Wade Clark Mulcahy LLP

In Mutual Benefit Insurance Company et al v. Courtney Koser and Mickael Abels, the Superior Court of Pennsylvania considered whether a tenant’s “reasonable expectations” for coverage under a landlord’s homeowners’ insurance policy superseded Mutual Benefit Insurance Company’s (“Mutual Benefit”) claim for subrogation. See 2023 WL 8360563, Pa. Super. 252 (Dec. 4, 2023).

In August 2023, tenants living in an apartment negligently caused fire damage to the building after leaving a candle burning unattended. Id. at *1. The building’s landlord was insured by a homeowners’ insurance policy issued by Mutual Benefit (the “Policy”), which covered the landlord’s damages. Id. Thereafter, Mutual Benefit filed a subrogation action against the tenants to recover the damages. Id. 

The tenants argued the apartment lease created a reasonable expectation of implied co-insured status under the Policy for damage to property owned by the landlord, precluding Mutual Benefit from pursuing a subrogation remedy. Id. at *2. Mutual Benefit disputed this interpretation, citing several lease provisions purportedly holding the tenants responsible for such property damage. Id. 

The Court reviewed these provisions, ultimately rejecting Mutual Benefit’s arguments in favor of the tenants’ “reasonable expectations” of coverage. The Court first concluded that although several lease provisions required the tenants to assume responsibility for property damage, these provisions did not obligate the tenants to procure liability insurance for damage to the property itself. Id. at *11. Rather, the provisions differentiated between the tenants’ obligation to insure their personal property in the apartment and the landlord’s obligation to insure his personal property and the property itself. Id. 

The Court then inquired whether the tenants could “reasonably expect” that the landlord would only seek coverage for fire damage from the Policy and not the tenants. Id. Relying on precedent, the Court concluded that absent a contrary agreement, the tenants could reasonably expect that the landlord’s agreement to maintain insurance for damage to the property afforded coverage—even for the tenants’ negligent acts causing fire damage. Id. at *12. Therefore, the Court held the tenants were entitled to additional co-insured status under the Policy. Id.  

The Mutual Benefit decision reflects Pennsylvania courts’ willingness to defer to a tenant’s “reasonable expectations” of coverage, even where a lease’s provisions appear to impose liability for property damage on the tenants. PA insurers should therefore be wary of lease provisions differentiating between the landlord and tenant’s insurance obligations for property damage, as the distinction may preclude subrogation.