United States District Court, D. Vermont
OPINION AND ORDER (DOCS. 67, 89, 97)
JOHN M. CONROY, Magistrate Judge.
This diversity action stems from an April 2012 fire that destroyed a garage and dwelling on property that Plaintiffs David Bisson and Suzanne Brosseau (the "Bissons") were leasing to Defendants Alycia Horn (now Alycia Reppel) and Jeremy Reppel (the "Reppels"). According to the Amended Complaint, the Reppels had allowed Defendant Joseph Yared to reside at the property in violation of the lease, and the fire was caused by Yared's attempt to charge a car battery in the garage. (Doc. 36 at 3-4.) The Bissons allege that Yared had left the charger attached overnight. (Id. at 3.)
Previously in this case, the Court dismissed the Bissons' negligence and negligent-supervision claims against the Reppels. (Doc. 21.) The remaining claims are the Bissons' negligence claim against Yared, and their breach-of-contract claim against the Reppels. In an April 2, 2014 ruling (Doc. 35), the Court granted the Bissons' Motion to amend their contract claim, and the Bissons thereafter filed an Amended Complaint that includes an express contractual-indemnification claim against the Reppels (Doc. 36). Defendants filed Answers to the Amended Complaint, asserting-among other things- the defenses of failure to mitigate damages, setoff, and the implied-coinsured doctrine. (Doc. 42 at 5; Doc. 48 at 5.)
Several motions are currently pending in this case. The Bissons have filed a Motion in Limine re: Evidence of Insurance Regarding Fire Loss and Motion to Strike Defendants' Affirmative Defenses re: Setoff and Implied Co-Insured Doctrine (collectively, the "Insurance Motion"). (Doc. 67.) While the Insurance Motion was under advisement, the Reppels filed a Motion for Summary Judgment (Doc. 89). All parties have consented to direct assignment to the undersigned Magistrate Judge. (Docs. 2, 7, 16.) For the reasons stated below, the Bissons' Insurance Motion (Doc. 67) is GRANTED, and the Reppels' Motion for Summary Judgment (Doc. 89) is DENIED.
Except where noted, the following facts are undisputed for present purposes. The Bissons were the owners of a rental property consisting of a two-bedroom dwelling unit and a detached garage located at 118 Rail Road, Colchester, Vermont. The Bissons used the property as a rental property continuously between 2000 and the date of the fire. On April 20, 2011, the Reppels entered into an Agreement of Lease (the "Lease") with the Bissons to rent the property for the period of May 1, 2011 to June 30, 2012.
The ten-page Lease includes the following material terms. The preamble states that "You and Owner admit that all agreements between You and Owner have been written into this lease." (Doc. 90-2 at 2.) Under a "purpose and occupants" clause:
The premises shall be used as a personal residence only, and not otherwise, for a total of 2 occupants. Only the following persons shall be considered tenants of this apartment under this lease: NAME: Alycia Horn and Jeremy Reppel. No other persons may reside at the premises unless approved by Landlord in writing.
(Id. ) The rent was $1, 200 per month. (Id. at 2.) The Lease provides for a $1, 200 security deposit, which the landlord could retain for, among other things, "damage to the property of the Landlord unless the damage is the result of normal wear and tear or the actions or events completely and totally beyond the control of the Tenant." (Id. at 3.)
The Lease includes a provision prohibiting the tenants from doing "anything in or about the premises which might increase the insurance premiums on the building." (Id. at 4.) The Lease also includes a yield-up clause that requires the tenants to "leave the premises, and the improvements therein, in the same conditions as at the commencement of this Lease, reasonable wear and tear is excepted." (Id. ) Other pertinent Lease provisions include the following:
REPAIRS AND MAINTENANCE: Landlord shall be responsible for all repairs and maintenance with respect to the premises except such repairs and maintenance as are caused by the negligent or deliberate act or omission of the tenant or any other person on the premises, and except for such repairs specifically excluded elsewhere in this Lease. Those repairs and maintenance which are the responsibility of the Tenant shall be performed by the Tenant immediately upon demand of the Landlord. Whether such repairs and maintenance are performed by the Tenant or the landlord, the cost of such repairs shall be paid by the Tenant as additional rent....
(Id. at 5.)
FIRE OR CASUALTY DAMAGE: If the premises are substantially damaged or destroyed by fire or other casualty so that [the] premises are largely unusable, Tenant may immediately vacate the premises and notify the Landlord within fourteen days of Tenant's intention to terminate [the] Lease. In such a case, this Lease shall be terminated as of the date that the premises are vacated and all keys are returned.
(Id. at 6.) A clause entitled "tenant property" requires the tenants to protect their personal property with "adequate personal property insurance, " and further provides that the "Landlord shall not be liable for loss of, or damage to Tenant property by reason of leakage of water, gas, fire, or from any other cause, including theft." (Id. ) A "hold harmless" clause states: "The Landlord shall not be liable to and the Tenant shall hold the Landlord harmless and indemnify the Landlord from injury or damage to persons or property occurring in or about the leased premises, unless caused by or resulting from the negligence of the Landlord." (Id. at 7.) A "joint and several liability" clause states: "All the tenants hereunder are jointly and severally liable for the performance of all of the obligations hereunder." (Id. at 8.)
