Opinion
Civil No. 1:20-cv-00224-HSO-JCG
2021-09-20
Gilberto Alarcon MORTERA, Plaintiff v. STATE FARM FIRE AND CASUALTY COMPANY, Defendant
Christopher J. Weldy, Weldy Law Firm, PLLC, Jackson, MS, for Plaintiff. John A. Banahan, Calen J. Wills, Bryan, Nelson, Schroeder, Castigliola & Banahan, Pascagoula, MS, for Defendant.
Christopher J. Weldy, Weldy Law Firm, PLLC, Jackson, MS, for Plaintiff.
John A. Banahan, Calen J. Wills, Bryan, Nelson, Schroeder, Castigliola & Banahan, Pascagoula, MS, for Defendant.
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT STATE FARM FIRE AND CASUALTY COMPANY'S MOTION [41] FOR SUMMARY JUDGMENT, OR IN THE ALTERNATIVE, MOTION FOR PARTIAL SUMMARY JUDGMENT AS TO PUNITIVE AND EXTRA-CONTRACTUAL DAMAGES, AND DENYING AS MOOT PLAINTIFF GILBERTO ALARCON MORTERA'S MOTION [67] FOR SUMMARY JUDGMENT
HALIL SULEYMAN OZERDEN, UNITED STATES DISTRICT JUDGE
BEFORE THE COURT are Defendant State Farm Fire and Casualty Company's Motion [41] for Summary Judgment, or in the Alternative, Motion for Partial Summary Judgment as to Punitive and Extra-Contractual Damages, and Plaintiff Gilberto Alarcon Mortera's Motion [67] for Summary Judgment. After due consideration of the record, the parties’ Motions, related pleadings, and relevant legal authority, the Court finds that Defendant State Farm Fire and Casualty Company's Motion [41] for Summary Judgment should be granted and that Plaintiff Gilberto Alarcon Mortera's Motion [67] for Summary Judgment should be denied as moot. Plaintiff's claims against Defendant will be dismissed with prejudice.
I. BACKGROUND
A. Factual background
Gilberto Alarcon Mortera ("Plaintiff" or "Mortera") owns a condominium unit in the Kona Villa complex in Diamondhead, Mississippi. State Ct. R. [3] at 7. On or about July 7, 2018, Plaintiff's unit was damaged from "a long-time water leak and ultimate failure of the hot water heater" in the unit above his. Mem. [54] at 2. At the time of the incident, Kona Villa Owners Association ("Kona Villa") was insured with Defendant State Farm Fire and Casualty Company ("Defendant" or "State Farm"). See Ex. 1 [54-1]. The Renewal Declarations Page of Kona Villa's policy with State Farm provides that Kona Villa is the only named insured. Id. at 2. The Complaint alleges that Plaintiff's property was also insured under this policy. State Ct. R. [3] at 8. Specifically, he lists the following items as being damaged by the incident: the unit's flooring, oven, refrigerator, microwave, dishwasher, bedroom furniture in multiple rooms, wood shutters, window blinds, cabinets, drapery rod, and a bathroom mirror. Ex. 5 [54-5] at 1. Plaintiff did not have any other insurance on his unit. Ex. 6 [54-6] at 27.
State Farm was notified of the water damage to Plaintiff's unit on July 16, 2018, by Kona Villa's Treasurer. Id. at 31. State Farm processed the claim as a "First Party Property" claim and informed Kona Villa's Treasurer that it was Kona Villa's decision whether to file a claim. Id. 30-31. On August 15, 2018, Bruce Howell ("Howell"), a State Farm Claim Representative, inspected the damaged units, including Plaintiff's, with Kona Villa property manager Randy Piefer ("Piefer"). Id. at 26-27. Howell reviewed the maintenance portion of Kona Villa's bylaws and determined that the "damages sustained by the unit owners to the interior of the units is not the responsibility of [Kona Villa]." Id. at 27. Howell indicated that a full copy of the bylaws would be placed in the file and reviewed "one final time with TM Burney." Id.
On September 7, 2018, Jeff Crow, a State Farm Claim Representative, sent Kona Villa a closing letter in response to a request from Piefer. Ex. 4 [41-4]. The letter confirmed that, based on State Farm's review of the bylaws, the damage was the responsibility of each unit owner and that Kona Villa should contact State Farm if it discovered any damages that fell within Kona Villa's responsibility. Id. at 2.
On February 4, 2020, Piefer informed State Farm that Plaintiff's counsel had contacted Kona Villa and requested that State Farm conduct an additional review of the damages. Ex. 6 [54-6] at 26. Piefer advised State Farm that he was unsure if Kona Villa wanted State Farm to perform an additional review, id. , and State Farm's claim file does not indicate that a subsequent review ever occurred, see generally id.
