Opinion ID: 2081428
Heading Depth: 1
Heading Rank: 2

Heading: Rausch

Text: In January, 1999, John Dunlop purchased 5037 Netherstone Court, in Columbia, as a piece of rental property. The property was a single-family dwelling. In September, 1999, he appointed American Relo Realty, Inc. to manage the property. The agreement between Dunlop and American Relo required Dunlop to maintain fire insurance for damage that might arise from the occupancy or management of the house. In March, 2000, American Relo leased the property to the Rausches, for a period of six months, at a rental of $1,500/month. Included in the written lease were provisions that: (1) Prohibited the tenants from doing anything on the property in contravention of any hazard insurance policy in force or which would increase the premium on such a policy; (2) Required the tenants to indemnify the owner for any liability for injury, death, property damage, or other loss arising within those portions of the property within the exclusive control of the tenants or occasioned by any act or omission of the tenants; (3) Required the tenants to surrender the property at the end of the lease in the same condition as when received, ordinary wear and tear excepted; (4) Declared, with respect to the portions of the property within the exclusive control of the tenants, that the owner was not responsible for any loss or damage to goods or chattels placed in the property or for personal injury to the tenants and that it was the responsibility of the tenants to obtain and pay the costs of any insurance to protect Tenant from loss or damage to Tenant's personal property placed on, in or about the Property, and to maintain adequate personal liability insurance. (Emphasis added); (5) Declared that, if the property were rendered totally uninhabitable by fire or certain other causes, or if the property were partially damaged and the owner elected not to repair the damage, the tenancy would immediately terminate and all rent would cease as of the date of the occurrence; and (6) Made the tenants responsible for any and all damages to the Property caused by any act of negligence of Tenant or other residents of the property as well as for the cost of all repairs, replacements, and related services if the need for the same resulted from the negligence or misuse by the tenants. Although Item (4) above clearly required the Rausches to maintain adequate personal liability insurance and insurance to protect their property, and Item (1) anticipated that the owner would likely have a fire insurance policy of his own in force, nothing in the lease itself required the owner to maintain such insurance, and there is no indication that the tenants were aware of that requirement in the management agreement. The owner, in fact, purchased a fire insurance policy from Allstate Insurance Company that remained in force during the tenancy. On April 12, 2000, Ms. Rausch caused a fire in the property by leaving a flammable item on the rear burner of the electric range that had been turned to high and then leaving the house. The fire caused nearly $152,000 in damage. Allstate paid $138,000 to Dunlop. [1] The Allstate policy contained a subrogation clause, which provided that (1) if Allstate paid any loss, the insured person's rights to recover from anyone else become ours up to the amount we have paid, (2) the insured person must protect these rights and help us enforce them, but (3) the insured could waive your rights to recover against another person for loss involving the property covered by this policy if the waiver was in writing and was given prior to the date of loss. There is no indication that Dunlop directly made such a waiver. Exercising its rights as subrogee, Allstate sued the Rausches in U.S. District Court to recover the $138,000 it had paid to Dunlop. The complaint alleged both negligence and breach of contract. The Rausches moved for summary judgment, arguing that the law prohibited subrogation actions by a landlord's insurer against the landlord's tenants on the ground that the tenants were regarded as implied co-insureds. Both sides acknowledged that, although there were cases on the issue around the country, this Court had never addressed it. Because it was an unanswered question in Maryland, the court, invoking the Maryland Uniform Certification of Questions of Law Act (Maryland Code, § 12-601 through 12-613 of the Cts. & Jud. Proc. Article) (CJP) and Maryland Rule 8-305, certified the following two questions: (1) Does Maryland law recognize the doctrine of `implied co-insureds' so that a tenant is an implied co-insured of the landlord? (2) If so, is Allstate barred from bringing the instant subrogation action against tenants of its insured? We shall address those questions as framed by the court, but, because theories other than implied co-insured have been used by courts to preclude subrogation actions against tenants, we shall, in our response, take account of those theories as well. The statute does permit this Court to reformulate the certified questions so long as our answer properly disposes of the questions as certified. See CJP § 12-604; also Mardirossian v. Paul Revere Life, 376 Md. 640, 647 n. 4, 831 A.2d 60, 64 n. 4 (2003) (citing Piselli v. 75th Street Medical, 371 Md. 188, 202 n. 4, 808 A.2d 508, 516 n. 4 (2002)).