Javier Alvarado v. Lexington Insurance Company

A lender obtains a mortgage insurance policy to protect itself when its borrower fails to secure his own insurance coverage for mortgaged property, placing the lender’s collateral at risk. The borrower in this case did not secure his own homeowner’s coverage. The borrower now sues the lender’s insurance carrier directly for coverage for roof damage to his home. With no indicia of third-party beneficiary status, however, the law presumes that an insurance contract governs only those who are parties to it. The borrower is not. Neither is he an intended third-party beneficiary of his lender’s force-placed policy, because the policy neither names the borrower as an additional insured, nor expressly declares that the policy covers the borrower’s interest in the insured property (as opposed to the lender’s), nor otherwise states that the borrower is a beneficiary of the lender’s coverage. The borrower thus lacks standing to directly sue his lender’s insurance carrier. On this basis, the trial court properly granted summary judgment. We should affirm the trial court’s ruling; as we do not, I respectfully dissent.

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