Green v. Underwriters at Lloyd's London

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF LOUISIANA

KAREN GREEN CIVIL ACTION

VERSUS NO: 23-927

UNDERWRITERS AT LLOYD’S, LONDON SECTION: “H”

ORDER AND REASONS

Before the Court are Defendant Nationstar Mortgage LLC’s Motion to

Dismiss (Doc. 3); Defendant Community Loan Services LLC’s Motion to

Dismiss (Doc. 17); and Defendant Certain Underwriters at Lloyd’s, London’s

Motion to Dismiss (Doc. 5). For the following reasons, the Motions are

GRANTED.

BACKGROUND

Plaintiff Karen Green alleges that she owns property at 232 Rue

Landry Rd., St. Rose, Louisiana that was damaged as a result of Hurricane

Ida on August 29, 2021 (“the Property”). The Property was secured by a

mortgage held by Defendant Community Loan Servicing, LLC

(“Community”). On February 8, 2021, Community purchased a lender-placed

insurance policy to insure the Property. In May 2021, Community purchased

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a replacement lender-placed policy from Defendant Certain Underwriters at

Lloyd’s, London (“Lloyds”) to insure the Property. After the Property was

damaged as a result of Hurricane Ida, a claim was submitted to Lloyds.

Although Lloyds issued a payment for some of the damage to the Property,

Plaintiff alleges that additional amounts are owed on the claim. She also

contends that Community breached its duties to her in various ways in

regard to force-placing insurance on the Property. Plaintiff refinanced the

mortgage loan with Defendant Nationstar Mortgage, LLC (“Nationstar”) on

September 20, 2022.

Defendants Lloyds, Community, and Nationstar have each separately

moved for dismissal of the claims against them on various grounds. Plaintiff

opposes. The Court will consider each Motion in turn.

LEGAL STANDARD

To survive a Rule 12(b)(6) motion to dismiss, a plaintiff must plead

enough facts “to state a claim for relief that is plausible on its face.”1 A claim

is “plausible on its face” when the pleaded facts allow the court to “draw the

reasonable inference that the defendant is liable for the misconduct alleged.”2

A court must accept the complaint’s factual allegations as true and must

“draw all reasonable inferences in the plaintiff’s favor.”3 The court need not,

however, accept as true legal conclusions couched as factual allegations.4 To

be legally sufficient, a complaint must establish more than a “sheer

1 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550

U.S. 544, 547 (2007)).

2 Id.

3 Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 232 (5th Cir. 2009).

4 Iqbal, 556 U.S. at 678.

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possibility” that the plaintiff’s claims are true.5 If it is apparent from the face

of the complaint that an insurmountable bar to relief exists and the plaintiff

is not entitled to relief, the court must dismiss the claim.6 The court’s review

is limited to the complaint and any documents attached to the motion to

dismiss that are central to the claim and referenced by the complaint.7

LAW AND ANALYSIS

A. Lloyds’s Motion to Dismiss

Defendant Lloyds moves for dismissal of Plaintiff’s claim under the

Policy, arguing that she is not a named insured, additional insured, or third-

party beneficiary under the Policy. The Policy, bearing certificate number

MP7004384, is properly considered on a motion to dismiss because it was

quoted in Plaintiff’s Complaint and is central to Plaintiff’s claims against

Lloyds.8

Under 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.”9 “When 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.”10 “An insurance

policy should not be interpreted in an unreasonable or a strained manner so

5 Id.

6 Lormand, 565 F.3d at 255–57.

7 Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498 (5th Cir. 2000).

8 Lee v. Safeco Ins. Co. of Am., No. CIV.A. 08-1100, 2008 WL 2622997, at *2 (E.D.

La. July 2, 2008)

9 Mayo v. State Farm Mut. Auto. Ins. Co., 869 So. 2d 96, 99 (La. 2004).

10 LA. CIV. CODE art. 2046.

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as to enlarge or to restrict its provisions beyond what is reasonably