On February 17, 2020, Plaintiff's counsel contacted State Farm and spoke with Andrea Wills ("Wills"). Id. at 25. Wills informed counsel that State Farm had not denied the claim and that, according to the Kona Villa bylaws, the individual unit owners were "responsible for the damage to the interior of the unit." Id. at 25. Kona Villa later granted State Farm permission to send a copy of its closing letter to Plaintiff's counsel but refused to allow State Farm to release a copy of its insurance policy to Plaintiff. Id. at 25.
B. Procedural History
On March 12, 2020, Plaintiff filed this action against State Farm in the Circuit Court of Hancock County, Mississippi. State Ct. R. [3] at 6. The Complaint alleges that Plaintiff "was insured under an insurance policy issued by State Farm," and that State Farm breached "its duty to promptly, fully, and fairly investigate and evaluate Plaintiff's claim" and breached "its duty of good faith and fair dealing" by refusing to pay insurance benefits due to Plaintiff. Id. at 8-9. State Farm removed the case to this Court pursuant to 28 U.S.C. §§ 1332, 1441, and 1446. Ex. 2 [1-2] at 1.
State Farm has filed the instant Motion [41] for Summary Judgment or, in the Alternative, Motion for Partial Summary Judgment as to Punitive and Extra-Contractual Damages. Mot. [41]. State Farm argues that Plaintiff is not an insured under the Kona Villa policy and, as such, is not permitted to maintain a direct action against State Farm. State Farm also contends that Plaintiff cannot satisfy his burden of proving that it acted without an arguable basis and is not entitled to recover punitive or extra-contractual damages. Id. at 2.
In support of its Motion [41], State Farm submitted the deposition of its Rule 30(b)(6) corporate representative, Darrel Burney. Ex. 7 [41-7]. Burney testified extensively on the policy and for whom it provided coverage. Id. He confirmed State Farm's position that Kona Villa is the only named insured and that the "provisions outlined under Section [I] of this policy, would all be for the benefit of the [Kona Villa]." Id. at 54-55. Burney acknowledged that some of the items covered under Section I of the policy are property of the unit owner, but he clarified that the individual unit owners are not an insured under Section I of the policy. Id. at 52-53. Burney explained State Farm's position that "for the benefit of" means that if there was a covered loss that exceeded Kona Villa's deductible under Section I of the policy, then State Farm would tender payment to Kona Villa. Id. at 56-57. State Farm contends that only the named insured, Kona Villa, is entitled to the "benefits" of the policy under Section I. Id. at 58-59.
Section I of the policy is titled "Property."
Plaintiff has filed a Memorandum [54] in Opposition to the Motion [41] and his own Motion [67] for Summary Judgment, essentially reiterating many of the arguments set forth in his Response to State Farm's Motion [41] for Summary Judgment. Plaintiff argues that he is either an insured or a third-party beneficiary under the language of the policy, which allows him to bring this direct action. Mem. [68] at 1. He asserts that State Farm denied his insurance claim without a good faith basis for doing so, entitling him to punitive and extra-contractual damages.
II. DISCUSSION
A. Legal Standard
Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). "The evidence is viewed in the light most favorable to the non-movants with all reasonable inferences drawn in their favor." United States Sec. & Exch. Comm'n v. Kahlon , 873 F.3d 500, 504 (5th Cir. 2017).
When faced with a properly supported motion for summary judgment, the non-moving party must show the existence of a genuine issue of material fact by producing "significant probative evidence." Hamilton v. Segue Software, Inc. , 232 F.3d 473, 477 (5th Cir. 2000). "A genuine dispute of material fact means that evidence is such that a reasonable jury could return a verdict for the nonmoving party." Royal v. CCC&R Tres Arboles, L.L.C. , 736 F.3d 396, 400 (5th Cir. 2013) (quotation omitted). "If the evidence is merely colorable, or is not significantly probative, summary judgment is appropriate." Cutting Underwater Techs. USA, Inc. v. ENI U.S. Operating Co. , 671 F.3d 512, 517 (5th Cir. 2012) (quoting Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 249-50, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (internal quotation marks omitted)). Because this case arises under the Court's diversity jurisdiction, it must apply the substantive law of the forum state, Mississippi. State Farm Mut. Auto. Ins. Co. v. LogistiCare Sols., LLC , 751 F.3d 684, 688 (5th Cir. 2014) (citing Erie R.R. Co. v. Tompkins , 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) ). Mississippi law requires the following elements in order to form a valid contract: "(1) two or more contracting parties, (2) consideration, (3) an agreement that is sufficiently definite, (4) parties with legal capacity to make a contract, (5) mutual assent, and (6) no legal prohibition precluding contract formation." GGNSC Batesville, LLC v. Johnson , 109 So. 3d 562, 565 (Miss. 2013) (quoting Adams Cmty. Care Ctr., LLC v. Reed , 37 So. 3d 1155, 1158 (Miss. 2003) ). For a breach of contract claim, the plaintiff must prove by a preponderance of the evidence: (1) "the existence of a valid and binding contract" and (2) "that the defendant has broken, or breached it." Bus. Commc'ns., Inc. v. Banks , 90 So. 3d 1221, 1224-25 (Miss. 2012) (overruling Warwick v. Matheney , 603 So. 2d 330, 336 (Miss. 1992) ).
