Javier Alvarado v. Lexington Insurance Company
389 S.W.3d 544
Tex. App.2012Background
- Alvarado sued Lexington for breach of contract and related claims after Hurricane Ike when Lexington denied his claim under a force-placed policy issued to his mortgagee Flagstar Bank.
- Lexington argued Alvarado had no contract with it and was not a named insured, additional insured, or third-party beneficiary, so he lacked standing.
- Policy structure: Flagstar named insured under a Mortgage Guard Property Policy; Endorsement #12 added Special Broad Form Homeowners Coverage ostensibly benefiting homeowners, with premiums paid by Alvarado as part of his mortgage payments.
- There was evidence that Flagstar reported Alvarado’s property damage to Lexington and that Lexington paid Flagstar, but it was unclear what portion, if any, was used for repairs or applied to the mortgage.
- The trial court granted summary judgment for Lexington, concluding Alvarado lacked standing; Alvarado appealed arguing he is a third-party beneficiary under Endorsement #12 and the Mortgage Guard Policy.
- The court held Lexington failed to prove as a matter of law that Alvarado could not be a third-party beneficiary and reversed/remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Alvarado is a third-party beneficiary of the policy | Endorsement #12 and policy language show direct benefit to homeowners like Alvarado. | Only Flagstar is the insured; Endorsement #12 does not confer third-party beneficiary status to Alvarado. | Yes; Lexington failed to conclusively negate third-party-beneficiary status; summary judgment reversed. |
Key Cases Cited
- Basic Capital Mgmt., Inc. v. Dynex Commercial, Inc., 348 S.W.3d 894 (Tex. 2011) (presumption against third-party beneficiaries; must clearly appear intent to benefit)
- MCI Telecommunications Corp. v. Texas Utils. Elec. Co., 995 S.W.2d 647 (Tex. 1999) (intent to contract or confer direct benefit must be clearly spelled out)
- Palma v. Verex Assurance, Inc., 79 F.3d 1453 (5th Cir. 1996) (subrogation clause can indicate borrower benefit under force-placed policy)
- Union Pac. R.R. Co. v. Novus Int’l, Inc., 113 S.W.3d 418 (Tex. App.—Houston [1st Dist.] 2003) (to enforce a contract, third party must be intended beneficiary; not incidental)