appeals. We find that Indiana law supports a largely case-by-case approach to subrogation actions by a landlord's insurer against a tenant and, therefore, does not preclude LBM from pursuing its claims against Mannia, at least with respect to damage to the leased premises. Accordingly, we affirm in part, reverse in part, and remand with instructions.
Facts and Procedural History
In July 2010, a fire--resulting in $743,402.86 in damages--occurred at Summer Place Apartments (the Apartments), an apartment complex in Granger, Indiana, owned by LBM. Appellant's App. p. 3. Mannia was a tenant in the Apartments, having signed a one-year lease in March 2010. Included within the lease are several relevant lease provisions, which we have condensed and paraphrased below:
o A provision titled " Insurance," which is silent as to LBM's obligation to maintain property insurance, but states in bold type: " Owner recommends the Resident obtain renter's insurance." This provision also states that in the event the leased premises are totally destroyed by some cause beyond the owner's control, the lease will terminate as of that date (and to the extent that the premises are only partially destroyed, there will be an abatement in rent).
o A provision titled " Rules," which incorporates an attached list
of " Rules
and Regulations" into the lease, the most relevant of which reads as
7. Resident must pay repair costs for all damages to Resident's Apartment, Apartment Community facilities, and common areas caused by Resident or members of Resident's household or guests. . . .
o A " Save Harmless Clause," which states: " Resident shall indemnify and save harmless Owner from and against any and all claims or actions for damages to persons or property," including claims in which it is asserted that Owner has been negligent.
o A provision stating that " 'Premises' shall mean only that portion of Owner's property contained within the interior walls of the dwelling unit described herein . . . ."
o Within " Miscellaneous Provisions" :
At the end of the term, Resident shall return the Leased Premises to Owner in the same good condition, reasonable wear and tear excepted. Resident is and shall be responsible and liable for any injury or damage done to the Leased Premises, common areas or any property of Owner caused by [R]esident, any occupant, or any other person whom Resident permits to be in or about the Leased Premises.
This section also states, " Resident shall permit no waste of the Leased Premises nor allow the same to be done, but Resident shall take good care of the same . . . ."
See id. at 5-14.
After the fire at the Apartments, Insurer filed a subrogation action in LBM's name against Mannia, alleging in its complaint that Mannia was in breach of contract and negligent. Id. at 1-4. Specifically, the complaint states that Mannia breached her contract with LBM in " one or more of the following ways" :
(1) Carelessly and improperly disposed of smoking materials by placing same in a plastic bottle and in close proximity to the vinyl siding on the balcony patio wall of the leased premises; and/or
(2) Carelessly and improperly allowed guests to dispose of smoking materials by placing same in a plastic bottle and in close proximity to the vinyl siding on the balcony patio wall of the leased premises[; ] and/or
(3) Otherwise failed to comply with her obligation to return the premises in the same condition as when she moved in, reasonable wear and tear excepted.
Id. at 2. In regard to its negligence claim, LBM repeated (1) and (2) above, and also alleged that Mannia had " otherwise acted carelessly and negligently." Id. at 3.
Mannia filed a motion to dismiss LBM's complaint. In her brief in support of the motion, Mannia discussed the three different approaches used by courts around the country to address subrogation claims of landlords' insurers against negligent tenants. See id. at 25-27. These approaches include:
(1) the no-subrogation (or implied co-insured) approach (i.e., the " Sutton rule" ), in which, absent an express agreement to the contrary, a landlord's insurer is precluded from filing a subrogation claim against a negligent tenant because the tenant is presumed to be a co-insured under the landlord's insurance policy; (2) the pro-subrogation approach, in which, absent an express term to the contrary, a landlord's insurer is allowed to bring a subrogation claim against a negligent tenant; and (3) the case-by-case approach, in which courts determine the availability of subrogation based on the reasonable expectations of the parties under the facts of each case.
See LBM Realty, LLC v. Mannia, 981 N.E.2d 569, 573 (Ind.Ct.App. 2012) (internal footnotes omitted). Mannia then argued that the trial court should adopt the first approach--the no-subrogation/implied co-insured rule articulated in the Oklahoma case of Sutton v. Jondahl, 1975 OK CIV APP 2, 532 P.2d 478, otherwise known as the Sutton rule--and dismiss LBM's complaint. Id. The trial court agreed--adopting this rule and then applying it--and granted Mannia's motion to dismiss, concluding that LBM was precluded from pursuing its subrogation claims because Mannia was an " additional insured" under LBM's insurance policy. Id. at 576.
LBM appealed, and this Court reversed and remanded, without adopting either approach:
Despite the current state of Indiana law that permits insurers to bring a subrogation claim against a tenant, the trial court did not test LBM's complaint against the backdrop of the law as it existed. Instead, the trial court adopted the no-subrogation approach, thereby precluding LMB's claims against Mannia. It seems that the trial court put the proverbial cart before the horse by first adopting a rule precluding subrogation claims against tenants and then reviewing LBM's complaint in light of that newly adopted rule.
Whether the no-subrogation approach, pro-subrogation approach, or case-by-case approach should be adopted in this State is a matter we leave for another day as the facts in this case are limited at this juncture of the proceedings and have not been developed enough to enable a meaningful review of the issue. Because Indiana law does not currently preclude a landlord's insurer from bringing a subrogation claim against a tenant and because the allegations in LBM's complaint establish a set of circumstances under which it would be entitled to relief, LBM's complaint states claims upon which relief could be granted.
Id. at 578.
Thereafter, further discovery occurred, and the parties agreed to the following Stipulations:
1. The money received from rent (including  Mannia's rent from March 25, 2010[,] to July 3, 2010) was used to pay LBM 's operating expenses, including but not limited to procurement and maintenance of insurance covering the apartment complex at 825 Summer Place Lane, Granger, Indiana, 46530 and all units included therein. However, [LBM]'s property insurance did not provide coverage to any of the belongings owned by  Mannia.
2. Furthermore, pursuant to the terms of the insurance policy that LBM  obtained, LBM 's insurer has asserted a right of subrogation as to the claims asserted by [LBM] against  Mannia based upon the insurer's payment to [LBM]
for damages resulting from the fire that
occurred on July 3, 2010, which is the subject of this lawsuit.
Appellant's App. p. 236-37. In addition, LBM deposed Mannia, and elicited the following testimony:
Q: Okay. Based on your discussions with the lady that was there on behalf of the management company, did you have any understanding at all concerning whether if [sic] you wanted to have insurance for your stuff in the apartment, whether you had to take out your own renter's insurance?
Q: Was that something that she explained to you?
Q: Okay. Based on your discussions with this lady representing the management company, did you have any understanding at all as to whether or not either you or your mother would be an insured under the apartment building's insurance policy?
A: I don't understand the question.
Q: Okay. Do you remember anything being discussed with the property management lady as to whether the apartment complex's own insurance would cover any of your property?
A: I don't remember.
Q: Okay. Is it fair to say that you had no understanding one way or the other whether you would be insured or qualify as an uninsured person under the apartment complex's property insurance?
A: I don't understand the question.
Q: Okay. Did you have any understanding as to whether or not the apartment complex would have any type of property ...