contemplated by its terms or so as to achieve an absurd conclusion.”11 “The

rules of construction do not authorize a perversion of the words or the

exercise of inventive powers to create an ambiguity where none exists or the

making of a new contract when the terms express with sufficient clarity the

parties’ intent.”12

“In Louisiana, a plaintiff may sue under an insurance policy when he is

a named insured, additional insured, or third-party beneficiary of the

contract.”13 It is clear from the terms of the Policy that Community is the sole

named insured under the Policy. And while the Policy lists several additional

insureds, Plaintiff is not among them. Instead, Plaintiff contends that she is

a third-party beneficiary under the Policy. To be a third-party beneficiary to a

contract under Louisiana law, “there must be a clear expression of intent to

benefit the third party.”14 “[A]bsent such a clear manifestation, a party

claiming to be a third party beneficiary cannot meet his burden of proof. A

stipulation pour autrui is never presumed.”15

Plaintiff argues that three provisions of the Policy support a finding

that she is a third-party beneficiary. First, the Policy requires that Lloyds

provide coverage “equal to the borrower’s policy” that should have been

obtained by the borrower. Second, Plaintiff points out that the Policy

provided coverage in the amount of $20 million, which far exceeded

11 Carrier v. Reliance Ins. Co., 759 So. 2d 37, 43 (La. 2000).

12 Mayo, 869 So. 2d at 99–100.

13 Lee, 2008 WL 2622997, at *2.

14 M & M Gaming, Inc. v. Storey, 788 So. 2d 1230, 1233 (La. App. 4 Cir. 2001).

15 Joseph v. Hosp. Serv. Dist. No. 2 of Par. of St. Mary, 939 So. 2d 1206, 1212 (La.

2006).

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Community’s interest in the Property.16 Finally, Plaintiff points to a

provision that states that “in the event of ‘dual interest,’” any mortgagor

claiming coverage under the policy shall submit to examination.

These statements do not evince a clear intention to make Plaintiff a

third-party beneficiary. Rather, the first and second provisions merely speak

to the amount of coverage that Lloyds must provide, and the third provides

obligations for a mortgagor “in the event” that there is a dual interest. The

third provision does not create a dual interest where one does not otherwise

exist. The Policy provisions relied upon by Plaintiff do not expree the clear

manifestations of intent considered in the cases to which she cites. For

example, the policy at issue in Lee v. Safeco Insurance Company of America,

expressly stated that the insurer would pay the lender no more than the

amount of its interest in the insured location and that “[a]mounts payable in

excess of [the lender’s] interest will be paid to the ‘borrower.’”17 The Policy at

issue here contains no similar provision. Plaintiff is not a third-party

beneficiary of the Policy.

Plaintiff next alleges that Lloyds has waived this defense and is

estopped from arguing that she is not a third-party beneficiary because it

initially adjusted the claim with her and issued funds directly to her. She

16 The Policy covered multiple properties with different borrowers. Doc. 17-1.

17 Lee, 2008 WL 2622997, at *4; see also D’Juve v. Am. Mod. Home Ins. Co., No.

CIV.A. 14-2386, 2015 WL 1650259, at *3 (E.D. La. Apr. 14, 2015) (relying on policy

provision stating “You hereby direct that any benefits due which are in excess of your

interest in the property be paid to the mortgagor”); Brown v. Am. Mod. Home Ins. Co., No.

CV 16-16289, 2017 WL 2290268, at *5 (E.D. La. May 25, 2017) (same).

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alleges that she relied on the conduct of Lloyds in believing that she was an

insured under the Policy and in incurring expenses to obtain estimates and

legal counsel.

“Waiver is generally understood to be the intentional relinquishment of

a known right, power, or privilege.”18 Courts have held that, under Louisiana

law, “[g]enerally, waiver of a policy defense can only be asserted by parties to

the insurance contract.”19 In fact, the court in Aguillard v. American Security

Insurance Co. noted that it could not locate “a single instance of waiver being

successfully raised by a non-party/non-beneficiary to an insurance contract”

outside of the context of the Louisiana Direct Action Statute.20 Further, the

Aguillard court found no justification for extending the defense of waiver to a

non-party to an insurance policy, “given the requirement under Louisiana

law that the contract ‘manifest a clear intention to benefit the third party’

that is lacking in this matter.”21 This Court finds this position compelling and

declines to allow Plaintiff, a non-party to the insurance policy, to argue

waiver here.

As for Plaintiff’s estoppel argument, the “rarely applied” doctrine

requires three elements: “(1) a representation by conduct or work; (2)

justifiable reliance thereon; and (3) a change of position to one’s detriment

18 Arceneaux v. Amstar Corp., 66 So. 3d 438, 450 (La. 2011).

19 Ins. Co. of N. Am. v. W. of England Shipowners Mut. Ins. Ass’n, 890 F. Supp. 1296,

1298 (E.D. La. 1995); Erem Invs., LLC v. Markel Int’l, No. 06-4553, 2008 WL 2704558, at *8

(E.D. La. July 8, 2008) (“This principle is equally instructive in the present case, as

Alabdalle is not an “insured” and, consequently, the policy rationale behind the benefit of

waiver does not extend to a person in his position.”).

