FIFTH CIRCUIT AFFIRMS SUMMARY JUDGMENT IN FAVOR OF INSURER BASED ON NON-PAYMENT OF PREMIUMS – CANCELLATION NOT AFFECTED BY FAILURE TO PROVIDE NOTICE TO MORTGAGEE
On Friday, the Fifth Circuit Court of Appeals affirmed a trial court’s decision to grant summary judgment in favor of the insurer in Molly Properties v. Cincinnati Insurance Co., 2014 WL 486521 (5th Cir. Feb. 7, 2014). The insured filed suit against the insurer for breach of contract after the insurer denied the insured’s fire claim for nonpayment of premiums.
The insured did not dispute that the insurer notified the insured that its policy would be cancelled for non-payment of premiums. However, the insurer argued that the policy was not cancelled at the time of the fire because the insurer failed to give notice of the cancellation to the mortgagee on the property. The Fifth Circuit stated that unless the terms of the policy provide otherwise, a policy cancellation is not affected by the failure of the insurer to give notice of cancellation to the mortgagee. The policy at issue did not condition the cancellation of coverage on notification to the mortgagee that the insured’s policy would be cancelled. Thus, the Court stated that whether or not the insurer gave notice to the mortgagee is irrelevant as to the insured’s loss of coverage.
The Court further held that the insured cannot recover as a third-party beneficiary to an agreement between the insurer and the mortgagee. The Court stated that any promise by the insurer to provide a cancellation notice to the mortgagee was made for the benefit of the mortgagee, not the insured.