Jayme Hans v. Penny Lucas
270 Neb. 421 (2005)
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Rule of Law:
When a real estate purchase agreement expressly requires the seller to maintain fire insurance on the property until closing, the buyer is considered an implied co-insured. Consequently, the insurer is barred by the anti-subrogation rule from suing the buyer for negligently causing fire damage, as an insurer cannot subrogate against its own insured.
Facts:
- On January 20, 2003, Penny Lucas executed a purchase agreement to buy a home owned by Jayme Hans.
- The parties signed an addendum allowing Lucas to live in the house before closing in exchange for a daily fee.
- The addendum stipulated that Hans would 'maintain fire and extended coverage on subject property' and urged Lucas to procure insurance for her personal property.
- Hans maintained her homeowner's insurance policy, and Lucas obtained a renter's insurance policy.
- On March 5, 2003, while occupying the home, Lucas started a fire while cooking french fries on the stove.
- The fire caused $24,683.13 in damages to the residence.
Procedural Posture:
- Jayme Hans, on behalf of her insurer, filed a subrogation action against Penny Lucas in district court.
- The complaint alleged negligence, unjust enrichment, and breach of contract.
- Both Hans and Lucas filed motions for summary judgment based on a stipulation of facts.
- The district court granted summary judgment in favor of Lucas and dismissed Hans's motion.
- Hans, the appellant, appealed the district court's judgment to the state's highest court.
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Issue:
Does a provision in a real estate purchase agreement requiring the seller to maintain fire insurance on the property preclude the seller's insurer from bringing a subrogation claim against the buyer for negligently causing a fire before closing?
Opinions:
Majority - Hendry, C.J.
No. A purchase agreement provision requiring the seller to maintain fire insurance on the property precludes the seller's insurer from bringing a subrogation action against the buyer for negligently causing a fire. The court's reasoning is that the specific contractual provision allocating the risk of loss overrides the general common law doctrine of equitable conversion. By expressly agreeing to maintain fire insurance, Hans assumed the risk of loss by fire for the benefit of both herself and Lucas. This agreement effectively makes Lucas an 'implied co-insured' on Hans's policy for the limited purpose of defeating a subrogation claim. A fundamental principle of insurance law, the anti-subrogation rule, prohibits an insurer from recovering from its own insured for a loss it was contracted to cover, even if the insured's negligence caused the loss. Therefore, Hans's insurer cannot sue Lucas for the damages.
Analysis:
This decision solidifies the principle that specific contractual terms allocating risk will triumph over default common law doctrines like equitable conversion. It expands the 'implied co-insured' doctrine to the context of a buyer occupying a home pre-closing, preventing insurers from pursuing subrogation claims against parties who were the intended beneficiaries of a contractually required insurance policy. The ruling underscores that courts will enforce the reasonable expectations of contracting parties, holding that an agreement to provide insurance protects both parties with an insurable interest. This creates a clear precedent limiting subrogation rights where a contract has already assigned the responsibility to insure against a specific peril.
