Molly Properties, Incorporated v. Cincinnati Insur

Case: 13-50567 Document: 00512525821 Page: 1 Date Filed: 02/07/2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 13-50567 February 7, 2014
Summary Calendar
Lyle W. Cayce
Clerk
MOLLY PROPERTIES, INCORPORATED
Plaintiff–Appellant
v.
THE CINCINNATI INSURANCE COMPANY,
Defendant–Appellee
Appeal from the United States District Court
for the Western District of Texas
USDC No. 6:12-cv-00177-WSS
Before REAVLEY, JONES, and PRADO, Circuit Judges.
PER CURIAM:*
Appellee-insurer, The Cincinnati Insurance Company (“Cincinnati
Insurance”), issued a policy that covered a commercial property owned by
Appellant-insured, Molly Properties, Incorporated (“Molly Properties”). After
the policy lapsed for nonpayment of premiums, a fire damaged the covered
property. Upon the denial of its claim for property damage, Molly Properties
sued Cincinnati Insurance for breach of contract. The district court held that
the policy was no longer in effect when the fire occurred, and granted summary
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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No. 13-50567
judgment to the insurer. Molly Properties contends that that the district court
erred when it found that the policy had been cancelled at the time of the fire
because Cincinnati Insurance failed to give notice to the mortgagee on the
property before it cancelled the insurance, as required by the policy. We affirm.
Under Texas law, unless the terms of the policy provide otherwise, a
policy cancellation is not affected by the failure of the insurer to give a notice
of cancellation to the mortgagee. In Standard Fire Ins. Co. v. U.S., 407 F.2d
1295, 1300 (5th Cir. 1969), the Court held that where an insured property is
subject to a mortgage, the Texas Insurance Code “make[s] a new and
independent contract between the mortgagee and the insurer.” Here, it is not
disputed that Cincinnati Insurance notified Molly Properties that its policy
would be cancelled for non-payment of premiums. Further, the terms of the
policy did not condition the cancellation of coverage on notification to the
mortgagee that the insured’s policy would be cancelled. Thus, whether or not
Cincinnati Insurance gave notice to the mortgagee is irrelevant as to the
insured’s loss of coverage. Under Standard, Cincinnati Insurance’s failure to
notify the mortgagee affects only the mortgagee’s “independent” contract.
Molly Properties attempts to circumvent Standard by characterizing
itself as a third-party beneficiary to the agreement between Cincinnati
Insurance and the mortgagee. For Molly Properties to qualify as a third-party
beneficiary under Texas law, the contracting parties, inter alia, must have
intended for Molly Properties to benefit from their promise. Talman Home
Fed. Sav. & Loan Ass'n of Ill. v. Am, Bankers Ins., 924 F.2d 1347, 1350 (5th
Cir. 1991). Further, the intention to confer a benefit to Appellant must be
“clearly and fully” stated. MCI Telecomms. Corp. v. Tex. Ultils. Elec. Co., 995
S.W. 2d 647, 651 (Tex. 1999). Here, the promise by the insurer to provide a
cancellation notice to the mortgagee was made for the benefit of the mortgagee,
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not Molly Properties. Thus, Molly Properties cannot recover as a third-party
beneficiary.
AFFIRMED.
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