MORTGAGOR LACKS STANDING TO SUE INSURER UNDER LENDER- PLACED COMMERCIAL POLICY

Last Tuesday, a U. S. District Court judge in the Houston Division of the Southern District of Texas granted summary judgment to an insurer after finding that the mortgagor lacked standing to bring a bad faith lawsuit for claims related to hurricane damage to the insured property under a lender-placed policy. In Barrios v. Great American Assurance Company, No. H-10-3511 (S.D.Tex., August 16, 2011), the mortgage company secured insurance coverage to protect its interests after the owner failed to maintain coverage.  The lender was the only named insured under the policy and after Hurricane Ike caused damage  to  the  property,  the  insured  paid  the  mortgagee’s  claim.   The  owner  claimed  that  that  the payments were insufficient to repair the damage 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 mortgagor lacked standing to sue under the policy.  And the owner responded by expressing that equitable concerns should allow them to force the insurer to perform under the policy.  But, they admitted or conceded that they had no privity nor standing under the policy. After reviewing the elements to be proved in support of the causes of action alleged, and finding that plaintiffs would be unable to support the causes of action alleged, summary judgment in favor of the insurer was granted.