A homeowner sued the bank that had her mortgage and the bank's insurance company. The bank had compulsorily insured her property because she had her previous insurance expired. She claimed that the insurance company refused to pay for damages after a storm. I Nina Breland v. Trustmark Corporation D / B / A Appelleestrustmark National Bank, Proctorfinancial Inc. A / K / A Proctor Financialinsurance Company and certain underwriters at Lloyd & # 39 ;s Of London, including Ironshore Europe Limited no. 2020- CA-00970-COA, Court of Appeals of Mississippi (January 4, 2022) resolved the dispute after the court issued a summary judgment and found that the bank and the insurance company were not liable because Breland did not have a contractual relationship with the insurer
In 2004, Trustmark National Bank lent Nina Breland $ 78,500 to let her buy a house in Gulfport. The house was financed by a Fannie Mae loan through Trustmark. As a result, Trustmark used a series of guidelines disseminated by Fannie Mae.
The deed of trust in the home required Ms. Breland assured it. She initially obtained a homeowner's risk insurance and wind policy for the home. Breland kept this private insurance from March 2004 to March 2015.
In 2015, Breland's insurance company informed her that it had terminated her insurance cover for wind damage. Breland did not succeed in getting a new wind policy. Trustmark sent letters to Breland on several occasions and informed her that the risk and wind storm coverage had ceased. Through these notices, the bank informed her that, in accordance with the deed of Trust, it intended to compulsorily insure if it did not insure its own private insurance.
After Breland failed to obtain adequate insurance cover, Trustmark secured compulsory insurance. insurance coverage for her house through a third-party insurance company called Proctor Financial Inc. According to the Deed of Trust, Ms. Breland was obliged to pay the insurance premiums even though her interests were not protected by the insurance. It was noteworthy that Trustmark, not Ms. Breland, was the insured under the insurance. Breland was not a party to the insurance and was not an extra insured on the insurance.
The insurance issued storm surge protection that extended from 2015 to 2016. The insurance charged a higher premium than Breland had paid for his private insurance. The insurance also had a deductible of $ 5,000, which Breland's private insurance did not have. Breland never received windstorm coverage during the period 2015 to 2016.
As a result, the compulsory wind storm coverage was reintroduced from 2016 to 2017 to the tune of $ 100,000.
In March 2016, Ms. Breland & # 39 ;s home was damaged in a storm. She first claimed a loss of $ 2,244. She filed a windstorm claim with Ironshore. The insurer denied the claim on the grounds that its investigation showed that the cost of repairing the home did not exceed $ 5,000 deductible. In August 2017, Breland ordered a second inspection of his home. This second inspection quoted Ms. Breland an estimate of $ 14,550 to replace her roof and wooden decks as well as correct termite damage. Ms. Breland later received private insurance cover, and Trustmark subsequently discontinued compulsory insurance cover.
When the court issued a summary judgment, the court found that Ms. Breland was not a third party beneficiary of the compulsory insurance contract, Trustmark did not breach its contract with Ms. Breland, and she had no private right to take action to enforce federal Fannie Mae rules governing her mortgage. The district court further found that Trustmark and the insurance companies did not act incorrectly and rejected Breland's claim for civil conspiracy and criminal damages.
Ms. Breland appealed.
A party must show, in order to establish that it is a beneficiary of a third party, the agreements between the original parties must have been concluded in his favor, or at least such benefit must be the direct result of the parties' consideration
When the insurance contract was entered into between the bank and the insurers, with the property owner as an extra insured, the property owner's claim necessarily fails according to law.  The Mississippi Supreme Court has ruled that in order to obtain third-party beneficiary status, the contract "must have been entered into in his favor . Here, the insurance agreement between Trustmark and Ironshore was not in favor of Ms. Breland, but rather in favor of In addition, it is clear from the Deed of Trust and on the simple front of the insurance contract that Ironshore's insurance was intended to protect Trustmark's interests. ] Deed of Trust further clarifies that " such coverage shall cover Lender but may or may not protect the borrower. . . . ” (My italics). In other words, the compulsory placement insurance was not to her advantage. In addition, the letters sent to her indicated that insurance was forcibly placed to protect the bank's interests, and these messages were sent to her on more than one occasion.
Here, Breland claims that the current agreements are the deed of trust between her and Trustmark and the compulsory insurances that cover her home. However, it is axiomatic that the duty of loyalty only arises when there is a contractual relationship between the parties. Neither Ironshore nor Proctor were parties to any contract with Ms. Breland. Therefore, her claim against the bank and the insurance companies fails according to law.
Mississippi law requires that the right of a third party to uphold an action that a third party beneficiary must derive from the terms of the agreement and Ms. Breland could not offer a competent summary judgment in support of the conclusion that she was an intended third party benefiting from Fannie Mae's Service Guidelines. . [Miss. Code Ann. § 11-1-65(c) (Rev. 2019).] As all the defendants have rightly pointed out, Breland's claim for damages fails at first because no compensation for damages was announced.
Ms. Breland was lucky that the uninsured loss was small. However, she tried to make money on her mistake, on her failure to fulfill the obligation under the trust deed to maintain an insurance policy that protects her and the lender from the risks of loss through storms and other dangers. She did not fulfill her obligation under the trust deed. The bank protected itself with compulsory insurance and did not insure the risks that Breland faced. Her action could not be enforced and an attempt to make her mistake a profit by seeking bad faith and damages from insurers who did not insure her directly or as a third party beneficiary.
© 2022 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his internship to a position as an insurance consultant specializing in insurance coverage, insurance claims management, insurance fraud and insurance fraud almost equally for insurers and policyholders.
. He practiced law in California for more than 44 years as a lawyer for insurance coverage and claims management and more than 54 years in the insurance industry.
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