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Does The “Case-By-Case” Approach In Florida Apply Only On A Case-By-Case Basis?

February 10, 2012

The “Anti-Subrogation Rule” dictates that an insurer is generally precluded from seeking recovery against its own insured. While this premise on its face seems simple, a special circumstance arises in the context of damage to leased property caused by a tenant’s negligence, Where “the obvious intent of the parties [to a lease] was to shift the risk of daruages … to an Insurer … [the lessee] qualifies as an intended beneficiary under the Insurance policy;” and therefore, the insurer is prohiblted from subrogating against the lessee.1 However, the lease provisions are commonly unclear, if not contradlctory, as to which party-landlord or tenant-is to bear the risk of a loss to the leased premises, or whether the tenant is considered a “co-insured” under the landlord’s property insurance policy. Most jurisdictions have been presented with these types of cases, and courts have implemented one of three recognized “analytic approaches,” Recently, the Fifth District Court of Appeal of Florida addressed this very issue in Underwriters of Lloyds of London v. Cape Publications, Inc., 2011 WL 2415845 (Fla. 5th DCA 2011).

In Cape Publications, the landlord’s property insurer sought recovery against a tenant for fire damage to leased commercial property. The tenant argued it was a “co-insured” under the landlord’s policy. The tenant relied on the lease provisions that lequired the landlord to purchase a property and casualty insurance policy, including fire coverage, and the agreement that a portion of tenant’s monthly rent was allocated to a pro rata share of the landlord’s Insurance premiums. The subrogating insurer alleged the tenant could not be considered a “co-insured,” however, because the lease contained certain provisions requiring the tenant to obtain gelleral liability insurance, and naming the landlord as an additional insured. Furthermore, the lease also contained an indemnity and hold harmless provision in favor of the landlord, for any damages occasioned by the tenant’s negligence or other wrongful use of the leased premises.

The Fifth District Court of Appeal resolved the issue by adopting the “Case-by-Case Approach,” which had been previously implemented by other Florida appellate courts.2 As opposed to he “Sutton Rule”3 or “Anti-Sutton Rule,” 4 the “Case-by-Case Applroach” avoids any presumption regarding whether a tenant is or is not a co-insured of the landlord. Instead, the Court must review the lease agreement in its entirety to discern the parties’ “reasonable expectations” as to which arty bears the risk of a loss occasioned by the tenant’s negligent acts.

The Court in Cape Publications determined that the lease provisions requiring the landlord to maintain insurance for fire damage, and applying a portion of the tenant’s rent to pay the premium for such coverage, were more specific than the general terms relied upon by the sirbrogating insurer (i.e., the agreement that the tenant would maintain general liability insurance, and the indemnification/hold harmless proviSions). Accordingly, the Court ruled the tenant was a “co-insured” under the landlord’s insurance policy,  and thus, the insurer was prohibited from maintaining its subrogated action. While the Court’s ruling is consistent with the earlier Florida decisions,5 certain footnotes contained in the Cape Publications’ decision leave the door open for Florida courts to consider alternative analyses, other than the “Case-by-Case Approach,” when evaluating these types of cases. First, the Cape Publications Court adopted the “Case-by-Case Approach” in  this particular instance because it presumed the parties had equal bargaining power due to the “commercial nature” of the lease.6 This certainly calls into question whether an alternative approach would be implemented in the case of a residential lease, or where it is apparent that the parties did not have commensurate negotiating power. Also, the Court noted that an earlier Florida appellate decision appeared to be supported by the application of the “Anti-Sutton Rule,” despite the fact that the earlier decision purported to adopt the “Case-by-Case Approach”.7 These seemingly inconspicuous footnotes further emphasize the fact that the Supreme Court of Florida has not yet ruled on this issue; and, although recent appellate decisions in Florida are consistent, room remains for arguments advocating for alternative approaches.


  1.    US Fire Ins Co. vs Norlin Induc, Inc., 428 Sp 2d 325, 326 (Fla 1st DCA 1983)
  2.     See Continental Ins Co. v. Kennerson, 61 So 2d 325 (Fla 1st DCA 1995), State Farm Florida Ins Co. v. Loo, 27 So 3d 747 (FLA 3d DCA 2010)
  3. See Sutton v. Jondahl, 352 P 3d 478 (Okla App 175) (a tenant is presumed to be a co-insured under the landlord’s fire policy absent any express agreement otherwise in the lease agreement).
  4. See Fire Ins. Exchange v. Geekie, 534 N E 2d 1061 (Ill App Ct 1989)(a landlords insurer may maintain a subrogated action against a negligent tenant who causes fire damage, unless the parties expressly agree otherwise.
  5. See footnote 2. supra
  6. Cape Pulications, Inc. 2011 WL 2415845 at FN5
  7. Id at FN 6