20 No. 2:22-CV-05085, 2023 WL 2521052, at *2 (W.D. La. Mar. 14, 2023).

21 Id.

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because of the reliance or representation.”22 The Court finds that Plaintiff

has not alleged sufficient facts in her Amended Complaint to support a claim

of estoppel against Lloyds. Plaintiff alleges that after initiating a claim for

damage on her property, Lloyds worked with her to adjust her claim and

issued payment directly to her as “payee.” However, she does not allege that

she was misled by this conduct or that she suffered due to her reliance

thereon. Rather, the Amended Complaint attributes the expenses she

incurred for a public adjuster and legal counsel to pursue a claim under the

Policy to her lender Community’s misrepresentations.23 Accordingly, Plaintiff

has not stated a claim for estoppel against Lloyds.

Finally, Plaintiff alleges that she can proceed against Lloyds under the

Louisiana’s Direct Action Statute. This is incorrect. The Louisiana’s Direct

Action Statute allows “injured persons” to bring direct actions under liability

policies covering tortfeasors. It has no application in the first-party property

insurance context. Accordingly, Plaintiff’s claims against Lloyds are

dismissed.

B. Community’s Motion to Dismiss

Next, Plaintiff brings claims for negligence, breach of contract, breach

of fiduciary duty, misrepresentation, violations of the Truth in Lending Act

(TILA), violations of the Real Estate Settlement Procedures Act (RESPA),

and violations of the Dodd-Frank Act against Community, her mortgage

22 Kinsale Ins. Co. v. CD Mgmt. of New Orleans, Inc., No. CV 23-736, 2023 WL

3949121, at *5 (E.D. La. June 12, 2023). See also Loubat v. Audubon Life Ins. Co., 177 So.

2d 281, 283 (La. 1965); Balehi Marine, Inc. v. Firemen’s Ins. Co. of Newark, New Jersey,

460 So. 2d 16, 17 (La. App. 1 Cir. 1984) (“[E]stoppel cannot be invoked to bring within the

coverage of a[n insurance] policy . . . risks not included nor contemplated by its terms.”).

23 Doc. 1-2 at 34.

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lender. Specifically, Plaintiff alleges that Community breached its duties to

her under their mortgage agreement (“the Loan Agreement”) by obtaining

insurance that exceeded the mortgage amount, obtaining insurance at above-

market rates, failing to give her notice of the new Policy, failing to list her as

a named insured, failing to submit a timely proof of loss or make a claim

under the Policy for the Property’s damage, and failing to use the loss

payments made under the Policy to repair the Property. She also alleges that

Community misrepresented to her that she could submit a claim under the

Policy and that she relied on this representation in obtaining experts to

assess the Property damage and legal counsel to pursue claims under the

Policy. Community moves for dismissal of all claims against it, arguing (1)

that Plaintiff’s claims are time-barred, (2) that Plaintiff’s claims are barred

by the Louisiana Credit Agreement Statute, and (3) that Plaintiff has failed

to state a claim for which relief can be granted.

First, Community argues that many of Plaintiff’s claims are time-

barred by a one-year term of prescription. It alleges that Plaintiff knew or

should have known of her claims against Community in December 2021 when

Lloyds rejected her insurance claim, yet she failed to add Defendant to this

lawsuit until February 1, 2023. “A statute of limitations may support

dismissal under Rule 12(b)(6) where it is evident from the plaintiff’s

pleadings that the action is barred and the pleadings fail to raise some basis

for tolling or the like.”24 “[D]ismissal for failure to state a claim based on the

statute of limitations defense should be granted only when the plaintiff’s

potential rejoinder to the affirmative defense was foreclosed by the

24 Jones v. Alcoa, Inc., 339 F.3d 359, 366 (5th Cir. 2003).

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allegations in the complaint.”25 Plaintiff responds, and this Court agrees, that

