Fontenot v. Great American Insurance Company

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF LOUISIANA

SANDRA FONTENOT CIVIL ACTION

VERSUS No. 23-2062

GREAT AMERICAN SECTION I

ASSURANCE COMPANY

ORDER & REASONS

Before the Court is defendant Great American Assurance Company’s

(“defendant”) motion1 to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1)

and 12(b)(6). Plaintiff Sandra Fontenot (“plaintiff”) has not filed a response to the

motion, and the deadline for doing so has passed.2 For the reasons below, the Court

grants the unopposed motion to dismiss.

I. BACKGROUND

This matter concerns a Hurricane Ida insurance claim. Plaintiff owned the

property that is the subject of this dispute.3 The property, at the time of damage, was

subject to an insurance policy (“the Policy”) issued by defendant.4 Following damage

to the property, plaintiff claims that defendant breached the Policy and acted in bad

faith by failing to make required payments.5 The Policy was purchased by Celink, the

1 R. Doc. No. 11.

2 Pursuant to Local Rule 7.5, plaintiff’s deadline to respond to defendant’s motion was

August 15, 2023.

3 R. Doc. No. 1-1, ¶ 4.

4 R. Doc. No. 1-1, ¶ 5.

5 R. Doc. No. 1-1, ¶ 17.

servicer of plaintiff’s loan, and lists Celink as the named insured.6 Accordingly,

defendant denies that plaintiff is covered by the policy and moves to dismiss the claim

pursuant to Rules 12(b)(1) and 12(b)(6).7

II. STANDARD OF LAW

In its motion, defendant raises both Rule 12(b)(1) and Rule 12(b)(6) as grounds

for dismissal. Defendant argues that plaintiff lacks standing, pursuant to Rule

12(b)(1), because she is not insured under the Policy nor a beneficiary of the Policy.

In addressing claims brought under both Rule 12(b)(1) and Rule 12(b)(6), the Fifth

Circuit stated in Cotton v. Certain Underwriters at Lloyd's of London, 831 F.3d 592,

594 (5th Cir. 2016):

“Standing,” however, is a label used to describe different things in the

law. It can describe whether a party has a right to sue under a contract.

Novartis Seeds, Inc. v. Monsanto Co., 190 F.3d 868, 871 (8th Cir. 1999)

(R. Arnold, J.). That concept of standing, which as the Supreme Court

has explained is really an issue of “contract interpretation” that goes to

the merits of a claim, Perry v. Thomas, 482 U.S. 483, 492, 107 S.Ct. 2520,

96 L.Ed.2d 426 (1987), is “entirely distinct from ‘standing’ for purposes

of Article III.” Novartis Seeds, 190 F.3d at 871 (noting that the argument

that plaintiff did not have right to enforce license agreement because of

an assignment did not go to jurisdiction); see also Perry, 482 U.S. at 487,

492, 107 S.Ct. 2520 (explaining that a contention that plaintiffs “were

‘not parties’ to [an] ... agreement” did not raise an issue of jurisdictional

standing); Cornhusker Cas. Co. v. Skaj, 786 F.3d 842, 850–51 (10th Cir.

2015) (rejecting attempt to classify question whether nonparties to an

6 The Policy was not attached to plaintiff’s complaint. The Court may consider

documents outside the complaint when they are: “(1) attached to the motion; (2)

referenced in the complaint; and (3) central to the plaintiff's claims.” Maloney Gaming

Mgmt. v. St. Tammany Parish, 456 Fed.Appx. 336, 340 (5th Cir. 2011). Accordingly,

consideration of the Policy is appropriate because it is attached to Great American’s

Motion, referenced in plaintiff’s complaint, and central to plaintiff’s claim for relief.

R. Doc. No. 1-1, ¶ 5 (reference to the Policy in the complaint); R. Doc. No. 11-2 (the

Policy as an attachment to defendant’s motion).

7 R. Doc. No. 5, ¶ 1.

insurance agreement could invoke waiver and estoppel against

insurance company as question of jurisdictional standing).

