Sierra Equipment, Incorporated v. Lexington Insura, 890 F.3d 555

Sierra leased heavy construction equipment to LWL under a written lease that required LWL to procure insurance, deliver the policy to Sierra, and obtain insurers/terms reasonably satisfactory to Sierra.
The lease did not require LWL to name Sierra as an additional insured or include a loss-payable clause in favor of Sierra.
LWL later filed bankruptcy; Sierra discovered damage to equipment and obtained little recovery from LWL’s bankruptcy estate.
Lexington issued a property policy naming LWL only; Sierra was not listed and never received a copy of the policy as the lease required.
Sierra sued Lexington (after demand) seeking a declaratory judgment that it could recover policy proceeds as a lessor despite not being a named insured; Lexington removed and moved to dismiss for lack of standing.
The district court dismissed with prejudice, holding Texas’s equitable-lien doctrine requires an express agreement to insure for the lessor’s benefit (i.e., a loss-payable clause or equivalent); Sierra appealed.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether a nonparty lessor may sue the insurer under Texas’s equitable lien doctrine where the lessee agreed to obtain insurance but did not list the lessor as loss-payable or additional insured	Sierra: lease’s requirements (procure insurance, deliver policy, terms satisfactory to Sierra) show insurance was for Sierra’s benefit, so equity should treat the policy as if it named Sierra	Lexington: lease contained no obligation to name Sierra or include a loss-payable clause; policy did not list Sierra; under Texas law a third party cannot sue absent an agreement to procure insurance in the third party’s favor	Court: Affirmed dismissal. Texas law requires an agreement to include a loss-payable clause or equivalent obligation; absent that, Sierra (a nonparty) lacks standing to sue the insurer

Duval Cty. Ranch Co. v. Alamo Lumber Co., 663 S.W.2d 627 (Tex. App.—Amarillo 1983) (explains equitable-lien doctrine treating policy as if it contained loss-payable provision where mortgagor/lessee is charged to procure such insurance)
Farmers Ins. Exch. v. Nelson, 479 S.W.2d 717 (Tex. Civ. App.—Waco 1972) (extends equitable-lien doctrine to lessor-lessee where lessee agreed to insure for lessor’s benefit)
Fidelity & Guar. Ins. Corp. v. Super-Cold Sw. Co., 225 S.W.2d 924 (Tex. Civ. App.—Amarillo 1949) (holds equity treats policy as containing loss-payable clause when contract requires mortgagor to insure for mortgagee’s benefit)
Walter Connally & Co. v. Hopkins, 195 S.W. 656 (Tex. Civ. App.—Texarkana 1917) (applies equitable lien where contract expressly provided loss payable to mortgagee)
Westview Drive Invs., LLC v. Landmark Am. Ins. Co., 522 S.W.3d 583 (Tex. App.—Houston [14th Dist.] 2017) (lists as a requirement for equitable lien that the insured agreed to obtain insurance with a loss-payable clause in the third party’s favor)