Homeowner Allowed to Amend Complaint to Demonstrate Third-Party Beneficiary Status Under Lender-Placed Policy

May 12, 2025 — Tred R. Eyerly - Insurance Law Hawaii
The homeowner's complaint was improperly dismissed without leave to amend to demonstrate she was a third-party beneficiary of a lender-placed policy on her home. Williams v. Integon Nat'l Ins. Co., 2025 U.S. App LEXIS 6919 (5th Cir. March 25, 2025). Ellen Williams purchased a home which was mortgaged by Flagstar Bank. Because she did not insure the home, Flagstaff obtained a "lender-placed hazard insurance policy from Integon at Williams' expense. The policy named Flagstaar as the "insured" and Williams as the "Borrower." Williams paid all premiums and complied with all requirements in the policy. Flagstar negotiated for a policy limit of $77,934, rather than opting to use its own insurable interest in the property to cap the liability risk. The policy provided as follows:

13. Loss Payment. WE will adjust each LOSS with [Flagstar] and will pay [Flagstar]. If the amount of Loss exceeds [Flagstar's] insurable interest, WE will pay BORROWER any residual amount due for the LOSS, not exceeding the Limit of Liability indicated on the NOTICE OF INSURANCE.

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Reprinted courtesy of Tred R. Eyerly, Damon Key Leong Kupchak Hastert
Mr. Eyerly may be contacted at te@hawaiilawyer.com