a determination that the statute of limitations has run cannot be made on the

basis of the allegations in the Amended Complaint. Specifically, while the

Amended Complaint does state that Lloyds denied her December 2021 claim,

it also states that Lloyds paid a supplemental claim to Plaintiff on February

7, 2022 and then failed to pay a supplemental claim submitted on June 10,

2022. Accordingly, the Court must “await further factual development before

ascertaining whether the statute of limitations bars Plaintiff's claims.”26

Next, Community argues that in light of the clear terms of the Loan

Agreement, Plaintiff’s claims against it are barred by Louisiana’s Credit

Agreement Statute, and she cannot state a claim upon which relief can be

granted. Louisiana’s Credit Agreement Statute provides that “[a] debtor shall

not maintain an action on a credit agreement unless the agreement is in

writing, expresses consideration, sets forth the relevant terms and conditions,

and is signed by the creditor and the debtor.”27 The Credit Agreement Statute

prohibits all causes of action based on alleged duties that are not contained

within a written agreement.28 Further, in order to state a claim for breach of

contract, “the plaintiff must allege the breach of a specific provision.”29 “When

the words of a contract are clear and explicit and lead to no absurd

25 Acad. of Allergy & Asthma in Primary Care v. Quest Diagnostics, Inc., 998 F.3d

190, 196 (5th Cir. 2021) (quoting Jaso v. The Coca Cola Co., 435 F. App’x 346, 352 (5th Cir.

2011)).

26 Curtis v. Cerner Corp., 621 B.R. 141, 159 (S.D. Tex. 2020).

27 LA. REV. STAT. § 6:1122.

28 Hovell v. Origin Bank, 311 So. 3d 340, 341 (La. 2021); Jesco Const. Corp. v.

Nationsbank Corp., 830 So. 2d 989, 992 (La. 2002).

29 Crouch v. Lakeview Loan Servicing, LLC., No. CV 20-2716, 2021 WL 928026, at *2

(E.D. La. Mar. 11, 2021).

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

intent.”30

The Loan Agreement between Plaintiff and Community required

Plaintiff to maintain homeowner’s insurance on the property. The relevant

portions of the Loan Agreement state as follows:

If Borrower fails to maintain any of the coverages described

above, Lender may obtain insurance coverage at Lender’s option

and Borrower’s expense. Lender is under no obligation to

purchase any particular type or amount of coverage. Therefore,

such coverage shall cover Lender, but might or might not protect

Borrower, Borrower’s equity in the Property, or the contents of

the Property, against any risk, hazard, or liability and might

provide greater or lesser coverage than was previously in effect.

Borrower acknowledges that the cost of the insurance coverage so

obtained might significantly exceed the cost of insurance that

Borrower could have obtained. . . .

In the event of loss, Borrower shall give prompt notice to

the insurance carrier and Lender. Lender may make proof of loss

if not made promptly by Borrower. Unless Lender and Borrower

otherwise agree in writing, any insurance proceeds, whether or

not the underlying insurance was required by Lender, shall be

applied to restoration or repair of the Property, if the restoration

or repair is economically feasible and Lender’s security is not

lessened. During such repair and restoration period, Lender shall

have the right to hold such insurance proceeds until Lender has

had an opportunity to inspect such Property to ensure the work

has been completed to Lender’s satisfaction, provided that such

inspection shall be undertaken promptly. Lender may disburse

proceeds for the repairs and restoration in a single payment or in

a series of progress payments as the work is completed. . . . If the

restoration or repair is not economically feasible or Lender’s

security would be lessened, the insurance proceeds shall be

30 LA. CIV. CODE art. 2046.

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applied to the sums secured by this Security Instrument, whether

or not then due, with the excess, if any, paid to Borrower.31

The parties also entered into a Waiver of Escrow Account Agreement,

which provided that:

At any time the Borrower has defaulted on its obligation under

this agreement, Lender may, in its sole discretion: a) establish an

escrow account for taxes or insurance as applicable and as

permitted by applicable law; b) immediately collect funds

sufficient to cover any outstanding taxes and insurance

premiums due; and c) begin to collect, on a monthly basis, a sum

for the annual taxes and insurance premiums, in addition to

whatever cushion is permitted by law and your loan documents.32

Community argues, and this Court agrees, that no part of the Loan

Agreement required it to obtain insurance for the Property if Plaintiff failed

to do so. Rather, the Agreement unequivocally states that Community “may”

at its option obtain coverage and it “may at its sole discretion” establish an

escrow account to pay for that coverage, but it “is under no obligation to

purchase any particular type or amount of coverage.”33 Likewise, the

Agreement does not provide that Plaintiff must be added as a named insured

on any policy obtained by Community, and it expressly acknowledges that

any coverage obtained may not protect Plaintiff. The Agreement does not

require any notice be given to Plaintiff if coverage is obtained. The

Agreement expressly acknowledges that any policy obtained may provide

greater coverage than was previously in effect and may significantly exceed

market rates. And the Agreement does not require Community to make a

31 Doc. 17-2.

32 Doc. 31-1.

33 Docs. 17-2, 31-1.

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claim under any insurance policy, instead providing only that the “Lender

