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The Sutton Rule: Court of Appeals of Tennessee Clarifies Insurer Subrogation Rights Against Tenants

The Court of Appeals of Tennessee recently held that a lawsuit brought in the name of a landlord by their insurance carrier was actually a subrogation lawsuit, and affirmed the tenant’s motion for summary judgment based on the Sutton Doctrine. The case stemmed from a 2019 fire at the leased premises caused by the tenant’s cat, playing with a ribbon near a candle. The landlord’s property insurer paid for the damage but filed suit for $150,000, fees, and costs against the tenant, naming only the landlord as the plaintiff. Despite the landlord’s objections based on the collateral source rule, discovery revealed that the lawsuit was actually a subrogation suit by the landlord’s insurer.

The tenant moved for summary judgment, arguing that under Tennessee law, even though the lease agreement did not reference insurance, the tenant was an implied co-insured under the landlord’s policy, which barred the landlord’s insurer from subrogating against the tenant.

The Sutton Doctrine, derived from a 1975 Oklahoma decision, represents the modern view of subrogation in landlord/tenant law. See Sutton v. Jondahl, 532 P.2d 478 (Okla. App. 1975). Tennessee adopted the Sutton Doctrine in Dattell Family Ltd. Partnership v. Wintz, 250 S.W.3d 883 (Tenn. Ct. App. 2007). The Sutton Doctrine provides that absent a clearly expressed agreement to the contrary, the tenant is presumed to be a co-insured on the landlord’s insurance policy, and therefore the landlord’s insurance carrier has no right of subrogation against a negligent tenant.

The Court of Appeals upheld the application of the Sutton Rule because the lease was silent regarding whether the tenant was to be considered a co-insured on the landlord’s property policy and was silent as to the obligation of either party to obtain property coverage.

The court also held that the collateral source rule is inapplicable when the evidence of insurance is introduced to establish that an insurer is improperly subrogating against a co-insured. To rule otherwise would allow a carrier to subrogate against a co-insured simply by filing in the name of the insured and objecting to discovery regarding insurance coverage.

The lesson here is that absent an express agreement, Tennessee tenants are presumed to be co-insureds of the landlord. The Sutton Rule prohibits a landlord’s carrier from subrogating against a tenant without an express provision in the lease stating that the tenant is not a co-insured on the policy, even if the lease explicitly holds the tenant responsible for damage caused by her negligence. And, a subrogating carrier cannot avoid the Sutton Doctrine simply by filing in the name of the insured.

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