HOMEOWNER LACKS STANDING TO SUE INSURER UNDER LENDER- PLACED HOMEOWNERS’ POLICY

Last Tuesday, a judge in the McAllen Division of the United States District Court for the Southern District of Texas granted summary judgment to an insurer after finding that the homeowner lacked standing under a lender-placed policy to bring a bad faith lawsuit for claims related to hurricane damage to the insured residence.  In Trevino v. Evanston Ins. Co., 2011 WL 2709063 (S.D.Tex., July 12, 2011), the mortgage company secured insurance coverage to protect its interests in the event that the insured failed to maintain coverage.  The lender was the only named insured under the policy.  The homeowner filed a claim for roof and water damage following Hurricane Dolly and ultimately filed this lawsuit against the insurer alleging breach of contract, unfair claim settlement practices and other causes of action.

The insurer filed a motion for summary judgment asserting that the homeowner lacked standing to sue under the policy.  The homeowner responded by claiming standing as a third-party beneficiary under the policy.  The court observed that the clear intent of the lender-placed (also known as “forced-placed”) policy was to protect the lender’s security interest in the property.  Following review of Texas and Louisiana law, the court noted that “a presumption exists that parties contracted for themselves unless it ‘clearly appears’ that they intended a third party to benefit from the contract.”  And, after addressing related arguments based on policy language, the court found no provision reflecting a clear intent to confer a direct benefit on the homeowner.  The court held: “Therefore, Plaintiff is not a third-party beneficiary under the Policy and has no standing to pursue his claims.”  Summary judgment was granted in favor of the insurer.