A hotel company that transferred its insurance to a real estate fund after it had paid off a loan then cannot sue the insurer for insurance revenue, a federal appeals court said on Monday, in a confirmation of a court ruling.
Shreveport, Louisiana-based CRU Shreveport, LLC received a loan from South Pasadena, California-based GreenLake Real Estate Fund LLC to fund its purchase of a Wyndham Grand hotel in Shreveport, according to Monday's ruling of the 5th U.S. Circuit Court of Appeals in New Orleans in CRU Shreveport LLC v. United National Insurance Co.
The loan was secured by a promissory note, which in turn was secured by a mortgage granting GreenLake security rights, among other things, in all insurance proceeds according to the decision. Bala Cynwyd, Pennsylvania-based United insured CRU's hotel property.
The CRU then claimed that the damage was much more extensive than it originally thought, which led to a dispute over whether the policy covered the extent of the damage described in the expanded claim, the decision said.
At the same time, the damage caused by the fireplace resulted in a number of rooms being unavailable to guests for an extended period of time, which caused CRU's room-related income to drop significantly and because it defaulted on its GreenLake mortgage payments, the judgment said .
In June 2018, the CRU filed suit against United National in the US District Court in Monroe, Louisiana, and accused it of breaching its insurance contract by not reimbursing it for the water-related damage to hotel rooms and breach of its duty to good faith and fair trade.
About four months later, the property was transferred to GreenLake due to CRU's payment terms. United National moved for a brief judgment, arguing that the CRU was no longer entitled to bring proceedings against United National.
A district court agreed and decided that the CRU had transferred all the rights held in the hotel, including the insurance policy to GreenLake, and had no rights under the insurance contract.
A three-judge appeals court panel unanimously adopted the decision. The property belonging to CRU was "unambiguously" transferred to GreenLake, according to the judgment. "The magistrate judge correctly considered that United was entitled to summary judgment."
United National Attorney Kathryn M. Caraway, Caraway LeBlanc LLC of New Orleans, said in a statement that her client "is satisfied with the trial and appellate courts properly appreciated the facts and fairly applied the law to dismiss the case against it."  CRU's lawyer did not respond to a request for comment.