may make proof of loss.”34

That said, the Agreement does require that insurance proceeds be

applied to repair the Property. Plaintiff’s Amended Complaint makes the

conclusory allegation that Defendant failed to apply loss payments made

under the Policy to repair the Property. It also states, however, that the

payments of insurance proceeds made by Lloyds were paid “directly to

Plaintiff.”35 Accordingly, Plaintiff has not alleged facts supporting a claim

that Community breached the Loan Agreement by failing to remit insurance

proceeds to Plaintiff for repair of her property. To the extent that Plaintiff is

alleging that Community is negligent in not procuring additional insurance

proceeds to repair the Property, the Loan Agreement does not create that

obligation.36

Further, Plaintiff has not alleged any facts supporting a

misrepresentation claim. There is no allegation that Community made any

written representation that Plaintiff was a beneficiary under the Policy.37

Plaintiff’s obligation in the Loan Agreement to submit a proof of loss under

the Policy does not create a right to payment under the Policy. The Loan

Agreement unequivocally provides that any coverage obtained by Community

34 Doc. 17-2 (emphasis added).

35 Doc. 1-2.

36 See Barbe v. Ocwen Loan Servicing, LLC, 383 F. Supp. 3d 634, 644 (E.D. La.

2019).

37 The purpose of the Louisiana Credit Agreement Statute is “to prevent potential

borrowers from bringing claims against lenders based on oral agreements.” Dixon v. Ally

Fin. Corp., No. CV 19-11344, 2020 WL 1234435, at *2 (E.D. La. Mar. 13, 2020). “A claim

based on oral assurances not memorialized in the written loan agreement” is barred by the

Louisiana Credit Agreement Statute. Whitney Bank v. SMI Cos. Glob., Inc., 949 F.3d 196,

206 (5th Cir. 2020).

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“shall cover Lender, but might or might not protect Borrower, Borrower’s

equity in the Property, or the contents of the Property.”38 The Loan

Agreement also provides that any costs for public adjusters or other third

parties retained by Plaintiff are the sole obligation of Plaintiff. Accordingly,

Plaintiff has failed to plead allegations that Defendant violated a written

provision of the Loan Agreement.

Finally, Plaintiff does not allege any facts or provide any zealous

argument in support of her claims under TILA, RESPA, or Dodd-Frank.

Plaintiff does not identify what provisions of these Acts she contends that

Community violated. In support of these claims, Plaintiff’s Amended

Complaint states only that Defendant “force placed unauthorized hazard

insurance on Plaintiff’s Property which exceeded the amount required by the

loan agreement, and which required accurate and meaningful disclosures as

well as changes to the policy’s requirements, none of which Defendant

provided therefore Plaintiff is entitled to relief under TILA, RESPA, and

Dodd-Frank.”39 As discussed above, the terms of the Loan Agreement do not

support an allegation that the force-placed insurance was unauthorized, and

the Loan Agreement expressly provides that any force-placed policy “might

provide greater or lesser coverage than was previously in effect.”40

Accordingly, these claims too fail.

Plaintiff has failed to state a claim upon which relief can be granted,

and her claims based on unwritten obligations of Defendant are barred by the

Louisiana Credit Agreement Statute.

38 Doc. 17-2.

39 Doc. 1-2.

40 Doc. 17-2.

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C. Nationstar’s Motion to Dismiss

Finally, in its Motion to Dismiss, Nationstar argues that Plaintiff has

not alleged facts to support a claim against it. In fact, the Amended

Complaint’s only allegation involving Nationstar is that in September 2022,

Plaintiff refinanced the mortgage loan held by Community with Nationstar.

Plaintiff alleges that upon taking over as lender on the Property, Nationstar

“became responsible for compliance with the terms of the mortgage and force

placed insurance policy.”*! Accordingly, for the same reasons discussed above

that Plaintiff has not alleged a claim against Community, she likewise has

not alleged a claim against Nationstar. Plaintiffs claims against Nationstar

are dismissed.

CONCLUSION

For the foregoing reasons, the Motions are GRANTED, and Plaintiffs

claims are DISMISSED. Plaintiff may amend her Complaint within 14 days

of this Order to the extent that she can remedy the deficiencies identified

herein.

New Orleans, Louisiana this 28th day of December, 2023.

g TRICHE

UNITED STATES DISTRICT JUDGE

41 Doc. 1-2.

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