“Considering Cotton, regardless of whether plaintiffs are additional or named

insureds or third-party beneficiaries . . . they have Article III standing to state claims

against the insurers . . . The issue of whether plaintiffs have “standing” in the sense

of a right to sue under the contract is better analyzed as whether they have stated a

claim under Rule 12(b)(6).” Brown v. Am. Mod. Home Ins. Co., 2017 WL 2290268, at

*3 (E.D. La. May 25, 2017) (Lemmon, J.). Therefore, because the defendant’s standing

argument is one of contract interpretation, the Court will treat this motion as one for

failure to state a claim pursuant to Rule 12(b)(6).

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

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).

III. ANALYSIS

Defendant moves to dismiss this claim pursuant to Rule 12(b)(6) because

plaintiff is not an insured, additional insured, or third-party beneficiary of the Policy.

Because the parties invoke the Court’s jurisdiction based on diversity of citizenship,

the Court applies the choice of law rules of the forum state, Louisiana. Klaxon Co. v.

Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941).

Louisiana choice of law rules dictate that “an issue of conventional obligations

is governed by the law of the state whose policies would be most seriously impaired

if its law were not applied to that issue.” La. Civ. Code art. 3540. “[T]he law of the

state where the insurance contract was issued and executed generally governs the

interpretation of that contract.” Pioneer Expl., L.L.C. v. Steadfast Ins. Co., 767 F.3d

503, 512 (5th Cir. 2014). However, “[i]f the laws of the states do not conflict, then no

choice-of-law analysis is necessary, and we simply apply the law of the forum state.”

Mumblow v. Monroe Broad., Inc., 401 F.3d 616, 621 (5th Cir. 2005) (quoting

Schneider Nat'l Transp. v. Ford Motor Co., 280 F.3d 532, 536 (5th Cir.2002)) (internal

quotations omitted).

The insured property is located in Louisiana. The Policy was executed by

defendant in Ohio and issued to Celink in Michigan. Accordingly, Ohio, Michigan,

and Louisiana all potentially have an interest in the application of their own laws.

To determine if a choice of law analysis is necessary, the Court must first analyze

whether a conflict exists between the states’ laws.

Pursuant to Louisiana law, “[a]n insurance policy is a contract between the

parties and should be construed by using the general rules of interpretation of

contracts set forth in the Louisiana Civil Code.” Cadwallader v. Allstate Ins. Co., 848

So.2d 577, 580 (La. 2003). While the general standard for interpretation is the intent

of the parties, “[w]hen the words of a contract are clear and explicit and lead to no

absurd consequences, no further interpretation may be made in search of the parties’

intent.” In re Katrina Canal Breaches Litig., 495 F.3d 191, 207 (5th Cir. 2007)

(quoting La. Civ. Code art. 2046). Accordingly, “[i]f the policy wording at issue is clear

and unambiguously expresses the parties’ intent, the insurance contract must be

enforced as written.” Id. (quoting Cadwallader, 848 So.2d at 580).

Louisiana law permits enforcement of policies by intended third-party

beneficiaries in addition to enforcement by the named insured or additional named

insured. Williams v. Certain Underwriters At Lloyd's of London, 398 F. App'x 44, 47

(5th Cir. 2010). “Under Louisiana law, a third-party beneficiary must be created by

contract, known as a stipulation pour autri, and is never presumed. To establish a

stipulation pour autri, a party must demonstrate that: ‘(1) the stipulation for a 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.’” Johnson v. Am. Sec. Ins. Co., 2023 WL 143325, at *4 (E.D. La.

