This case involved a dispute between a condominium owner (“Owner”), his homeowners association (“Association”), and its insurance carrier (“Insurer”) over Owner’s entitlement to make a claim for insurance proceeds from Association’s policy issued by Insurer. In 2016, Owner’s condominium unit suffered water damage as a result of a ruptured water pipe caused by renovation work being performed in another unit. Association had a commercial property insurance policy issued by Insurer which provided coverage for “direct physical loss or damage to Covered Property” caused or resulting from any covered cause of loss. Association was the only named insured identified in the policy which provided a single stated limit of liability for the building and a separately stated limit of liability for business personal property. The policy did not contain a separate stated limit of liability for the individual units.
After suffering a loss due to the water damage, Owner submitted a proof of loss setting forth the damage to his unit to Insurer. Association also submitted a claim for damages caused to Association’s property. Insurer paid Association’s claim, but denied the claim submitted by Owner on the basis that he was not a named insured, an additional insured, or a third party beneficiary under the insurance policy. Owner also filed suit against the owner of the unit where the water originated and its insurance carrier seeking to recover his damages. The insurance carriers sought dismissal of Owner’s action and summary judgment on the basis that Owner was not a named insured or an additional named insured and had no right under the policies to sue the insurers for losses sustained to his individual unit. In response to Insurers’ claims, Owner contended that he had a right to recover under the theory that he was a third party beneficiary of the policies. Alternatively, Owner argued that he was the beneficiary of an express contractual insurance trust administered by Association as trustee for the members of Association.
The trial court granted judgment in favor of Insurers and dismissed Owner’s claims with prejudice after finding that the subject insurance policy did not express an intent to benefit Owner, and any benefit which may have accrued to Owner was merely incidental to the contract. Thus, Owner could not be a third party beneficiary of the insurance coverage under the policy and had no standing to assert a claim under Association’s policy. Owner then filed an appeal.
In his appeal, Owner contended that the trial court erred in not finding that Association’s policy contained “manifestly clear, certain, and direct stipulations of insurance coverage and other benefits in his favor as the owner of a condominium unit insured by the Policy,” and thus, finding that he was a third party beneficiary of the subject policy, or alternatively, the beneficiary of an “express contractual insurance trust” that was administered by Association as the trustee for the benefit of the unit owners, including Owner. As such, Owner contended that he was entitled to enforce Association’s rights under the policy in order to protect his interest in the insurance proceeds applicable to damages caused to his unit.
The appellate court ruled that, although Owner derived some benefit under the subject policy, any such benefit was incidental to the insurance contract and insufficient to establish a third party beneficiary relationship. The court found that the clear policy language reflected that the primary purpose of the policy was to discharge Association’s obligation under law and its governing documents to have insurance for the common elements and units against damage and loss, and to protect Association’s interests and property, and not to directly benefit the unit owners or to insure their individual units. In sum, the court stated, “we find the Policy devoid of any benefit flowing directly in favor of individual unit owners, which would create in them a direct right of action against the Insurers to either enforce the Policy or demand its performance.” Accordingly, the judgment of the trial court was affirmed.
Louisiana Appellate Court decision (October 17, 2018)
See case decision: Ledet_v._Fabianmartins_Constr._LLC_(La._App._2018)1