Court of Appeals of Indiana | Opinion 06A01

- 1708

- CT

- 1969 | March 7, 2018 Page 1 of 10

A TTORNEY FOR A PPELLANT Kevin L. Moyer Moyer Law Firm, P.C. Indianapolis, Indiana A TTORNEY FOR A PPELLEE Richard K. Milam Lebanon, Indiana



### I N T H E 

# COURT OF APPEALS OF INDIANA

Hoosier Insurance Company , Appellant ,
v. 

### Nicole R. Riggs and Michael J. Riggs , Appellee s. March 7, 2018 Court of Appeals Ca se No. 06A01

- 1708

- CT

- 1969 Appea l from the Boone Superior Court The Honorable Matthew C. Kincaid, Judge Trial Court Cause No. 06D01

- 1704

- CT

- 416

Barnes , Judge . 

### Case Summary

[1] Hoosier Insurance Company (“Hoosier”) appeals the trial court’s order of dismissal entered in favor of Nicole R. Riggs and Michael J. Riggs (“the Riggses”). We reverse and remand with instructions

.Court of Appeals of Indiana | Opinion 06A01

- 1708

- CT

- 1969 | March 7, 2018 Page 2 of 10 

### Issue

[2] The sole issue before us is whether the trial court erred in dismissing Hoosier’s subrogation claim because Hoosier was not a real party in interest for purposes of pursuing a breach of contract claim against the Riggses

. 

### Facts

[3] During the relevant period , Frank and Leah Harker (“the Harkers”) owned real property (“the Premises”) in Lebanon . Th e Premises were insured under an insurance policy underwritten by Hoosier. In Ju ne 2013, t he Harkers leased the Premises to the Riggses pursuant to a written agreeme nt (“Lease”) . Dustin Blevins also resided on the Premises during the Riggses’ lease term

. On April 22, 2015, the Premises sustained $42,497.27 in fire damage after Blevins allegedly left burning incense unattended. The Lease provided, in part, as follow s :
5. Use and Occupancy. [The Riggses] shall use the Leased Premises only for residential purposes and shall comply with all federal, state and local laws and ordinances. [The Riggses] shall commit no waste thereon, and shall deliver the premises to [the Harkers] at the end of the lease term in as good of condition as when the lease commenced, normal wear and tear excepted

. . . .
* * * * *

7. Insurance. [The Riggses are] responsible for obtaining fire and extended coverage, including public liability[ ] insurance with [ t he Harkers] to be listed as an additional insured under the policy. [The Riggses] shall also be responsible for renter’sCourt of Appeals of Indiana | Opinion 06A01

- 1708

- CT

- 1969 | March 7, 2018 Page 3 of 10

coverage on [ t he Riggses ’ ] own pe rsonal property located on the Leased Premises. [The Riggses] shall indemnify and hold [the Harkers] harmless from all claims of thi 9 rd [sic] parties for bodily injury, property damage or death arising from [the Riggses ’ ] use or occupancy of the Leased Pr emises.
App. Vol. II pp. 9

- 10. After the fire, Hoosier paid $42,497.27 to or on behalf of the Harkers for repairs to the Premises.

[4] On April 20, 2017, Hoosier filed a complaint for damages against the Riggses alleging breach of contract. 1 Hoosier alleg ed that the Riggses had materially breached the Lease , causing $42,497.27 in damages. On April 27, 2017, t he Riggses moved to dismiss on Indiana Trial Rule 12(B)(6) grounds, arguing that Hoosier was not a “ landlord ” as defined in Indian a Code Section 32

- 3 1

- 3

- 3 and , therefore , was not a Trial Rule 17(A) “ real party in interest” entitled to
pursue a breach of contract claim against the Riggses

. On May 19, 2017, t he trial court granted the Riggses’ motion to dismiss. Hoosier now appeals. 

### Analysis

[5] Hoosier argues that the trial court erred in granting the motion to dismiss because, by paying damages to or on behalf of the Harkers, Hoosier became subrogated to the Harkers’ landlord rights, including the ir right to seek damages from the Riggses for bre ach of the Lease. The Riggses counter that Hoosier’s subrogation claim was properly dismissed because Hoosier is not a “real party

1 Hoosier also brought a negligence claim against Blevins

.Court of Appeals of Indiana | Opinion 06A01

- 1708

- CT

- 1969 | March 7, 2018 Page 4 of 10

in interest” pursuant to Indiana Trial Rule 17(A), which provides that “[e]very action shall be prosecuted in the name of th e real party in interest.” 2 We restat e the issue before us as follows: When a landlord’s insurer pays insurance benefits to or on behalf of its insured (the landlord), does the landlord’s right to pursue damages for breach of contract from the liable par ty (i.e., a negligent tenant) inure to the insure r , such that the insurer is a “real party in interest” for purposes of pursuing subrogation relief ?

