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Helen Fawkes v. Balboa Insurance Company

February 17, 2012



THIS CAUSE comes before the Court upon Defendant's Motion for Summary Judgment (Dkt. 40), Plaintiff's Response in opposition (Dkt. 49), and Defendant's Reply (Dkt. 52). The Court, having reviewed the motion, response, reply, record evidence, and being otherwise advised of the premises, concludes that the motion should be denied.


This is an insurance action against Defendant Balboa Insurance Company related to damages to Plaintiff's property allegedly caused by a sinkhole. The property is located at 19817 Wetherby Lane, Lutz, Hillsborough County, Florida (hereinafter referred to as the "home" or "subject property"). Plaintiff claims that she is the owner of the home, the home suffered damages caused by sinkhole activity, the subject policy covers sinkhole damages, and Defendant unlawfully denied her claim.

The record reflects that the subject property was secured by a mortgage serviced by BAC Home Loans Servicing, LP ("BAC") at all relevant times. As part of the mortgage agreement, Plaintiff agreed to maintain acceptable and continuous hazard insurance on the subject property until she paid off her loan. However, at some point, Plaintiff stopped making payments on her loan, failed to maintain hazard insurance on the subject property, and failed to pay the required county property taxes.

BAC, in an effort to protect its loan interest, obtained a lender placed mortgage protection policy from Defendant, policy number 4800-0100, with policy limits of $1,384,773.00 at Plaintiff's expense (hereinafter referred to as the "subject policy"). BAC charged the subject policy's premiums to Plaintiff's escrow account. According to the subject policy's Certificate of Coverage Placement, the subject policy provides coverage to BAC to protect its interest in the property owned by Plaintiff. The subject policy does not refer to Plaintiff, the borrower, as an insured. However, the Loss Payment section of the policy provides:

13. Loss Payment. WE will adjust each LOSS with YOU and will pay YOU. If the amount of LOSS exceeds YOUR insurable interest, 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 damages or destroyed property on the DATE OF LOSS. Other than the potential right to receive such payment, the BORROWER has no rights under the Residential Property Form.

(Dkt. 40, Ex. E at 000266).

On or about September 2, 2010, Plaintiff's counsel reported the sinkhole loss to Defendant, which Defendant investigated and ultimately denied. Plaintiff filed a breach of contract action against Defendant in the Circuit Court of the Thirteenth Judicial Circuit in and for Hillsborough County, Florida. Defendant removed the state court case to this Court. The notice of removal relied on the subject policy's limit to establish the amount of controversy. Plaintiff then moved to remand the case to state court, which this Court denied.

Defendant moved to dismiss the action, with prejudice, arguing that Plaintiff was neither the owner of the subject property nor an insured under the subject policy. The Court denied Defendant's motion because Plaintiff alleged that she was the owner of the subject property and Florida law was clear that, as the owner of the subject property, Plaintiff could pursue her breach of contract claim as a third-party beneficiary of the subject policy.

This case is at issue upon Defendant's motion for summary judgment. Defendant argues that Plaintiff is not a third-party beneficiary of the subject policy. Defendant also argues that there are no residual amounts of insurance available to Plaintiff, which should preclude her claim. Finally, Defendant argues that even if Plaintiff can pursue her claim as a third-party beneficiary, her claim for attorney's fees must be dismissed because Fla. Stat. § 627.428 does not permit a third-party beneficiary to recover attorney's fees and costs against an insurer.

The record reflects that BAC is not actively pursuing a claim under the subject policy. According to Plaintiff's affidavit, Defendant has attempted to exclude her from the adjustment process and BAC "has done nothing to pursue a claim for damages to [her] property, nor has it advised [her] of its intent to do so." (Dkt. 49-1). Plaintiff's affidavit also states that it is her intention to seek a loan modification or refinance the current loan with BAC, but that she cannot do so until the damages to the subject property have been repaired.

The record reflects that Plaintiff's mortgage balance on the subject property is $1,384,773.65 and there is an escrow owed in the amount of $135,003.60 for hazard insurance payments and overdue property tax payments. The record also reflects that Plaintiff took out a line of equity on the subject property in the amount of $500,000 on November 28, 2005, and, as of June 3, 2010, Plaintiff owes $495,225 on this loan.

The Subsurface Exploration and Distress Evaluation report completed by EFI Global Inc. ("EFI") at Defendant's request and, presumably, in response to Plaintiff's claim, concluded that the damages to Plaintiff's home were not caused by a sinkhole. This report identifies Plaintiff as the insured of the subject property. (Dkt. 49-6).

Florida Testing & Environmental, Inc. ("FTE") also conducted a review of the damages to the subject property and concluded that sinkhole activity was present at the subject property. (Dkt. 49-2). According to FTE's report, the total repair cost ...

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