Hickman v. Safeco Insurance Company

695 N.W.2d 365 (2005)

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Nature of the Case

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Facts

P had a mortgage on his home with D. P failed to provide proof of insurance as required under the mortgage agreement. The provisions of the insurance contract between D and D1 provide in relevant part: We will provide the insurance described in this policy in return for the premium and compliance by you and the 'borrower' with all applicable provisions of this policy. Definitions Throughout the policy, 'you' and 'your' refer to the Named Insured Mortgagee shown in the Declarations. * * * * 'Borrower' means the mortgagor or mortgagors of an 'insured location' indebted under a mortgage held or serviced by you. As used in this policy, 'borrower' applies to the 'insured location' on which the 'borrower' is the mortgagor. * * * * The policy includes coverage for the 'dwelling on the 'insured location,'' 'other structures on an 'insured location,'' and 'personal property, usual to the occupancy as a dwelling and owned or used by the 'borrower' or members of the 'borrower's' family residing with the 'borrower' while it is on the 'insured location.'' The policy provides that payment for a loss, except losses under personal property coverage, will be paid to D up to the amount of its interest and 'amounts payable in excess of [D's] interest will be paid to the 'borrower.'' For losses under the personal property coverage, the policy provides that D1 will 'adjust all losses with the 'borrower'' and 'will pay the 'borrower.'' Under the policy, the 'claimant' also has rights in connection with the appraisal of any loss. When it got the insurance D's notice to P stated: In order to protect our mutual interest in the property, we have obtained coverage in accordance with the terms of your Loan Agreement/Mortgage or Deed of Trust. The premium amount for this coverage that we have ordered will be charged to your escrow account. * * *. PLEASE NOTE THIS IS NOT A HOMEOWNERS POLICY. * * * NO ATTEMPT WAS MADE TO DUPLICATE ANY INSURANCE YOU MAY HAVE HAD IN THE PAST. THE INSURANCE COVERAGE WE HAVE OBTAINED MAY BE MORE EXPENSIVE, MAY NOT BE ENOUGH TO COVER YOUR LOSS AND PROVIDE LESS COVERAGE THAN YOU COULD OBTAIN FROM AN AGENT OR COMPANY OF YOUR CHOICE. * * * We encourage you to obtain an acceptable replacement policy from an agent or company of your choice. The notice indicated that the insurance coverage was obtained in the amount of $85,500 for the house itself, $8,550 for personal property, and $8,550 for 'other structures.' The $855 premium for this insurance was paid from a real estate tax and insurance escrow account established with funds paid by P with his monthly mortgage payments. D's home and the detached storage building on the property were damaged by a windstorm. FEMA concluded that the house was a total loss. The estimate of damages was $114,048. D1's insurance adjuster also inspected the property but concluded that the house was not a total loss. D1 sent D $50,981.80 in insurance proceeds-- $42,431.80 for the house and $8,550 for the storage building. P's mortgage to D was less than $43,000. P requested that D apply the insurance proceeds to the outstanding balance on their mortgage. D sent the $7,339.08, remaining to P. P filed a complaint against Ds contending that under the terms of the insurance policy he was entitled to insurance coverage up to the policy limit for the losses incurred as a result of the storm. D1 filed a motion for summary judgment asserting that P failed to prove that he was either a party or a third-party beneficiary to the insurance contract. D1 got summary judgment. The court of appeals affirmed summary judgment in favor D1.