A federal appeals court on Wednesday upheld a lower court’s ruling in favor of an insurer on the question of whether rights to an insurance policy had been properly transferred to the new owner of a damaged hotel.
Thousand Oaks, Calif.-based MS & Sons Hospitality LLC bought a motel in Thousand Palms, Calif., from Santa Clara, Calif.-based Seoul Plaza LLC in 2017, according to the complaint in the case, MS & Sons Hospitality LLC; Mukesh K. Patel Vs. DB Insurance Co. Ltd.; and do 1 to 10 inclusive.
In April 2017, during the escrow period for the motel’s purchase, the motel suffered extensive water damage, requiring a complete rebuild and renovation and resulting in more than $2 million in damages, the complaint said.
Seoul filed a claim with its insurer, South Korea-based DB Insurance Co. Ltd., whose U.S. headquarters are in Anaheim, Calif., through its operating unit, Pinnacle Hospitality Inc., the complaint said.
In February 2018, Pinnacle retroactively assigned all of its rights under the policy to MS to coincide with the June 2017 transfer of the property, the complaint said.
DB refused to recognize the assignment as valid and MS filed suit against the insurer in US District Court in Riverside, California, alleging negligence and breach of contract.
The district court ruled in favor of the insurer and was affirmed by the 9th US Circuit Court of Appeals in San Francisco. “MS asserted that it has a legally protected interest in the proceeds of the DB and Pinnacle Hospitality insurance contracts,” the ruling said. “But MS was not a party to the insurance contract. Whether MS has standing therefore depends on whether it was validly assigned rights under the contract.”
“The only evidence in the document related to the transfer is a February 2018 letter to DB from Chris Choi, who was the secretary of the company that owned the property covered by the insurance agreement,” the ruling said.
Mr. Choi is not named as a beneficiary on the policy, and he is not the “owner of the right,” the ruling said. “No evidence suggests that Mr. Choi had real authority,” it said.
“In sum, Pinnacle did not validly assign its contractual rights to MS under California law,” said the ruling, which affirmed the lower court.
MS attorney Frank A. Weiser, of the Frank A. Weiser Law Firm in Los Angeles, said he disagrees with the ruling and plans to seek a mistrial in the case. Lawyers for the insurance company did not respond to a request for comment.