Tardo v. Integon National Insurance Company

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF LOUISIANA

JONATHAN TARDO CIVIL ACTION

VERSUS No. 23-296

INTEGON NATIONAL INSURANCE SECTION I

COMPANY

ORDER AND REASONS

Before the Court is a motion to dismiss, pursuant to Federal Rule of Civil

Procedure 12(b)(6), filed by defendant Integon National Insurance Company

(“Integon”).1 Plaintiff Jonathan Tardo (“Tardo”) opposes the motion.2 For the reasons

below, the Court grants Tardo leave to file an amended complaint.

I. BACKGROUND

This case arises from a property insurance claim made by Tardo after his

property sustained damage from Hurricane Ida.3 Plaintiff alleges that Integon

underpaid covered damages and adjusted his claim in bad faith.4

Tardo’s property, a home in Destrehan, Louisiana, is mortgaged by Bank of

America, N.A. (“Bank of America”).5 Tardo inherited the property from his deceased

mother. Bank of America purchased an insurance policy from Integon to protect its

interest in the home because Tardo did not provide them with evidence that he

1 R. Doc. No. 5.

2 R. Doc. No. 9.

3 R. Doc. No. 1-1.

4 Id. at 2.

5 R. Doc. No. 5-3.

purchased property insurance himself.6 Though Bank of America purchased the

policy, it passed the cost along to Tardo.7 The named insured on the policy is Bank of

America, and Tardo is identified only as “BORROWER.”8 This type of insurance

policy is called a “lender-placed” policy.

The “loss payment” provision of the policy states:

[Integon] will adjust each LOSS with [Bank of America] and will pay [Bank

of America]. If the amount of LOSS exceeds the UNPAID PRINCIPAL

BALANCE [of the mortgage], the BORROWER may be entitled, as a simple

LOSS payee only, to receive payment for any residual amount due for the

LOSS, not exceeding the lesser of the applicable Limit of Liability indicated

on the NOTICE OF INSURANCE and the BORROWER’S insurable interest

in the damaged or destroyed property on the DATE OF LOSS. Other than the

potential right to receive such payment, the BORROWER has no rights under

this RESIDENTIAL PROPERTY FORM.9

In the instant motion, Integon asserts that Tardo is not a named insured,

additional insured, or third-party beneficiary under the policy and therefore lacks

standing to enforce the insurance contract.10

II. STANDARD OF LAW

Rule 12(b)(6) of the Federal Rules of Civil Procedure allows for dismissal of a

complaint for “failure to state a claim upon which relief can be

granted.” Fed. R. Civ. P. 12(b)(6). “To survive a motion to dismiss, a complaint must

contain sufficient factual matter, accepted as true, to state a claim to relief that is

6 Id. at 2.

7 Id. (“We charged the Lender-Placed Hazard Insurance coverage to the account as

an additional debt secured by the mortgage[.]”).

8 R. Doc. No. 5-4, at 12.

9 Id. at 17.

10 R. Doc. No. 5, at 1.

plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation and internal

quotations omitted). A claim is facially plausible “when the plaintiff pleads factual

content that allows the court to draw the reasonable inference that the defendant is

liable for the misconduct alleged.” Id. “The plausibility standard is not akin to a

probability requirement, but it asks for more than a sheer possibility that a defendant

has acted unlawfully.” Culbertson v. Lykos, 790 F.3d 608, 616 (5th Cir. 2015) (citation

omitted) (internal quotation marks omitted).

“[T]he face of the complaint must contain enough factual matter to raise a

reasonable expectation that discovery will reveal evidence of each element of the

plaintiffs’ claim.” Hi-Tech Elec., Inc v. T&B Constr. & Elec. Servs., Inc., No. 15-3034,

2017 WL 615414, at *2 (E.D. La. Feb. 15, 2017) (Vance, J.) (emphasis added) (citing

Lormand v. US Unwired, Inc., 565 F.3d 228, 255–57 (5th Cir. 2009). A complaint is

insufficient if it contains “only labels and conclusions, or a formulaic recitation of the

elements of a cause of action.” Whitley v. Hanna, 726 F.3d 631, 638 (5th Cir. 2013)

(citation and internal quotations omitted). It “must provide the defendant with fair

notice of what the plaintiff's claim is and the grounds upon which it rests.” Dura

Pharms., Inc. v. Broudo, 544 U.S. 336, 346 (2005) (internal quotations omitted).

In considering a motion to dismiss, a court views the complaint “in the light

most favorable to the plaintiff, accepting as true all well-pleaded factual allegations

and drawing all reasonable inferences in the plaintiff's favor.” Lovick v. Ritemoney

Ltd., 378 F.3d 433, 437 (5th Cir. 2004).

When considering a motion to dismiss, the court is generally limited to the

factual allegations contained in the complaint and any attachments. See Kennedy v.

