Unless there is a contract or lease that provides otherwise, a tenant generally is liable to a landlord for negligently damaging the landlord’s property, such as by accidentally starting a fire. But, depending on the language in the landlord’s fire insurance policy, the tenant could end up defending himself against a powerful insurance company rather than the landlord.
Many insurance policies provide for subrogation, meaning that if the insurer pays a claim from the landlord for losses due to a negligently started fire, the rights of the landlord against the wrongdoer are transferred to the insurance company. In effect, the insurance company steps into the shoes of the landlord.
This scenario played out in two recent cases that were consolidated because of their similarity. In one case, a person renting a single-family home caused a fire by leaving a flammable item unattended on an electric stove. In the other case, an apartment tenant accidentally started a fire with candles left burning in the bedroom. In both instances, the insurers had subrogation clauses in the policies taken out by the landlords.
Without success, the tenants argued that they should be treated as co-insureds, and therefore they should not be subject to a lawsuit by the insurers. The court ruled that tenants may well have an insurable interest in the leased premises, but they are on their own in terms of liability, unless a contract provides otherwise. The court reasoned that allowing an insurance company to sue a tenant avoids a double recovery by the landlord (from the insurer and the tenant), and it prevents culpable tenants from evading responsibility for their conduct.