Court Extends Liability Protection To Tenant As ‘Co-insured’ For Property Coverage

November 30, 2021 / Writing and Speaking

By Don R. Sampen, published, Chicago Daily Law Bulletin, November 24, 2021

The 3rd District Appellate Court recently held that tenants on property for which the landlord purchased insurance were not only co-insureds for purposes of property coverage, but also entitled to defense coverage when sued on a contribution claim.

The case is Sheckler v. Auto-Owners Insurance Co., 2021 IL App (3d) 190500 (October 22). The tenants, Monroe and Dorothy Sheckler, were represented by the Law Office of Mark Wertz P.C. of Pekin. The Brooks Law Firm P.C., of Rock Island represented the insurer, Auto-Owners.

The Shecklers rented an apartment in Pekin from Ronald McIntosh. The lease provided that McIntosh would maintain fire and other hazard insurance on the premises only, and that the Shecklers were responsible for any coverage they desired on their possessions. McIntosh obtained property and liability coverage from Auto-Owners, with McIntosh and his wife as the only named insureds.

During a visit to the apartment by a stove repairman, Wayne Workman, Workman left temporarily to find replacement parts, and the Shecklers began smelling gas. Apparently to deal with the smell, the Shecklers turned on the stove, and the stove burst into flames, resulting in damage to the apartment.

Auto-Owners paid for the damage, and filed a subrogation action against Workman. Workman then filed a contribution action against the Shecklers. The Shecklers tendered to Auto-Owners, which declined to provide them a defense. The Shecklers then filed this declaratory action against Auto-Owners, Workman and McIntosh, and Workman counterclaimed against Auto-Owners seeking coverage for the Shecklers.

Following cross summary judgment motions, the trial court found that Auto-Owners did not owe the Shecklers a defense obligation, and entered summary judgment in its favor. The Shecklers and Workman both appealed. During pendency of the appeal, a jury found in favor of Workman on the subrogation action brought by Auto-Owners, and he withdrew his appeal. That left only the Shecklers’ appeal.


In an opinion by Justice Daniel L. Schmidt, the 3rd District reversed. He began with the proposition that, under Dix Mutual Insurance Co. v. LaFramboise, 149 Ill.2d 314 (1992), and absent lease or policy language to the contrary, a tenant may become a co-insured under a landlord’s insurance policy.

The tenant became a co-insured where, as here, the lease did not impose liability for damage to the premises on the tenant, the landlord paid for the insurance from rental payments, and an inference could otherwise arise that the lease did not intend to hold the tenant responsible for the damage. An insurer, moreover, under Dix, has no right of subrogation against co-insured tenant.

With these principles in mind, Schmidt found that the Shecklers qualified as co-insureds. He then turned the question whether Auto-Owners owed the Shecklers a defense in connection with Workman’s third-party contribution action. Schmidt said it did owe such a defense.

He came to that conclusion in part based on the fact that Auto-Owners’ subrogation action against Workman, grounded in equity, was what led to Workman’s contribution action against the Shecklers. If Auto-Owners pursued its subrogation claim directly against the Shecklers, it would be barred by the principle just noted, namely that an insurer cannot subrogate against its own insured. Schmidt suggested that Auto-Owners should have anticipated Workman’s third-party action.

He then went a step further to say that, as a co-insured, a tenant is owed both a defense and indemnity with respect to a claim for negligently causing fire damage, and it would be inequitable to hold otherwise. This was so, according to Schmidt, even though the language in the liability portion of the policy did not support a duty to defend. Schmidt, in fact, did not review the language in the policy pertaining to a defense obligation at all.

Based on this reasoning, the court reversed and remanded with directions to enter summary judgment in favor of the Shecklers on the duty to defend.

Justice Mary W. McDade dissented, arguing that Dix dealt only with property coverage, and because that case did not give rise to a reasonable expectation that the tenant would have liability protection and a right to a defense.

Key Point

According to this court, a tenant, as co-insured under a landlord’s property insurance policy, may be entitled to a defense by the insurer if the tenant is sued in a third-party contribution action for property damage, regardless what the policy might otherwise say.

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