Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—W.D. N.C.: Homeowners had standing to sue insurer as intended third-party beneficiaries, (Nov 7, 2013)

By Linda O’Brien, J.D., LL.M.

Homeowners had standing to pursue their claims of unfair and deceptive trade practices against two insurance companies as intended third-party beneficiaries of the insurance policy, the federal district court in Statesville, North Carolina has ruled. (Mosely v. Balboa Insurance Company, November 5, 2013, Voorhees, R.).

Elijah and Sallie Mosely brought a lawsuit against Balboa Insurance Company and Newport Insurance Company, arising out of an insurance claim for storm damage to the Moselys’ home and alleged unfair and deceptive trade practices. In 2008, the Moselys owned a home in North Carolina, on which Countrywide Home Loans held a mortgage. Newport had issued a lender-placed mortgage protection policy to Countrywide as the only named insured party.

A windstorm blew down a tree that caused damage to the Moselys’ home. The Moselys submitted a claim to Newport for the storm damage. After the property was evaluated by an independent adjuster and engineer, Newport issued payments in the amount of $12,272 to Countrywide, which in turn released the insurance proceeds to the Moselys to make repairs to the home. Subsequently, the Moselys reported water and mold damage in the home and contended that the damages exceed the amount previously issued under the insurance policy. They brought an action, claiming that Balboa and Newport violated the North Carolina Unfair and Deceptive Trade Practices Act. The defendants moved to dismiss the plaintiffs’ complaint for lack of standing.

The defendants argued that the Moselys lacked standing for any legal claim founded on rights provided by the insurance policy because the Moselys were never in privity of contract to the policy and could avoid the privity requirement on the ground that they were the intended third party beneficiaries of the policy. The defendants also argued that Countrywide was the only party named as the insured in the policy contract and its express language disclaims the Moselys as an insured or additional insured.

The Moselys argued that they were insured under the policy between the defendants and Countrywide notwithstanding the explicit language of the policy to the contrary. In the alternative, they claimed that they were intended third party beneficiaries of the policy as they paid the policy premiums and a policy endorsement provides that payments were be made to the Moselys as mortgagors in legal possession of the insured property.

The court found that the insurance policy was not ambiguous, included only Countrywide as an insured party, and named only Countrywide and Newport as parties to the policy. However, the court ruled that the Moselys were intended third-party beneficiaries of the policy, since the policy endorsement conferred a legally enforceable benefit to the Moselys. The endorsement explicitly stated that a benefit would be conferred to a mortgagor in possession of the property as any payments for loss or damage would be made to the mortgagors.

The case is No. 5:10-cv-0132-RLV-DSC.

Attorneys: Stephen Mason Thomas (Patrick, Harper & Dixon) for Elijah Lawrence Mosely and Sallie Ard Mosely. Robert Marc Rubin (Cranfill, Sumner & Hartzog, L.L.P.) for Balboa Insurance Co. and Newport Insurance Co.

Companies: Balboa Insurance Company; Newport Insurance Company

Cases: StateUnfairTradePractices NorthCarolinaNews