Jan. 10, 2023) (Vitter, J.) (quoting Joseph v. Hosp. Serv. Dist. No. 2 of Par. of St. Mary,

939 So. 2d 1206, 1212 (La. 2006)).

Michigan law does not conflict with Louisiana law. Pursuant to Michigan law,

“a court should “give contractual language that is clear and unambiguous full effect

according to its plain meaning unless it violates the law or is in contravention of

public policy.” Stryker Corp. v. XL Ins. Am., 735 F.3d 349, 354 (6th Cir. 2012). Like

Louisiana law, Michigan law dictates that third parties have the right to enforce

policies only when the promisor has “undertaken the promise directly to or for that

person.” Schmalfeldt v. N. Pointe Ins. Co., 469 Mich. 422, 428 (2003). The parties to

the contract must be “clearly aware that the scope of their contractual undertakings

encompasses a third party.” Id. A court “should look no further than the form and

meaning of the contract itself to determine whether a party is an intended third-party

beneficiary.” Id. Accordingly, Michigan law, like Louisiana law, requires the court to

give meaning to the plain language of the contract and only infer a right to enforce a

contract by a third-party where the intent to benefit the third-party is direct, not

incidental.

Similarly, Ohio law requires the court to begin with the plain language of the

contract. “If a contract is clear and unambiguous, then its interpretation is a matter

of law and there is no issue of fact to be determined.” Inland Refuse Transfer Co. v.

Browning-Ferris Indus. of Ohio, Inc., 15 Ohio St. 3d 321, 323 (1984). Ohio law

“requires that for a third party to be an intended beneficiary under a contract, there

must be evidence that the contract was intended to directly benefit that third party.”

Cook v. Ohio Nat'l Life Ins. Co., 961 F.3d 850, 856 (6th Cir. 2020). “Third parties that

are only incidental beneficiaries are generally not permitted to assert claims under

contracts to which they are not parties.” Id.

The laws of all three states require a court to begin with the plain language of

the contract. If an unnamed beneficiary of a policy seeks to enforce the policy, the

court must determine if the benefit conferred was direct or incidental. Only direct

beneficiaries of the policy may enforce the policy. Accordingly, the laws of the states

do not conflict, and no choice of law analysis is necessary. The Court will, therefore,

apply the law of the forum state, Louisiana. See Mumblow v. Monroe Broad., Inc., 401

F.3d 616, 621 (5th Cir. 2005).

The language of the Policy issued by defendant is clear. The Policy states that

“[t]he mortgagor or tenant is not an insured or additional insured under the policy.”8

8 R. Doc. No. 11-2, at 34.

Pursuant to the plain language of the Policy and the Louisiana standard of

interpretation, plaintiff is neither an insured nor an additional insured. See

Cadwallader v. Allstate Ins. Co., 848 So.2d 577, 580 (La. 2003).

Additionally, plaintiff is not an intended third-party beneficiary pursuant to

Louisiana law. The Policy was initiated by Celink, the mortgagee, to protect its own

interest in the property. There was no intent to confer a direct benefit upon plaintiff.

Any benefit conferred on plaintiff was merely incidental to the mortgagee’s coverage.

See Riley v. Sw. Bus. Corp., c, at *3 (E.D. La. Sept. 17, 2008) (Vitter, J.) (“Indeed, the

very purpose of a forced placed policy is to cover the uninsured portion of the

mortgagee’s interest. Though [the mortgagor] may incidentally benefit from the

stopgap coverage, he was not an intended beneficiary and is thus not entitled to

enforce the contract in court.”); Gisclair v. Great American Assurance Company, 2023

WL 1765922, at *6 (E.D. La., Feb. 3, 2023) (Morgan, J.); Johnson, 2023 WL 143325,

at *4. Because plaintiff does not assert a plausible claim for relief under the Policy,

plaintiff’s breach of contract claim must be dismissed pursuant to Rule 12(b)(6).

Plaintiff additionally claims that defendant is liable for violating statutory

duties pursuant to La. R.S. §§ 22:1973 and 22:1892. These claims rely on the existence

of a valid, underlying insurance claim. Gisclair, 2023 WL 1765922, at *7; Riley, WL

4286631, at *3. Because plaintiff is not entitled to coverage under the Policy, these

claims also lack a plausible basis.

IV. CONCLUSION

For the reasons stated herein,

IT IS ORDERED that defendant’s motion to dismiss is GRANTED pursuant

to Rule 12(b)(6) and this case is DISMISSED WITH PREJUDICE.

New Orleans, Louisiana, September 18, 2023.

LANCE M. fr

UNITED STATES DJSTRICT JUDGE