Chase Manhattan Bank USA, NA, 369 F.3d 833, 839 (5th Cir. 2004) (“Although the

court may not go outside the complaint, the court may consider documents attached

to the complaint.”). However, the court may expand its review to consider

attachments to defendant’s motion to dismiss if the documents “are referred to in the

plaintiff’s complaint and are central to her claim.” Collins v. Morgan Stanley Dean

Witter, 224 F.3d 496, 498–99 (5th Cir. 2000) (quoting Venture Access Corp. v. Zenith

Data Sys. Corp., 987 F.2d 429, 431 (7th Cir. 1993) (internal quotation mark

omitted); see also Kane Enters. v. MacGregor (USA), 322 F.3d 371, 374 (5th Cir.

2003).

III. ANALYSIS

As a threshold matter, the Court notes that the insurance policy underlying

the dispute was not attached to Tardo’s complaint. However, Integon attached the

policy to its motion to dismiss.11 Tardo makes reference to the policy in his complaint,

and the policy is central to his claims.12 Accordingly, the Court will consider the policy

document in ruling on the instant motion to dismiss. Collins, 224 F.3d 496, 498–99.

To have standing to enforce an insurance policy, a plaintiff must be (1) a named

insured; (2) an additional named insured; or (3) an intended third-party beneficiary

of the policy. Barbe v. Ocwen Loan Servicing, LLC, 383 F. Supp. 3d 634, 641 (E.D. La.

11 R. Doc. No. 5-3.

12 R. Doc. No. 1-1, at 1, 2.

2019) (Feldman, J.) (citing Brown v. Am. Mod. Home Ins. Co., No. 16-16289, 2017 WL

2290268, at *4 (E.D. La. May 25, 2017) (Lemmon, J.)) (further citations omitted). A

court looks to the language of the policy to determine whether a plaintiff is a named

insured, additional insured, or third-party beneficiary. See Graphia v. Balbao Ins.

Co., 517 F. Supp. 2d 854, 856 (E.D. La. Sept. 28, 2007) (Vance, J.).

In Louisiana, a contract for the benefit of a third party is referred to as a

stipulation pour autrui. Brown, 2017 WL 2290268, at *4. “A stipulation pour autrui is

never presumed” and the party claiming the benefit bears the burden to show that

such a stipulation exists. Joseph v. Hosp. Serv. Dist. No. 2 of Par. of St. Mary, 939

So.2d 1206, 1212 (La. 2006). To do so, a plaintiff must show that “1) the stipulation

for [the] third party is manifestly clear; 2) there is certainty as to the benefit provided

the third party; and 3) the benefit is not a mere incident of the contract between the

promisor and the promisee.” Id. The contract must confer a specific “direct benefit” in

favor of the third party. Id.

As previously stated, Integon contends that Tardo lacks standing to enforce

the policy.13 It is undisputed that Tardo is not a named insured or additional named

insured. Integon asserts that Tardo is not a third-party beneficiary because the policy

“bestows no direct benefit on plaintiff; it was purchased by the lender to protect the

lender’s collateral only, and any benefit to the borrower would be purely incidental.”14

Integon further asserts that without a “valid, underlying, substantive claim upon

13 R. Doc. No. 5, at 13.

14 Id.

which insurance coverage is based,” plaintiff’s bad faith claims must fail.15 Tardo

acknowledges that Bank of America is the named insured, but argues that “[t]he

property, BOA, and plaintiff are all beneficiaries of [the policy] . . . particularly since

[Tardo] paid for the policy.”16

This court and others have previously addressed similar standing issues with

regard to lender-placed insurance policies. Courts have focused on whether the loss

amount exceeds the lender’s insurable interest (i.e., the mortgage balance), and

whether, under the policy, any loss amount exceeding that interest is to be paid to

the borrower. Williams v. Certain Underwriters at Lloyd’s of London, 398 F. App’x 44

(5th Cir. 2010) (per curiam) (homeowner was not a third-party beneficiary of lender-

placed policy where all policy benefits were payable to the lender, not to the

borrower); Lee v. Safeco Ins. Co. of Am., No. 08-1100, 2008 WL 2622997 (E.D. La. July

2, 2008) (Africk, J.) (homeowner qualified as a third-party beneficiary where

homeowner could potentially recover, as direct payee, amounts in excess of the

lender’s interest); D’Juve v. Am. Mod. Home Ins. Co., No. 14-2386, 2015 WL 1650259,

at *2 (E.D. La. Apr. 14, 2015) (Lemmon, J.) (same as Lee in that the plaintiff might

have qualified as a third-party beneficiary under the policy language; however, the

losses that she claimed did not exceed the lender’s interest).

