Following Stove Fire, Co-insured Tenant Denied Coverage for Contribution Claim

January 3, 2023 / Writing and Speaking

By Don R. Sampen, published, Chicago Daily Law Bulletin, January 3, 2022

The Illinois Supreme Court recently limited the application of a 1992 decision of the court that deemed a tenant to be a co-insured under a landlord’s fire insurance policy. Reversing the appellate court, the Supreme Court’s new decision holds that the tenant’s co-insured status does not obligate the insurer to provide a defense in a contribution action against the tenant.

The case is Sheckler v. Auto-Owners Insurance Co., 2022 IL 128012 (Nov. 28). The tenants, Monroe and Dorothy Sheckler, were represented by Statham & Long LLC of Galesburg. Dinsmore & Shohl LLP of Chicago represented in the insurer, Auto-Owners.

The Shecklers rented residential property from Ronald McIntosh in Pekin. The lease agreement provided that McIntosh would provide fire insurance on the premises and the Shecklers would be responsible for any insurance on their own personal property.

McIntosh procured first-party property coverage from Auto-Owners, under a policy that also provided him third-party liability coverage. The policy listed only McIntosh and his wife as named insureds.

As the result of a gas leak in the stove and range in the Shecklers’ unit, a service technician came to inspect. When the technician temporarily left, one of the Shecklers turned on the stove, causing a fire that resulted in substantial property damage.

Auto-Owners paid to restore the property and then brought a subrogation action against the technician. The technician then filed a third-party contribution action against the Shecklers, who tendered to Auto-Owners. The insurer declined to defend.

The Shecklers subsequently filed a declaratory action against Auto-Owners seeking a determination that it had a duty to defend and indemnify them in the contribution action. The service technician, who was named a defendant in the declaratory action, filed a counterclaim against Auto-Owners likewise seeking coverage on behalf of the Shecklers.

After analyzing Dix Mutual Insurance Co. v. LaFramboise, 149 Ill. 2d 314 (1992), the circuit court found in favor of Auto-Owners. In that case, the Supreme Court found that a tenant was a co-insured under the landlord’s property insurance policy even though not identified as such. As a co-insured, moreover, Dix held that the insurer paying the property loss could not subrogate against the tenant, because an insurer cannot subrogate against its own insured.

Hence, because the Shecklers were not being sued for subrogation, the circuit court found Dix inapplicable and held in favor of Auto-Owners.

On appeal to the 3rd District, the appellate court reversed. It said that, according to Dix, the Shecklers were co-insureds under McIntosh’s policy. The appellate court then held that an equitable extension of Dix required Auto-Owners to defend and indemnify the Shecklers in the contribution action by the technician. Auto Owners sought and was granted leave to appeal to the Supreme Court.


In an opinion by Justice Lisa Holder White, the Supreme Court reversed. She wrote that Dix found the tenant in that case to be a co-insured in part by construing the parties’ intention under the lease as exculpating the tenant for fire damage and requiring the landlord to look solely to the insurance policy for compensation for fire damage.

Because the tenant was a co-insured, moreover, White agreed that Dix applied the well-settled principle that an insurer has no subrogation right against its own insured. The insurer in that case therefore could not recover against the tenant on a subrogation theory.

In the instant case, by contrast, while Auto-Owners had sued the technician on a subrogation theory, the technician’s third-party action against the Shecklers was based on contribution, not subrogation. White therefore found Dix to be irrelevant.

In addition, White observed that the Auto-Owners policy did not identify the Sheklers as insureds and the liability portion of the policy covered only claims brought against an insured. Under the policy terms, moreover, even for an insured, an exclusion barred coverage for damage to property occupied or used by the insured.

The Supreme Court therefore concluded that Auto-Owners had no duty to defend or indemnify the Shecklers, and it reversed the appellate court and affirmed the decision of the circuit court.

Key Point

An insurer’s duty to defend or indemnify does not extend to the tenants of insured property against a third-party negligence contribution claim when the tenants are not identified as insureds under the policy.

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