Emerald Coast Finest Produce Co. v. Alterra American Insurance Co.
2017 U.S. App. LEXIS 13105
| 5th Cir. | 2017Background
- Emerald Coast leased a Pensacola warehouse to Sunrise; lease required Sunrise to maintain property-damage insurance at 100% of building replacement value and gave Sunrise option to purchase.
- Sunrise requested insurance through its agent BancorpSouth; emails discussed placing $5,000,000 of coverage and contents limits; BancorpSouth added the warehouse to Sunrise’s existing Alterra policy and endorsed Emerald as mortgagee; Emerald received a certificate showing $5,000,000 coverage.
- Three months later a fire substantially damaged the warehouse; replacement-cost estimates exceeded $15 million, but the insurer paid only the $5,000,000 policy limit.
- Emerald sued Sunrise, BancorpSouth (agent), and Alterra (insurer) alleging negligent procurement of insufficient insurance and related claims; Emerald settled with Sunrise; district court granted summary judgment for BancorpSouth and Alterra.
- District court applied Mississippi law; Emerald argued on appeal Florida law should control and that it could sue for negligent procurement as a third-party beneficiary; Fifth Circuit affirmed, holding Emerald’s claims fail under either state’s law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Choice of law | Florida law applies to claims against insurer/agent (lease’s Mississippi choice doesn’t bind nonparties) | Mississippi law governs or, in any event, plaintiff’s claims fail under either state | Court: no need to resolve because claims fail under both; district court did not err in its analysis |
| Duty to third party (negligent procurement) | BancorpSouth/Alterra owed Emerald (mortgagee) a duty to procure full replacement coverage | Agent/insurer owe duties to insured (Sunrise); no Mississippi authority imposing duty to a noninsured like Emerald | Court: No recognized duty to Emerald under Mississippi law; will not expand duty; claim fails |
| Third-party beneficiary status | Emerald contends it is a third-party beneficiary of the insurance/contract-to-procure such that it can sue for negligent procurement | Defendants: policy/contract does not create enforceable promise to Emerald as to coverage amount; Emerald was not the insured or party to procurement | Court: Emerald did not allege it was a third-party beneficiary of the contract to procure insurance; Mississippi law requires contract terms to create the right; claim fails |
| Notice / duty-to-read | Emerald contends it did not receive the policy and could not know coverage was insufficient | Defendants: Emerald received certificate showing $5M limit; duty-to-read and imputed-knowledge doctrines apply; insureds better placed to assess needs | Court: Certificate put Emerald on notice; duty-to-read/imputed knowledge supports rejecting plaintiff’s claim |
Key Cases Cited
- Rogers v. Bromac Title Servs., L.L.C., 755 F.3d 347 (5th Cir. 2014) (standard of review for summary judgment)
- Lincoln Gen. Ins. Co. v. U.S. Auto Ins. Servs., Inc., 787 F.3d 716 (5th Cir. 2015) (review standard for Rule 59(e) motion)
- Tyler v. Union Oil Co. of California, 304 F.3d 379 (5th Cir. 2002) (pure legal questions reviewed de novo)
- Mladineo v. Schmidt, 52 So. 3d 1154 (Miss. 2010) (Mississippi recognition and limits of negligent-procurement claims)
- Rein v. Benchmark Constr. Co., 865 So. 2d 1134 (Miss. 2004) (third-party beneficiary must spring from contract terms)
- Taylor Mach. Works, Inc. v. Great Am. Surplus Lines Ins. Co., 635 So. 2d 1357 (Miss. 1994) (agent’s duty owed to insured to procure coverage with reasonable diligence)
- Barfield v. Madison Cnty., 212 F.3d 269 (5th Cir. 2000) (caution against judicially expanding state law)
- Daniel v. Fla. Residential Prop. & Cas. Joint Underwriting Ass’n, 718 So. 2d 936 (Fla. Dist. Ct. App. 1998) (Florida intermediate appellate case discussing negligent procurement/third-party issues)