When should a tenant benefit from a landlord’s insurance?
The recent case of Fresca-Judd v Golovina (QBD, 5 February 2016) provides food for thought for anyone concerned with the rental of residential property – and those who insure it.
In the case, the tenant (G) took an 18-month lease of a cottage in Wiltshire. The tenancy contained a covenant requiring the landlord (F) to insure, and specifically required G to leave the heating on if vacating the cottage during the winter months.
G moved in shortly before Christmas, but after the festive period she returned to London. During her absence, the property was found to have suffered extensive flood damage.
It was alleged this had been caused by G turning off the heating, causing water in the pipes to freeze and crack the pipes. F was compensated in full by her insurers, who then started proceedings in her name in the exercise of their rights of subrogation.
G denied liability on the facts. But she also argued that, on a proper construction of the lease, F had been required to insure for the joint benefit of both herself and G, and that she was required to look to insurers rather than to G for compensation.
In the exercise of their subrogated rights, insurers could be in no better position than F and were thus precluded from bringing a claim.
Mr Justice Holgate acceded to this argument. He concluded that the presence of a covenant on the part of a landlord to insure tended to indicate that the tenant did not need to take out their own insurance, and would not be liable for damages in the event that an insurance claim by the landlord was met.
In reaching this conclusion, the judge applied principles that have long been recognised in the context of commercial lettings (see, for example, Mark Rowlands v Berni Inns  1 QB 211), but which had not previously been considered in the residential sphere.
Consistently with Rowlands and other commercial cases, he held that the presumption of joint benefit was not automatic, but would be strengthened by covenants that, for example, the tenant contribute to the premium, or would be relieved of liabilities in the event that an insured event rendered the property uninhabitable. Such covenants were present, to a limited extent, in the case before him.
Ms Golovina was also absolved of liability on the facts. But it is the ruling on this legal point which will attract the more attention, since it will provide encouragement to tenants who negligently allow rental property to become damaged. It means that where an insurance claim is paid out, there will usually be no further comeback against the tenant, either on the part of the landlord or his or her insurers.
Tenants’ celebrations should, however, be muted. The immediate effect of this decision is that it will diminish the value of insurers’ rights of subrogation, and the inevitable knock-on effect of that is likely to take the form of increased premiums. Such increases are, of course, then likely to be passed on by landlords in the rents they charge.
Andrew Butler is a barrister at Tanfield Chambers