The Mississippi Supreme Court has held that "insurance policies are contracts, and as such, they are to be enforced according to their provisions." Corban v. United Servs. Auto. Ass'n. , 20 So. 3d 601, 609 (Miss. 2009) (quoting Noxubee Cnty. Sch. Dist. v. United Nat'l Ins. Co. , 883 So. 2d 1159, 1166 (Miss. 2004) ). If the language of an insurance policy is clear and unambiguous, "then the language of the policy must be interpreted as written." Hayne v. The Doctors Co. , 145 So. 3d 1175, 1180 (Miss. 2014) (citing Hankins v. Md. Cas. Co./Zurich Am. Ins. Co. , 101 So. 3d 645, 652 (Miss. 2012) ). "[I]n interpreting an insurance policy, this [c]ourt should look at the policy as a whole, consider all relevant portions together and, whenever possible, give operative effect to every provision in order to reach a reasonable overall result." Id. (quoting J & W Foods Corp. v. State Farm Mut. Auto. Ins. Co. , 723 So. 2d 550, 552 (Miss. 1998) ).
B. Analysis
1. Is Plaintiff a named insured under the policy?
Plaintiff asserts that he is an insured under the policy because he is a unit owner and because his property is insured under the policy. Mem. [54] at 14. Under Mississippi law a party may only recover damages for breach of contract if there is privity of contract between the damaged party and the party sought to be held liable for the breach. Burns v. Washington Savings , 251 Miss. 789, 171 So. 2d 322, 324 (1965) (citing Jones v. Miss. Farms Co. , 116 Miss. 295, 76 So. 880 (1917) ; 17 Am.Jur.2d Contracts § 297 (1964) ; 17A C.J.S. Contracts § 519(2) (1963) ); see also Bissette v. Univ. of Miss. Med. Center , 282 So. 3d 507, 513 (Miss. 2019). Thus, in order to maintain his breach of contract claim against State Farm, Plaintiff must show the existence of a contractual relationship with State Farm. Absent such a relationship, State Farm does not owe Plaintiff any duty of good faith and fair dealing. See Am. Bankers’ Ins. Co. of Fla. v. Wells , 819 So. 2d 1196, 1207 (Miss. 2001) (holding that the "[t]he duty of good faith and fair dealing arises from the existence of a contract between the parties.").
State Farm's Motion [41] seeks dismissal of the Complaint on grounds that Plaintiff is not an insured under the Kona Villa policy, and as such he may not pursue "a direct action, bad faith lawsuit against State Farm." Mot. [41] at 2. Defendant submits that the policy identifies the "insured" on the Renewal Declarations page as:
Kona Villa Owners AssociationC/O Beverly Blount212 Kona VillaDiamondhead, MS 39525-3484
See Ex. 6 [41-6] at 2. The policy's Renewal Declarations page does not identify any other person or entity as an insured. See id.
Plaintiff counters that he qualifies as an insured because the policy language is broad enough to include him as an insured and his property is covered under the policy. Mem. [54] at 14-15. The introductory language of the policy provides that the terms "you" or "your" include not only the named insured, but also "any other person or organization qualifying as a Named Insured under the policy." Ex. 1 [54-1] at 41. Plaintiff argues that this definition is broad enough to include him, because Section II of the policy provides that unit owners are insureds under the policy. Mem. [54] at 15. Section II of the Residential Community Association Endorsement ("Endorsement") to the Kona Villa policy defines who is an insured for purposes of liability coverage. Ex. 1 [54-1] at 21. This Endorsement defines an insured as follows:
Any unit-owner including:
(1) The declarant, builder, sponsor, developer or promoter in the capacity as a unit-owner, but only with respect to the declarant's, builder's, sponsor's, developer's or promoter's liability arising out of:
(a) The ownership, maintenance or repair of that portion of the premises which is not owned solely by the declarant, builder, sponsor, developer or promoter; or
(b) The declarant's, builder's, sponsor's, developer's or promotor's membership in the association.