The following additional facts are not material to interpretation of the Lease, but are necessary as background regarding events giving rise to this litigation and the parties' arguments. In October 2011, the Reppels agreed that, in exchange for monthly rent payments, Yared could reside at the property beginning in November 2011. The Reppels did not ask the Bissons for approval to allow Yared to reside at the property. On April 29, 2012, the property was destroyed by fire. Two fire investigators later determined that the fire originated in the garage in the immediate vicinity of Yared's Porsche 911, where a battery charger had been in use. ( See Doc. 94-6 at 1, 3.) Yared was the only person at the property at the time of the fire.
On May 17, 2012, Alicia Horn (now Reppel) emailed Suzanne Brosseau and stated, among other things: "According to the lease, we do not need to pay you the June rent because of the fire, correct? Just want to make sure." (Doc. 90-6 at 3.) Suzanne Brosseau replied the same day, stating: "No, you would not be paying any[ ]more rent." (Id. at 2.)
At the time of the fire, the Bissons were carrying a policy of fire insurance (the "Policy") with the Peerless Insurance Company ("Peerless"). (Doc. 90-5 at 2.) The Policy limits included $141, 000 for the dwelling and $67, 100 for the garage. ( See id. ) The parties agree that Peerless has waived subrogation; Plaintiffs in this case are the Bissons themselves.
In their Motion for Summary Judgment, the Reppels argue that the Bissons' breach-of-contract claim fails as a matter of law for three reasons:
(1) under a plain reading, the Agreement of Lease does not impose liability on tenants for damage to the property from a fire beyond their control or resulting damages not reasonably foreseeable at the time of contracting; (2) the Agreement of Lease cannot do so as a matter of law under the Vermont Residential Rental Agreement Act, 9 V.S.A. §§ 4451-4469a (the "VRRAA"); and (3) Plaintiffs' insurance was for the parties' mutual benefit and, accordingly, the breach[-]of[-]lease claim is barred by the implied co-insured rule.
(Doc. 89 at 1.) In response, the Bissons maintain that the Lease terms entitle them to pursue recovery, and that neither the VRRAA nor the implied-coinsured doctrine bars their claims. (Doc. 94 at 1, 14, 16.) The parties' arguments regarding the implied-coinsured rule appear principally in their filings related to the Bissons' Insurance Motion. After setting forth the applicable legal standards, the Court addresses each of the Reppels' three arguments for summary judgment in turn.
I. Legal Standards
A. Summary Judgment
Under Rule 56 of the Federal Rules of Civil Procedure, summary judgment is appropriate "if the movant shows that there is no dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). In deciding whether there is a genuine issue of material fact, "[a]ll reasonable inferences must be construed in the nonmoving party's favor." Hill v. Curcione, 657 F.3d 116, 124 (2d Cir. 2011). Summary judgment is granted only when "the record taken as a whole could not lead a rational trier of fact to find for the non-moving party.'" Donnelly v. Greenburgh Cent. Sch. Dist. No. 7, 691 F.3d 134, 141 (2d Cir. 2012) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)).
B. Construction of a Lease
As the Court previously noted (Doc. 35 at 6), the substantive law of Vermont applies in this diversity case. In Vermont, the "master rule" in the construction of written agreements (including written leases) "is that the intent of the parties governs." Hall v. State, 2012 VT 43, ¶ 21, 192 Vt. 63, 54 A.3d 993 (quoting Main Street Landing, LLC v. Lake St. Ass'n, 2006 VT 13, ¶ 7, 179 Vt. 583, 892 A.2d 931 (mem.)). "In discerning the intent of the parties, the court must consider the written document as a whole." Id. "[T]he first task of the court is to determine whether the language is ambiguous, which is a question of law." Mueller v. Mueller, 2012 VT 59, ¶ 20, 192 Vt. 85, 54 A.3d 168. "If the contract language is ambiguous, its interpretation is a question of fact to be determined on all the evidence, including extrinsic evidence, to determine the intent of the contracting parties." Id. Specific contract terms control over more general terms. See Fairchild Square Co. v. Green Mountain Bagel Bakery, Inc., 163 Vt. 433, 439, 658 A.2d 31, 35 (1995).
II. The Lease Language is Unambiguous
The Reppels' first argument for summary judgment is that the Lease is unambiguous and does not impose responsibility on them for damage caused by an accidental fire beyond their control. (Doc. 89 at 4.) The Bissons maintain that the plain language of the Lease obligates the Reppels to indemnify the Bissons for the fire loss. (Doc. 94 at 19.) The Court examines the parties' arguments in detail below.
A. "Fire or Casualty Damage"
The Court begins with the "fire or casualty damage" clause; as stated above, that ...