[6] A motion to dis miss under Trial Rule 12(B)(6) tests the lega l sufficiency of the plaintiff’ s clai m, not the facts supporting it. Thornton v. State, 43 N.E.3d 585, 587 (Ind. 2015). Dismissals are improper under Rule 12(B)(6) “unless it appears to a certainty on the face of the complaint that the complaining party is not entitled to any relief.” State v. Am erican Family Voices, Inc., 898 N.E.2d 293, 296 (Ind. 2008) (citations omitted). We review rulings on a Rule 12 ( B )( 6 ) motion to dismiss de novo, with no deference to the trial court’s decision

. Liberty Landowners Ass’n, Inc. v. Porter Cnty. Comm’rs , 913 N.E.2d 1245, 1249 (Ind. Ct. App. 2009); Veolia Water Indianapolis, LLC v. Nat’ l Trust Ins. Co., 3 N.E.3d 1, 4 (Ind. 2014). In reviewing the complaint, we take the alleged facts to be true and consider the allegations in the light most favorable to the

2 A real party in interest is the person who is the true owner of the right sought to be enforced. Hammes v. Brumley, 659 N.E.2d 1021, 1030 (Ind. 1995). He or she is the person who is entitled to the fruits of the action. Id.Court of Appeals of Indiana | Opinion 06A01

- 1708

- CT

- 1969 | March 7, 2018 Page 5 of 10

non moving party, drawing every rea sonable inference in that party’ s favor. Veolia Water Indianapolis, LLC, 3 N.E.3d at 4

- 5.

[7] The equitable doctrine of subrogation “applies whenever a party, not acting as a volunteer, pays the debt of another that, in good con science, should have been paid by the one primarily liable.” Erie Ins. Co. v. George, 681 N.E.2d 183, 186 (Ind. 1997). The ultimate purpose of the doctrine, as with other equitable principles, is to prevent unjust enrichment. Id.
Because subrogation is an equitable remedy, in determining whether an insurer may bring a subrogation action in a particular case, courts must weigh “the principles of equity and good conscience.” RAM Mut. Ins. Co. v. Rohde, 820 N.W.2d 1, 16 (Minn. 2012) (citing Dix Mut. Ins. Co. v. LaFramboise, 149 Ill.2d 314, 173 Ill.Dec. 648, 597 N.E.2d 622, 626 (1992) (explaining that the equities of the case should be considered in addition to examining “the provisions of the lease as a whole [and] the reasonable expe ctations of the parties”)); Am. Family Mut. Ins. Co., 757 N.W.2d at 595 (allowing landlord’ s insurer to maintain a su brogation action against tenant’ s liability insurer after examining the lease and “[c]onsidering the equitable underpinnings of subrogatio n”). When the insurer claims a right through subrogation, it stands in the shoes of the insured and takes no rights other than those which the insured had.
LBM Realty, LLC v. Mannia, 19 N.E.3d 379, 386 (Ind. Ct. App. 2014) (internal citation omitted).

[8] T here are “ three different approaches used by courts across the country to address subrogation claims of landlords’ insurers against negligent tenants ” :Court of Appeals of Indiana | Opinion 06A01

- 1708

- CT

- 1969 | March 7, 2018 Page 6 of 10

(1) the no

- subrogation (or implied co

- insured) approach (i.e., the

“ Sutton rule”), in which, absent an e xpress agreem ent 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 whi ch, absent an express t erm 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 expect ations of the parties under the facts of each case.

Id. at 383 (quoting LBM Realty, LLC v. Mannia, 981 N.E.2d 569, 573 (Ind. Ct. App. 2012)).

[9] The Mannia panel advocated that Indiana should adopt the case

- by

- case approach, “ finding that a tenant’s liability to the landlord’s insurer for damage

causing negligence depends on the reasonable expectations of the parties to the lease as ascertained from the lease as a whole and any other admissible evidence.” 19 N.E.3d at 393

- 94. The panel further reasoned:
Although the case

- by

- case approach is said to provide less predictability than either the pro

- or no - subrogation approaches, we find that this approach best effectuates the intent of the parties by simply enforcing the terms of their lease. In determining the expectations of the parties as articulated in the lease, courts should look for evidence indicating which party agreed to bear the risk of loss for a particular type of damage. For instance, if the lease indicates that th e landlord has agreed to procure insurance covering a particular loss, a court “may properly conclude that, notwithstanding a general ‘surrender in good condition’ or ‘liability for negligence’ clause in the lease,” the landlord and tenant reasonably expec ted “that the landlordCourt of Appeals of Indiana | Opinion 06A01

- 1708

- CT

- 1969 | March 7, 2018 Page 7 of 10

would look only to the policy, and not to the tenant, for compensation for

. . . loss[es] covered by the policy.” Likewise, if a lease obligates a tenant to procure insurance covering a particular type of loss, such a provision will provide evidence that the parties reasonably anticipated that the tenant would be liable for that particular loss, which would allow another insurer who pays the loss to bring a subrogation action against the tenant.