(2) Each other unit-owner of the described condominium association or similar community association, but only with respect to that person's liability arising out of :
(a) The ownership, maintenance or repair of that portion of the premises which is not owned solely by the unit-owner; or
(b) Membership in the association.
Id. at 21-22 (emphasis added).
Plaintiff claims that Section II's definition of who is an insured is not limited solely to liability claims. Mem. [54] at 15. However, the policy is clear that the term "insured" as used in Section II "means any person or organization qualifying as such under Section II – WHO IS AN INSURED." Ex. 1 [54-1] at 41. The Court finds that this language is clear and unambiguous, and that it limits the application of the definition of insured used in Section II to claims falling under Section II. Thus, while Plaintiff might arguably qualify as an insured under the policy for purposes of liability claims under Section II, this is not sufficient to render him an insured for purposes of Section I of the policy, which is the relevant portion here. Based upon the plain language of the policy, this does not make Plaintiff a named insured under Section I.
Alternatively, Plaintiff argues that he is an insured under Section I of the policy because his property is covered under Section I. Mem. [54] at 15. In support of this position Plaintiff again draws the Court's attention to the Endorsement. Id. at 2; Ex. 1 [54-1] at 20. The Endorsement amends the definition of property under Section I of the policy to include:
Any of the following types of property contained in an individual unit, regardless of ownership:
(a) Fixtures, improvements, and alterations that are a part of the building or structure; and
(b) Appliances, such as those used for refrigerating, ventilating, cooking, dishwashing, laundering, security or housekeeping.
But Building does not include personal property owned or used by or in the care, custody or control of a unit-owner except for personal property listed in Paragraphs (a) or (b).
Ex. 1 [54-1] at 20. Plaintiff asserts that under this language the policy covers the "appliances, fixtures, improvements, and alterations that are part of the building or structure, that are owned by the unit owner." Mem. [54] at 15. He claims that the flooring, appliances, bedroom furniture, wood shutters, window blinds, cabinets, drapery rod, and a bathroom mirror in his unit qualify as covered property under Section I. See Ex. 5 [54-5] at 1 (listing the damages to Plaintiff's unit).
The Court finds that under the unambiguous terms of the policy, Plaintiff is not an insured under this provision because the property covered under the Endorsement in question is insured for the benefit of Kona Villa, and not for Plaintiff's benefit. See Ex. 1 [54-1] at 41 (providing coverage for "[p]ersonal property owned by you that is used to maintain or service the buildings or structures or the described premises"). Kona Villa had an insurable interest in this property because it benefits from its existence and would suffer a loss it was destroyed. See Penthouse Owners Ass'n, Inc. v. Certain Underwriters at Lloyd's, London , No.1:07-CV-568, 2011 WL 13073693, at *5 (S.D. Miss. Feb. 14, 2011) (quoting Estate of Murrell v. Quin , 454 So. 2d 437, 444 (Miss. 1984) ). The Mississippi Supreme Court has recognized that one has an insurable interest in property "if he derives a benefit from its existence or would suffer loss from its destruction." Quin , 454 So. 2d at 444. The property covered under the Endorsement enhances the value of the Kona Villa condominium units because without the fixtures, improvements, alterations, and appliances the units would be less suitable for residential living and thus less desirable.
The Endorsement covers only Kona Villa's interest in the property within each individual unit because the policy is clear that, under Section I, it is Kona Villa that is the named insured and not Plaintiff. Although certain property within Plaintiff's unit may be covered under Section I of the policy, this by itself is insufficient to render Plaintiff an insured under the terms of the policy. State Farm's Motion [41] should therefore be granted in this regard.
2. Is Plaintiff a third-party beneficiary under the policy?
a. Third-party beneficiaries under Mississippi law
Plaintiff contends that even if he is not an actual insured under the Kona Villa policy, he has standing to sue for breach of the duty of good faith and fair dealing as a third-party beneficiary. Mem. [54] at 1. Under Mississippi law, a stranger to a contract may bring a breach of contract claim as a third-party beneficiary. Burns , 171 So. 2d at 324. However, "a third[-]party beneficiary may sue for a contract breach only when the alleged broken condition was placed in the contract for his direct benefit." Trammell v. State , 622 So. 2d 1257, 1260 (Miss. 1993). The Mississippi Supreme Court employs the following analysis to determine third-party beneficiary status:
(1) When the terms of the contract are expressly broad enough to include the third party either by name or as one of a specified class, and (2) the said third party was evidently within the intent of the terms so used, the said third party will be within its benefits, if (3) the
promisee had, in fact, a substantial and articulate interest in the welfare of the said third party in respect to the subject of the contract.