15 Id.

16 R. Doc. No. 9, at 2.

Using this reasoning, courts have granted motions to dismiss where the

plaintiff’s complaint did not allege that the loss payment exceeded the mortgage

balance. For example, in Brown, Judge Lemmon found that:

[The complaint] does not allege facts sufficient to establish [third-party

beneficiary] status because there is no information regarding the

amount of insurance claim against American Modern or plaintiffs’

mortgage balance. Without allegations demonstrating that the condition

requiring American Modern to pay plaintiffs was triggered, i.e. that the

amount of the loss exceeds the mortgage balance, plaintiffs’ complaint

does not sufficiently allege that there was a stipulation pour autrui, and

plaintiffs have not stated a claim against American Modern for

breaching the insurance contract.

2017 WL 2290268, at *5. In Brown, the court granted the motion to dismiss, and

granted the plaintiff leave to amend the complaint. Id. at *8.17

In this matter, the policy contemplates that “[i]f the amount of LOSS exceeds

the UNPAID PRINCIPAL BALANCE, the BORROWER may be entitled . . . to

receive payment for any residual amount due for the LOSS.”18 Thus, under the policy,

if the actual cash value of the damage exceeds Bank of America’s insurable interest,

17 Integon cites one case in this district that concluded that a homeowner could not

be a third party beneficiary of a lender-placed policy even when the policy specifically

stated that payments in excess of the mortgage balance would be paid to the borrower.

In re Katrina Canal Breaches Consol. Litig., No. 05-4182, 2010 WL 11541602, at *8–

9 (E.D. La. Apr. 1, 2010) (Duval, J.). That case found the reasoning of Lee and similar

cases “unconvincing in that they fail to recognize the true purpose and intent of

[lender-placed] insurance” and concluded that “[w]here there is no direct benefit

outlined in the policy as purchased—such as there being no Content coverage or

Additional Living Expense coverage, there is simply no evidence that such a contract

was made to benefit the mortgagee.” Id. at 9. The Court finds such logic unconvincing,

as the policy language that contemplates payment to the borrower clearly indicates

intent to benefit the borrower, as explained above. This conclusion is in accordance

with more recent decisions on the issue. E.g., Brown, 2017 WL 2290268, at *5.

18 R. Doc. No. 5-4, at 17.

Integon will pay Tardo the excess amount. As in the cases cited above, this policy

provision constitutes a clear intent to benefit the borrower (here, Tardo) in the event

that the loss amount exceeds the mortgage balance. Lee, 2008 WL 2622997, at *4–5

(concluding that a similar policy provision conferred third party beneficiary status on

the borrower). However, Tardo’s complaint does not allege that the loss to be paid by

Integon exceeds Bank of America’s interest in the property.19

Without that information, as in Brown, Tardo has not sufficiently alleged that

he has standing to enforce the insurance contract as a third-party beneficiary. And,

because he has not sufficiently alleged the breach of contract claim, the bad faith

claim also fails. Bradley v. Allstate Ins. Co., 620 F.3d 509, 526 (5th Cir. 2010) (“[A]

plaintiff attempting to base her theory of recovery against an insurer on [Louisiana’s

bad faith statutes] must first have a valid, underlying, substantive claim upon which

insurance coverage is based.” (quotation and citation omitted)).

Therefore, the Court will grant Tardo leave to file an amended complaint

alleging, if possible, specific facts demonstrating that he is able to recover as a third-

party beneficiary of the contract.20 See Gary v. Am. Sec. Ins. Co., 21-706, 2021 WL

19 The liability limit under the policy is $185,152. R. Doc. No. 5-3, at 11. Tardo’s

petition, which was filed in Louisiana state court before being removed by Integon,

does not state the amount he seeks to recover.

20 In his opposition, Tardo “requests that the Court defer ruling on this motion and

grant the unopposed motion for stay” and that, “[i]f the case is returned to the docket,

then plaintiff requests that he be allowed to submit the additional information he

learns between now and then about the relationship between defendant and BOA,

and that he be allowed to join BOA as a party at that time.” R. Doc. No. 9, at 2–3. The

Court has already denied the motion for a stay. R. Doc. No. 10. Tardo’s request to

“join BOA as a party” appears to be based on Tardo’s allegation, raised in his

opposition, that Integon “serves as the claim center for BOA.” R. Doc. No. 9, at 2. The

2143061, at *3, 6 (W.D. La. May 26, 2021) (Cain, J.) (denying motion to dismiss and

granting plaintiff leave to amend in similar circumstances).

IV. CONCLUSION

For the reasons stated herein,

IT IS ORDERED that Tardo may file an amended complaint no later than

APRIL 24, 2023 to allege claims against Integon as specified herein, reserving

Integon’s right to re-urge the motion as to Tardo’s amended complaint. If Tardo does

not file an amended complaint by that date, Integon’s motion to dismiss will be

granted.

New Orleans, Louisiana, April 3, 2023.

Si ne

Sefer

UNITED STATES DISTRICT JUDGE

Court has not been provided with sufficient legal or factual information to assess this

allegation and takes no position on it at this time.