Additional Insured is Loss Payee after Hurricane Damage

    Construing the policy language, the federal district court found that the policy's additional insured was the loss payee for damage caused by Hurricanes Laura and Delta. TCP Ryan St. LLC v. Weschester Surplus Lines Ins. Co., 2024 U.S. Dist. LEXIS 125529 (W.D. La. July 16, 2024).

    Hurricanes Laura and Delta caused damage to TCP Ryan Street, LLC's (TCP) property. Westchester had issued a policy to MRI Heritage Brand, Inc. (MRI). MRI, as lessee, was obligated pursuant to the lease terms to "purchase and maintain . . . a policy of fire, extended coverage, vandalism and malicious mischief (or 'all risk') insurance coverage on all real property situated at the Lease Premises." The lease also required MRI to obtain coverage under a policy naming only the landlord as the sole insured and provided that the proceeds would be payable to the landlord. 

    The policy provided that no entity was covered unless Westchester had received identifying information for the entity during the application process or the entity was added by endorsement. 

    Immediately following Hurricane Laura, MRI submitted a notice of loss to Westchester. The claim was assigned to Engle Martin & Associates ("Engle"). Engle performed a preliminary inspection of the property, Because MRI informed the Engle adjuster that MRI was the tenant, Engle reported to Westchester that "it was unclear as to who is responsible for the property."

    MRI provided the lease agreement to Engle, which provided that MRI was responsible for obtaining insurance for the property and to name TCP as an insured and loss payee. MRI requested that the structure portion of the insurance proceeds be made payable to the landlord. Westchester denied the request based on its position that TCP was never endorsed as a named insured, additional insured, or loss payee. 

    After suit was filed, TCP and Westchester filed motions for summary judgment seeking a determination on whether TCP was an additional insured and loss payee. 

    The issue was whether or not the policy required a separate written request to designate TCP as an additional or named insured. Westchester argued that the cover letter that included that requirement in a footnote was part of the policy and because MRI failed to meet the "written requirement," TCP had no claims in this lawsuit. TCP argued that the cover letter and associated footnote were not part of the policy and the policy did not provide that MRI make a written request to add TCP as an additional or named insured. 

    The court did not agree with Westchesger that the cover letter was part of the terms and conditions of the policy itself. Even if it was, such language should have been included under the policy heading "Mortgagees, Loss Payees, and Additional Insureds" where the terms and conditions of additional insureds were placed. MRI provided the lease agreement that identified the additional insured in compliance with the policy. Therefore, the court found that TCP was an additional insured under the policy as well as a designated payee for insurance proceeds for claims made for damage caused by the hurricanes. TCP's status as an additional insured also allowed it to pursue breach of contract and bad faith claims.

    Westcheser's motion for summary judgment was denied, which TCP's motion for partial summary judgment was granted finding that TCP was a proper plaintiff in the lawsuit as an additional insured a payee.