Simmons Hous., Inc. v. Shelton , 36 So. 3d 1283, 1286 (Miss. 2010) (quoting Yazoo & M.V.R. Co. v. Sideboard , 161 Miss. 4, 133 So. 669, 671 (1931) ). The United States Court of Appeals for the Fifth Circuit has recognized that to qualify as a third-party beneficiary under Mississippi law, "the plaintiff must show that ‘the condition which is alleged to have been broken was placed in the contract [between third parties] for his direct benefit.’ " Gerard J.W. Bos & Co., Inc. v. Harkins & Co. , 883 F.2d 379, 382 (5th Cir. 1989) (quoting Ivey's Plumbing and Elec. v. Petrochem Maint., Inc. , 463 F. Supp. 543, 549 (N.D. Miss. 1978) ).
An incidental beneficiary to a contract, however, does not acquire any rights under the contract against the promisor or promisee. Rosenfelt v. Miss. Dev. Auth. , 262 So. 3d 511, 519 (Miss. 2018) (citing Miss. High Sch. Activities Ass'n, Inc. v. Farris ex rel. Farris , 501 So. 2d 393, 396 (Miss. 1987) ). As such, a third party who is a "mere incidental beneficiary" to a contract lacks standing to sue for its breach. Trammell , 622 So. 2d at 1260. The Mississippi Supreme Court has held that a third party is an incidental beneficiary rather than a third-party beneficiary when the contract benefits flow directly to the contracting party and not to the third party. Farris , 501 So. 2d at 396 (holding that the notice provisions between the school and the MHSAA directly benefited the school and not the high school basketball team that sued to enforce the provisions); see also Rein v. Benchmark Const. Co. , 865 So. 2d 1134, 1147 (Miss. 2004) (holding that the nursing home was the direct beneficiary of the contract between the nursing home and landscaping company and as such the resident of the nursing home was only an incidental beneficiary).
Although this Court has not addressed the specific factual scenario presented here, it has considered the rights of a third-party homeowner in a lender-secured insurance policy on the third party's home. See, e.g., Simpson v. Balboa Ins. Co. , No. 2:08-CV-281KS-MTP, 2009 WL 1291275 (S.D. Miss. May 7, 2009) ; Hume v. Evanston Ins. Co. , No. 1:08-CV-189HSO-JMR, 2008 WL 5233415 (S.D. Miss. Dec. 10, 2008) ; Paulk v. Balboa Ins. Co. , No. 1:04-CV-97, 2006 WL 1994864 (S.D. Miss. July 14, 2006). In each case this Court held that the homeowner was an incidental rather than an intended beneficiary because the homeowner failed to show any duty or obligation owed to the homeowner by the insurance company, which had contracted with the lender. See Simpson , 2009 WL 1291275, at *5 ; Hume , 2008 WL 5233415, at *3 ; Paulk , 2006 WL 1994864, at *3.
In Turner v. General Ins. Co. of America , No. 5:09-CV-00057-DCB-JMR, 2009 WL 3247302 (S.D. Miss. Oct. 7, 2009), this Court did find that the plaintiff-homeowners were third-party beneficiaries of the lender-placed insurance policy on their home. Turner , 2009 WL 3247302, at *4. However, the insurance policy in Turner covered the homeowners’ personal property, whereas in the other cases the policies did not afford coverage for personal property. Id. ; see, e.g., Simpson , 2009 WL 1291275 at *4. Additionally, the policy in Turner obligated the insurance company to adjust all personal property losses with the homeowners and pay them directly for the losses. Turner , 2009 WL 3247302, at *4. Based on these facts, the Court determined that the homeowners in Turner qualified as third-party beneficiaries because of the legal obligation owed to the homeowners. Id.
In this case, Plaintiff argues that he satisfies each element required for third-party beneficiary status. Mem. [54] at 16. First, he maintains that the terms of the insurance contract are broad enough to include him as a member of a specified class. Id. State Farm acknowledges that "certain portions of the policy are broad enough to include [Plaintiff] ..." such as for any liability claims arising from Plaintiff's condominium ownership. Mem. [62] at 5, 12. Again, however, Plaintiff's claim here is not a liability claim.
Moving to the second requirement, Plaintiff argues that he was within the intent of the terms used in the policy, Mem. [54] at 16, pointing to the categories of property owned by unit owners that are covered under Section I of the policy, id. at 16-17. Plaintiff further maintains that the policy gave State Farm the authority to adjust claims with the individual unit owners and pay unit owners directly, establishing that he was within the benefits of the policy. Id. at 17. State Farm counters that "Kona Villa did not intend for [Plaintiff] to be covered" under the terms of the insurance policy for the damages he claims, Mem. [62] at 12, and that any coverage for the interior of Plaintiff's unit existed only for the benefit of its named insured, Kona Villa. id. at 11.
