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Miami Homeowner With Mortgage Barred From Hurricane Insurance Claim

Hurricane Irma. Photo: Shutterstock.com

Hurricane Irma. Photo: Shutterstock.com

A Florida court has ruled the owner of a home damaged by Hurricane Irma could not sue the property’s insurer where the mortgagee was the named insured under the policy and the property owner was listed only as the borrower.

The Case

Roger Ulloa sued Integon National Insurance Co. as the owner of the Miami property mortgaged to Financial Freedom, a division of CIT Bank N.A. The lawsuit said Financial Freedom was the named insured under an insurance policy issued by Integon, the property was damaged on Sept. 10, 2017, and he reported the loss to Integon with a request to pay for the damage.

Integon moved to dismiss.

Ulloa opposed the motion. He conceded he was not the named insured under the Integon insurance policy but argued that, as the owner of the property, he had an insurable interest that gave him standing as a third-party beneficiary.

In addition, Ulloa contended he was not seeking relief for himself but rather was seeking to protect the interests of Financial Freedom by seeking to enforce the promise that Integon made to Financial Freedom to pay Financial Freedom for damage to the property.

Finally, he argued there was a loss payee provision in the policy that contemplated an intention to benefit his interests:

"Loss Payment. We will adjust each loss with you and will pay you. If the amount of the loss exceeds the unpaid principal balance, the borrower may be entitled, as a simple loss payee only, to receive payment for any residual amount due for the loss, not exceeding the lesser of the applicable Limit of Liability indicated on the notice of insurance and the borrower's insurable interest in the damaged or destroyed property on the date of loss. Other than the potential right to receive such payment, the borrower has no rights under this residential property form."

Integon noted the insurance policy expressly stated Integon and Financial Freedom, the named insured, were the only parties to the contract and it was not intended to benefit Ulloa, who was designated as the borrower.

Integon noted that the policy stated: "The contract of insurance is only between the named insured and Integon National Insurance Company. There is no contract of insurance between the borrower and Integon Insurance Company. The insurance purchased is intended for the benefit and protection of the named insured, insures against loss only to the dwelling and other structures on the described location, and may not sufficiently protect the borrower’s interest in the property.

The Court’s Decision

The court decided that Integon’s motion should be granted.

In its decision, the court explained that, to be able to move forward, Ulloa had to demonstrate there was a “clear or manifest intent of the contracting parties that the contract primarily and directly benefit" Ulloa.

The court decided Integon’s motion was “well taken” because Ulloa could “not plausibly allege a claim as a third-party beneficiary when the policy expressly" stated Ulloa was not a named insured and was excluded from coverage.

As a matter of law, the court ruled, Ulloa was not a third-party beneficiary with standing to state a claim for breach of an insurance policy. According to the court, “when a policy includes an unambiguous provision that the named insured was the only beneficiary, that foreclose a third-party beneficiary claim.”

The court concluded the only way Ulloa could state a plausible claim for breach of contract under the policy was if he plausibly alleged entitlement to insurance proceeds as a “simple loss payee,” where the amount of the loss exceeded the unpaid principal balance. The court said Ulloa should be permitted to amend his complaint if he could allege the amount of the covered loss exceeded the unpaid principal balance at the time of the loss.

The case is Ulloa v. Integon National Insurance, No. 18-23069-Civ-WILLIAMS/TORRES (S.D. Fla. March 13, 2019). Attorneys involved include: For Roger B. Ulloa, Plaintiff: Ramon Julio Diego, lead attorney, Law Office of Ramon J. Diego, Miami. For Integon National Insurance, Defendant: Ana Laura Olman, Keller Landsberg, Fort Lauderdale, and Katie Drozd, lead attorney, Lewis Brisbois Bisgaard & Smith, Fort Lauderdale.