In general, when a “Bad Guy” causes damage to your property and your own insurance company pays for it, that insurance company will often sue the Bad Guy to get their money back. That helps keep your rates lower, and helps to ensure the actual Bad Guy is paying for the damage he caused. But, that is not always the case when the Bad Guy is your tenant; unless you have very clear language about it in the lease agreement.
In Nebraska, there is a legal doctrine that prevents an insurance company in most cases from bringing a lawsuit against its own insured to recover money it paid out under the insurance policy. Particularly regarding damage by a tenant to property owned by the landlord, the Nebraska courts have ruled that the landlord’s insurance company cannot sue the tenant for damage to the property caused by the tenant. (See Tri-Par v. Sousa, 269 Neb. 199 (2004)).
In the Tri-Par case, the tenant caused a fire which burned the landlord’s home. The Nebraska Supreme Court ruled that the tenant was considered a “co-tenant” under the landlord’s fire insurance, and that the insurance company could therefore not bring a lawsuit against the tenant. The court gave several rationale, such as that the tenant was basically the one paying the premiums for the fire insurance, by paying his rent.
In particular, the court said that the insurance company cannot sue the tenant unless there is an “express agreement” between the landlord and tenant. Basically, the lease agreement must be super-clear that that the tenant could be responsible and is not a co-insured with the landlord, thereby giving the tenant a chance to get their own insurance on the property.
We should learn from the Tri-Par case that landlords should explicitly write into their lease agreements that the tenant is not a co-insured with the property owner on the property owner’s insurance policy. This will help shift the responsibility back to the Bad Guy for any damage to the property caused by the Bad Guy’s own negligence.
If you are preparing a lease agreement or other contract, or if you have a dispute over such documents, contact the experienced attorneys at Goosmann Law Firm, PLC, in our Sioux City, Sioux Falls, and Omaha offices.