Section I of the policy affords coverage to "Buildings" which is defined as "the building and structures at the described premises, including" several different categories of property. Ex. 1 [54-1] at 41. The Residential Community Association Endorsement to the policy amends the definition of Buildings to include:
Any of the following types of property contained in an individual unit, regardless of ownership:
(a) Fixtures, improvements, and alterations that are a part of the building or structure; and
(b) Appliances, such as those used for refrigerating, ventilating, cooking, dishwashing, laundering, security or housekeeping.
But Building does not include personal property owned or used by or in the care, custody or control of a unit-owner except for personal property listed in Paragraphs (a) or (b).
Id. at 20.
The Loss Payment section of the policy provides in relevant part:
[a] payment for loss to personal property of others may be provided to you on behalf of the owners of the property. We may adjust losses with the owners of lost or damaged property if other than you. If we pay the owners, such payments will satisfy your claims against us for the owners’ property.
Id. at 57 (emphasis added).
Finally, Plaintiff contends that Kona Villa had a substantial and articulate interest in Plaintiff's welfare, because although the contract was between State Farm and Kona Villa, Kona Villa intended for "the contract to provide coverage for the unit-owners." Mem. [54] at 17. Plaintiff cites to the Declaration of Condominium ("Declaration") to support this argument. Id. (citing Ex. 3 [54-3] at 13). State Farm responds that Kona Villa "has no substantial or articulate interest in [the] damages [Plaintiff] claims to have suffered," Mem. [62] at 12, because unit owners are "responsible for the repairs and maintenance inside the walls of their unit" and Kona Villa is only responsible "for everything outside of the exterior walls and common areas," id. It also argues that Plaintiff was allowed to, but did not, obtain separate insurance to cover his personal property within the unit. Id.
Because third-party beneficiary status "must spring from the terms of the contract itself," Burns , 171 So. 2d at 325, the Court looks to the language of the insurance policy to determine whether any rights "spring" to Plaintiff, see Farris , 501 So. 2d at 396.
b. Whether Plaintiff satisfies the first requirement for third-party beneficiary status
State Farm acknowledges that the insurance contract is broad enough to include Plaintiff as a member of a specified class for purposes of liability claims. Mem. [62] at 12. Under the plain terms of the contract Plaintiff could only arguably be considered an insured for liability, not property damage, claims arising out his ownership of a condominium unit. See Ex. 1 [54-1] at 21. The terms of the contract are otherwise not broad enough to include Plaintiff with respect to property loss claims under Section I of the policy. As noted previously, Plaintiff is plainly not a named or additional insured under Section I. See Ex. 1 [54-1] at 2. Plaintiff and the other unit owners are only referred to as potential insureds with respect to coverage under Section II. Id. at 41; 70. As such the plain terms of the contract are not broad enough to include Plaintiff with respect to property damage coverage and Plaintiff does not meet the first requirement for third-party beneficiary status.
c. Whether Plaintiff satisfies the second requirement for third-party beneficiary status
Plaintiff also does not fall within the intent of the terms used. The policy designates Kona Villa as the only named insured and Section I refers exclusively to Kona Villa. Ex. 1 [54-1] at 2, 41. The terms of the policy indicate that the parties did not intend for unit owners to directly benefit from coverage under Section I. Id. (listing Kona Villa as the only named insured and limiting the definition of insured under Section II to only apply to Section II). The Mississippi Supreme Court has consistently found that a party is within the intent of the terms used when the party is explicitly named in the contract. Aladdin Constr. Co. v. John Hancock Life Ins. , 914 So. 2d 169, 180 (Miss. 2005) (finding that the explicit references in the contract to the third parties demonstrated that they were parties "whose performance was contemplated"); Miss. High School Activities Ass'n., Inc. v. R.T. ex rel. Trail , 163 So. 3d 274, 278 (Miss. 2015) (finding that the student-plaintiffs were within the intent of the terms used where the MHSAA bylaws on eligibility expressly mentioned students by name); Cope v. Thrasher Constr., Inc. , 231 So. 3d 989, 994 (Miss. 2017) (finding that the parties intended to name the plaintiff as a third-party beneficiary where the agreement explicitly named plaintiff). Here, nowhere in Section I is Plaintiff explicitly named as an insured, nor is any class of which Plaintiff is a member.
The fact that the Endorsement appears to cover some property within Plaintiff's unit does not change the result. The threshold question is whether any of the property that Plaintiff claims was damaged would even qualify for coverage under the Endorsement to the policy. The policy does not elsewhere define several of the categories of property for which the Endorsement provides coverage. Ex. 1 [54-1] at 20. Under Mississippi law, if an insurance policy does not define a term, "words are afforded their ordinary and popular meaning." Noxubee Cnty. School Dist. v. United Nat'l Ins. Co. , 883 So. 2d 1159, 1165 (Miss. 2004) (citing Blackledge v. Omega Ins. Co. , 740 So. 2d 295, 298 (Miss. 1999) ).
Accordingly, a fixture under the policy is "[a]n article in the nature of personal property which has been so annexed to the realty that it is regarded as a part of the real property." Check Cashers Exp., Inc. v. Crowell , 950 So. 2d 1035, 1040 (Miss. Ct. App. 2007) (quoting Fixture , BLACK'S LAW DICTIONARY (6th ed. 1991)). An improvement is "[a] valuable addition made to property (usually real estate) or an amelioration in its condition, amounting to more than mere repairs or replacement of waste, costing labor or capital, and intended to enhance its value, beauty or utility or to adapt it for new or further purposes." Ferrell v. River City Roofing, Inc. , 912 So. 2d 448, 454 (Miss. 2005) (quoting Phipps v. Irby Constr. Co. , 636 So. 2d 353, 368 (Miss. 1993) ) (internal quotations removed). Finally, an alteration is "a substantial change to real estate, esp[cially] to a structure, usu[ally] not involving an addition to or removal of the exterior dimensions of a building's structural parts." Alteration , BLACK'S LAW DICTIONARY (11th ed. 2019).
Utilizing these definitions, under the plain language of the policy not all of the items Plaintiff claims were damaged would qualify for coverage. The Endorsement would not cover the Plaintiff's bedroom furniture, Ex. 5 [54-5] at 1; 30-32 (listing purchases for beds, dressers, and a nightstand), which does not qualify as a fixture, improvement, alteration, or an appliance. As such, under no circumstances would Plaintiff be entitled to coverage for his bedroom furniture.
Viewing the summary judgment record in the light most favorable to the non-moving party, Plaintiff's remaining property could qualify for coverage under the Endorsement. Id. The flooring, shutters, blinds, and cabinets arguably qualify as fixtures because they are attached to the real property and could be regarded as part of the real property. Ex. 1 [54-1] at 20. Plaintiff's drapery rod and bathroom mirror could arguably be considered improvements because they were added to the property and enhance its utility. Id. Finally, the range oven, refrigerator, microwave hood, and dishwasher appear to qualify as appliances under the Endorsement. Id.
However, the foregoing definitions of these terms indicate that the intent of this provision was to afford coverage for items that enhance the value of the structure for the benefit of Kona Villa. This is consistent with the overarching definition of "Buildings" in Section I, and with Section I's omission of unit owners as named or additional insureds. The Court concludes that Plaintiff was not within the intent of the terms used because, even though the personal property described in the Endorsement may be within individual units, the policy itself covers Kona Villa's interest in this property. Ex. 1 [54-1] at 1, 20.
As noted earlier one has an insurable interest when they "derive a benefit from property or would suffer loss from its destruction." Universal Underwriters Group, Inc., v. State Farm Fire and Cas. Co. , 931 So. 2d 617, 620 (Miss. Ct. App. 2005) (citing Dorsey Miss. Sales Inc. v. Newell , 251 Miss. 77, 168 So. 2d 645, 649 (1964) ); see also Necaise v. U.S.A.A. Cas. Co. , 644 So. 2d 253, 258 (Miss. 1992) ("[a]ll that is required for one to have an insurable interest in property is that the insured will suffer an economic loss if the property is destroyed."). Kona Villa would have an interest in certain personal property within the individual units, because without the fixtures, improvements, alterations, and appliances within each unit the value of the condominium complex would decrease. See Penthouse Owners Assoc., Inc. , 2011 WL 13073693, at *5 (holding that the plaintiff-owners association had an insurable interest in the individual condominium units and their interior finishes).
The policy language underscores Kona Villa's interest, because it affords coverage to Kona Villa for property located within each individual unit "regardless of ownership." Ex. 1 [54-1] at 20. Thus, Kona Villa's interest is in maintaining and preserving these items to directly benefit the entire complex, and it insured this interest through the Endorsement to the policy. This conclusion is reinforced by the policy language which excludes from coverage personal property within each unit that is "owned by, used by or in the care, custody or control of a unit-owner." Id. In sum, the terms of the policy reflect that State Farm and Kona Villa did not intend for Plaintiff to directly benefit from Section I of the policy. Plaintiff does not satisfy the second requirement for third-party beneficiary status.
d. Whether Plaintiff satisfies the third requirement for third-party beneficiary status
Here, although Kona Villa may have a substantial and articulable interest in Plaintiff's welfare with respect to any liability arising from his unit ownership, no claim for liability coverage is implicated in this case.
Plaintiff contends that under the condominium bylaws Kona Villa is under a duty, pursuant to the Declaration, to obtain insurance "upon the condominium property and the property of the unit owners." Ex. 3 [54-3] at 13. However, nowhere does the policy incorporate the Declaration, and as such it is not part of the contract between State Farm and Kona Villa. As a result, this asserted interest does not "spring" from the contract of insurance and Plaintiff does not meet the third requirement for third-party beneficiary status. In sum, because Plaintiff does not satisfy the requirements for third-party beneficiary status, he is at most merely an incidental beneficiary which is insufficient to establish coverage.
Finally, the Court recognizes that there are similarities between the facts of this case and those in Turner ; however, there are important distinctions as well. In Turner , the policy expressly provided coverage for the homeowners’ personal property and the insurance company was obligated to adjust personal property losses with the homeowners. Turner , 2009 WL 3247302, at *3-4. Here, the Kona Villa policy affords coverage for some property within each individual unit under the Endorsement and the policy is clear that State Farm "may adjust losses with the owners of lost or damaged property" other than Kona Villa, Ex. 1 [54-1] at 20, 57 (emphasis added). Unlike Turner , the Kona Villa policy does not cover all personal property within individual units and State Farm may, but is not obligated to, adjust claims for personal property loss with unit owners. Turner , Doc. [3] Ex. B [3-B] at 7, 14. Thus, this case is distinguishable from Turner and is more aligned with the lender-placed policies in the other cases the Court has discussed. See Simpson , 2009 WL 1291275, at *5 ; Hume , 2008 WL 5233415, at *3 ; Paulk , 2006 WL 1994864, at *3. Much like the insurers in those cases, State Farm is under no obligation to adjust and pay claims to unit owners. See generally id. ; Ex. 1 [54-1] at 56-57. Without "any evidence of a legal obligation or duty to [Plaintiff] on the part of ... [State Farm] created by the insurance contract ... any benefit to [Plaintiff] was merely incidental." Hume , 2008 WL 5233415, at *3.
The policy in Turner provided in relevant part as follows:
[w]e cover personal property, usual to the occupancy as a dwelling and owned or used by the "borrower" or members of the "borrower's" family residing with the "borrower" while it is on the "insured location[.]"
....
We will adjust all losses with the "borrower". We will pay the "borrower" unless some other person is named by the "borrower" to receive payment.
Turner , Doc. [3] Ex. B [3-B] at 7, 14.
Plaintiff has also not shown that the duty of good faith and fair dealing existed in the contract for his direct benefit. As the Fifth Circuit noted in Gerard , this is a requirement for a party to obtain third-party beneficiary status. Gerard , 883 F.2d at 382. The evidence submitted by Plaintiff indicates that, under the plain language of the insurance contract, the policy was intended to directly benefit Kona Villa. Ex. 1 [54-1] at 2; 41. Thus, any duty of good faith and fair dealing State Farm owed was owed only to Kona Villa, and not Plaintiff.
III. CONCLUSION
Because the Court finds that Plaintiff is not an insured and does not qualify as a third-party beneficiary under the Kona Villa policy, State Farm's Motion [41] for Summary Judgment should be granted, and it need not address State Farm's alternative Motion [41] as to Plaintiff's claim for punitive and extra-contractual damages. Plaintiff's Motion [68] for Summary Judgment should be denied as moot. To the extent the Court has not addressed the parties’ remaining arguments, it has considered them and determined that they would not alter the result.
IT IS, THEREFORE, ORDERED AND ADJUDGED that, Defendant State Farm Fire and Casualty Company's Motion [41] for Summary Judgment is GRANTED .
IT IS, FURTHER, ORDERED AND ADJUDGED that Plaintiff Gilberto Alarcon Mortera's Motion [67] for Summary Judgment is DENIED AS MOOT .
IT IS, FURTHER, ORDERED AND ADJUDGED that, Plaintiff Gilberto Alarcon Mortera's claims against Defendant State Farm Fire and Casualty Company are DISMISSED WITH PREJUDICE . A separate Final Judgment will issue in accordance with Federal Rule of Civil Procedure 58.
SO ORDERED AND ADJUDGED , this the 20th day of September, 2021.