Id . at 394 (internal citations omitt ed)

.

[10] In Mannia , a fire loss occurred to the insured premise s

— a multiunit apa rtment building. T he landlord’s insurer , LBM Realty (“LBM”), paid benefits to or on behalf of its insured and subsequently sought subrogation relief from the
tenant

— Mannia. Mannia moved for summary judgment , which was granted. Although these cases are factually distinguishable in that the insured premises

was a multiunit building, 3 the Mannia panel’s reasoning is apposite.

[11] In analyzing whether Mannia was liable to LBM for negligence

- caused fire damage, the Mannia panel considered the following provisions within the parties’ lease: (1) “ [ LBM ] recommends [Mannia] obtain renter’s insurance”; and (2) “[ Mannia is liable for] any injury or damage don e to the Leased Premises, common areas or any other property of [ LBM ]”

. Id . at 395. The panel also addressed an omission from the lease noting,

3 Mannia provides that “with rega r d to tenants in a multiunit dwelling, . . . absent clear notice

— ideally in th e form of an unambiguous, enfor ceable lease provision

— that a negligent tenant will be held liable for damages to areas of the building beyond the tenant’s leased premises, such liability would not be within the tenant’s reasonable expectations and is therefore barred.” Mannia, 19 N.E.3d at 394 (emphasis in original)

.Court of Appeals of Indiana | Opinion 06A01

- 1708

- CT

- 1969 | March 7, 2018 Page 8 of 10

. . . [T] here is no clear and enforceable lease provision putting Mannia on notice that she would be held lia ble for damage caused by negligence to areas of the multiun it apartment building beyond the leased premises (and should obtain liability insurance to provide for that possibility).

Id

. Lastly, t he panel considered Mannia’s prior deposition testimony tha t : (1) although she was told that LBM had insurance coverage fo r the build ing, she was notified that she was still obligated to obtain renter’s insurance ; and (2) she did not believe , when she executed the lease , that she would be covered under LBM’s insurance policy.

[12] In light of the evidence , as to fire loss to areas beyond the leased premises, the Mannia panel upheld the trial court’s entry of summary judgment in favor of Mannia; h owever, with respect to damage of the leased premises, the panel fo und that the trial court had erred in granting summary judgment in Mannia’s favor . Accordingly, the Mannia panel remanded to the trial court with instructions “to engage in the analysis of the case

- by

- case approach ” as follows : First, that the court shou ld consider the lease and any other relevant and admissible evidence, including . . . the insurance maintained by each party as evidence of each party’s expectations with respect to liability for damage to the leased premises. Second, because subrogation is an equitable remedy, the trial court must also weigh “the principles of equity and good conscience” . . . . In su m, the trial court should analyz e all relevant and admissible evidence in order to determine the parties’ expectations and should weigh and balance the equities of the case

— as well as addressing the issue of Mannia’s negligence

— in order to determine Mannia’s liab i lity for the damage to the leased premises.Court of Appeals of Indiana | Opinion 06A01

- 1708

- CT

- 1969 | March 7, 2018 Page 9 of 10

Id . at 395

- 96 (internal citations omitted).

[13] Applying the case

- by

- case approach to addre ssing subrogation claims of landlords’ insurers against negligent tenants, and upon review of the Lease to determine the parties’ expectations with respect to liability for damage to the Premises, we cannot say that it appears to a certainty on the face of the complaint that Hoosier is not entitled to any relief on the related threshold question s of (1) whether the Lease manifests the parties’ intent regarding the appropriate party to bear the risk of fire loss; and (2) whether the Harkers’ right to pursue damages for breach of contract from the Riggses inures to Hoosier, such that Hoosier is a real party in interest entitled to pursue subrogation relief

. See Mannia , 981 N.E.2d at 394 (“[I]f a lease obligates a tenant to procure insurance covering a particular type of loss, such a provision will provide evidence that the parties reasonably anticipated that the tenant would be liable for that particular loss, which would allow an[ ] ins urer who pays the loss to bring a subrogation action against the tenant.”).

[14] Based upon the foregoing, we reverse the trial court’s judgment dismissing Hoosier’s subrogation claim and remand for further proceedings

. O n remand, the trial court should anal yze the Lease and all other relevant and admissible evidence to determine the parties’ expectations; and weigh and balance the equities

— including the issue of the Riggses’ negligence

— to determine the Riggses ’ liability for the damage to the Premises.Court of Appeals of Indiana | Opinion 06A01

- 1708

- CT

- 1969 | March 7, 2018 Page 10 of 10 

### Con clusion

[15] The trial court erred in dismissing Hoosier’s subrogation claim. We reverse and remand with instructions

.
[16] Reversed and remanded with instructions

. Najam, J., and Mathias, J., concur.