The court denied the insurer’s motion to dismiss the insured’s fire damage claims under a forced-place policy because the insured was a third-party beneficiary of the policy. Fredericks v. Assurant Specialty, et al., 2026 U.S. Dist. LEXIS 179779 (E.D. