Donegal Insurance Group v. Thangavel ( 2022 )

SUPERIOR COURT
OF THE
STATE OF DELAWARE
Sussex County Courthouse
ROBERT H. ROBINSON, JR. 1 The Circle, Suite 2
JUDGE Georgetown, DE 19947
Telephone: (302) 856-5264
Submitted: June 15, 2022
Decided: September 15, 2022
Robert C. McDonald, Esquire Marissa D. White, Esquire
Jeffrey S. Friedman, Esquire Wade A. Adams, III, Esquire
Silverman, McDonald & Friedman Law Offices of Wade A. Adams, III
1010 North Bancroft Parkway, Ste. 22 Christiana Executive Campus
Wilmington, Delaware 19805 111 Continental Drive, Suite 309
Attorneys for Plaintiff Newark, Delaware 19713
Attorneys for Defendants
Mark H. Riesenfeld, Esquire
Smith & Cohen Law Group
1528 Walnut Street, Suite 400
Philadelphia, Pennsylvania 19102
Attorneys pro hac vice for Plaintiff
Re: Donegal Insurance Group v. Sathiyaselvam Thangavel and Sasikala
Muthusamy
C.A. No.: S21C-08-013 RHR
Dear Counsel:
Defendants Sathiyaselvam Thangavel and Sasikala Muthusamy (collectively
“Defendants”) were lessees of an apartment owned and managed by Seaford
Apartment Ventures, LLC (“Seaford Apartments”). On December 28, 2019, a fire
suppression sprinkler was activated in Defendants’ apartment—allegedly after a
drone aircraft they were operating inside the apartment damaged the sprinkler—that
caused extensive water damage. Seaford Apartments filed a claim with its insurance
company, Donegal Insurance Group (“Donegal” or “Plaintiff”), which paid
$77,704.06 to repair the damage. Donegal filed this complaint, as subrogee of
Seaford Apartments, against Defendants, seeking to recover the cost of the repairs.
Defendants have moved for summary judgment. For the following reasons, the
motion for summary judgment is GRANTED.
A. The Parties’ Contentions
Defendants argue that they are entitled to summary judgment under the
Delaware Superior Court’s holding in Lexington Insurance Company v. Raboin,1
which adopted the reasoning of Sutton v. Jondahl.2 Sutton and Lexington hold that
insurance obtained by a landlord is for the mutual benefit of the landlord and tenant,
and that therefore the parties should be considered co-insureds. Unless there is an
express agreement or provision in the lease that would place liability on the tenant,
the landlord’s insurance carrier cannot obtain subrogation against the tenant
(commonly referred to as the “Sutton Rule.”)3
Plaintiff contends that the Sutton Rule does not apply to the present case.
Plaintiff argues that the lease between the Defendants and Seaford Apartments (the
“Lease”) constitutes an express agreement between Seaford Apartments and
1
712 A.2d 1011 (Del. Super. Ct. 1998).
2
532 P.2d 478 (Okla. Civ. App. 1975).
3
Deloach v. Houser, 2018 WL 5899080, at *2 (Del. Super. Ct. Nov. 9, 2018).
2
Defendants that makes Defendants liable under the Lease. Plaintiff cites to the
following provision:
12. NO LIABILITY FOR LOSS OR DAMAGE TO TENANTS’ PERSONS
OR PROPERTY; INDEMNITY TO LANDLORD.
(a) Tenants agree to be solely responsible for all loss or damages to
Tenants or their property or to any other person which may be situated
in the Rental Unit and storage area; gross negligence of Landlord, its
servant, agents or employees excepted; In addition, Tenants agree to
indemnify and save Landlord harmless from any and all loss occasioned
by the tenant’s breach of any of the covenants, terms and conditions of
the Agreement, or caused by the tenant(s) family, guests, visitors,
agents or employees. See § 5309.
(b) Tenant agrees to procure and maintain adequate content and liability
insurance in an amount not less than $300,000.00 to afford protection
against the risks herein assumed….4
The Court requested further argument from the parties as to their interpretation of
another provision in the Lease:
29. TENANT RESPONSIBLE FOR DAMAGES.
Tenant by accepting this agreement covenants and agrees that tenant
will be responsible for all damages accidentally, maliciously,
intentionally, or negligently caused by the tenant, tenant’s family,
guests or invitees to any of the property of the landlord. 5
Plaintiff argues this provision further supports its position. Finally, Plaintiff argues
that, at the very least, the Lease’s language creates ambiguity and a question of fact
that precludes the entry of summary judgment.
4
Defs.’ Mot. Summ. J. Ex. A (the “Lease”).
5
Id.
3
B. Standard of Review
Summary judgment may be granted only if, when viewing the facts in the light
most favorable to the non-moving party, there is no genuine issue of fact and the
moving party is entitled to relief as a matter of law.6 When considering a motion for
summary judgment, the Court’s role is to examine the record to determine whether
genuine issues of material fact exist “but not to decide such issues.”7 This Court
“will accept as established all undisputed factual assertions, made by either party,
and accept the non-movant’s version of any disputed facts.”8 “The proper
construction of any contract … is purely a question of law.”9 Delaware courts adhere
“to an objective theory of contracts, the contract’s construction should be that which
would be understood by an objective, reasonable third party.”10 Summary judgment
is appropriate in contract disputes where the language at issue is clear and
unambiguous and not subject to multiple interpretations.11 Ambiguity exists only if
the disputed language is “fairly or reasonably susceptible to more than one
6
Moore v. Sizemore, 405 A.2d 679 (Del. 1979); Super. Ct. Civ. R. 56.
7
Merrill v. Crothall-Am., Inc., 606 A.2d 96, 99-100 (Del. 1992).
8
Id.9
Rhone-Poulenc Basic Chemicals Co. v. Am. Motorists Ins. Co., 616 A.2d 1192, 1195 (Del. 1992).
10
Leaf Invenergy Co. v. Invenergy Renewables LLC, 210 A.3d 688, 696 (Del. 2019); see also
GMG Cap. Inv., LLC v. Athenian Venture P’rs I, L.P., 36 A.3d 776, 780 (Del. 2012) (“Contract
terms themselves will be controlling when they establish the parties’ common meaning so that a
reasonable person in the position of either party would have no expectations inconsistent with the
contract language”).
11
GMG Cap. Inv., LLC, 36 A.3d at 783.
4
meaning.”12 The Court’s function in construing a lease is to ascertain and give effect
to the mutual intention of the parties as manifested by its terms.13 As with all
contracts, this Court should give effect to all of its provisions if possible.14
C. Discussion
I find that the language in Paragraphs 12 and 29 of the Lease is substantially
the same as the language of the leases considered in Lexington,15 Deloach v.
Houser,16 and State Farm Fire & Casualty Company v. Lambert.17 In each of these
cases, the trial court rejected the insurer’s argument that the lease contained an
express agreement placing liability for damage on the tenant and found that the
Sutton Rule controls.
In the present matter, the Lease must be considered in its entirety and
particular provisions should not be considered in isolation. As in Lexington, the
12
Alta Berkeley VI C.V. v. Omneon, Inc., 41 A.3d 381, 385 (Del. 2012).
13
Schwartzman v. Weiner, 319 A.2d 48, 51–52 (Del. Super. Ct. 1974).
14
Roffman v. Wilm. Hous. Auth., 179 A.2d 99, 102 (Del. 1962).
15
The court quoted the lease as follows: “Resident agrees to indemnify and save Owner harmless
from any and all loss occasioned by Resident’s breach of the covenants, terms and conditions of
this general agreement or caused by his family, guests, visitors, agents or employees. Resident is
required to furnish insurance coverage on all personal property within the leased premises and
public areas of this community, at the expense of the Resident.” 712 A.2d 1011, 1013 (Del. Super.
Ct. 1998).
16
“To distinguish the Lexington holding, [Plaintiff] directs the Court to 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 his relatives or guests.” 2018 WL 5899080, at *1 (Del. Super. Ct. Nov. 9, 2018).
17
The court noted the following language in the lease: “[T]he tenant will be responsible for
damages to the unit and premises, other than normal wear and tear” and “repair of tenant-caused
damages must be completed by the owner at the expense of the tenant.” 2017 WL 5593784, at *3
(D. Del. Nov. 21, 2017).
5
Lease contemplates an allocation of risk between the landlord and tenant. The Lease
requires the tenant to pay a security deposit and to obtain and maintain insurance for
personal property and liability of at least $300,000.00. In Lexington, the Superior
Court expressly addressed whether a tenant is an implied co-insured under the
landlord’s fire insurance policy for purposes of a subrogation action by the
landlord’s insurance carrier against a residential tenant.18 The Superior Court
determined that, absent some clearly expressed intent in the lease to the contrary,
tenants are considered co-insureds for the purposes of preventing subrogation even
where the tenant’s alleged negligent conduct caused the loss.19 There is no ambiguity
in the language of the Lease.
I note that the important policy considerations underlying the Sutton Rule
apply in the present case. For example, the Lexington decision referenced the
landlord’s “generally dominant relationship over the residential tenant, the typical
assignment of risk of loss for fire, the practical effect that rental payments contribute
to the cost of the landlord’s fire insurance premiums, the mutual benefits derived by
the parties from dividing respective liabilities, and the efficiency of not carrying
duplicative insurance coverage on the same property.”20 Here, the possible damage
caused by fire and water are similar in nature, such that the Sutton Rule can be
18
712 A.2d at 1014.
19
Id. at 1017. See also Deloach, 2018 WL 5899080, at *1.
20
712 A.2d at 1016.
6
extended to water damage. Those policy considerations are echoed in Deloach,
where the Superior Court noted the following important policy considerations: “each
tenant cannot reasonably be expected to purchase their own insurance for damage to
a multi-million dollar apartment complex, the tenant’s only insurable interest being
in his own apartment, and landlords are better able to insure the whole premises and
pass the cost of such insurance on to all tenants in rent.”21
I find the language of the Lease in the present case is substantially similar to
the language of the leases in Lexington, Deloach, and Lambert, and that the Sutton
Rule applies. Plaintiffs have not cited—and cannot cite—to language in the Lease
that differentiates this Lease from the leases in similar Delaware cases. Therefore,
Defendants’ Motion for Summary Judgment is GRANTED.
IT IS SO ORDERED.
Sincerely,
Robert H. Robinson, Jr.
Judge
21
2018 WL 5899080, at *1.
7