Mortgagors Seek Coverage Under Mortgagee's Policy

Judge sitting behind bench (illustration)

After hurricane damage to their home, plaintiffs sued American Security for coverage for the losses.

July 19, 2021
Tred R. Eyerly - Insurance Law Hawaii

The mortgagor homeowners survived a motion to dismiss their claim for coverageunder the lender's property policy after their home suffered hurricane damage. Gary v. Am. Sec. Ins. Co., 2021 U.S. Dist. LEXIS 100010 (W.D. La. May 26, 2021).

Plaintiffs' home was mortgaged by Pennymac Loan Services, LLC. Pennymac held a property policy with American Security to insure its interest in the home. Plaintiffs were not named as insureds or additional insureds under the policy. Plaintiffs were identified as the borrowers under the policy on the Declarations page.

After hurricane damage to their home, plaintiffs sued American Security for coverage for the losses. American Security moved to dismiss, arguing plaintiffs were neither additional insureds nor third party beneficiaries. Lender-placed policies were designed to insure the lender's collateral whenever the borrower failed to maintain adequate insurance. The Loss Payment provisions in the policy stated that "Loss will be made payable to the named insured [Pennymac]. No coverage will be available to any mortgagee other than that shown as the named insured on the Declarations."

Mr. Eyerly may be contacted at te@hawaiilawyer.com



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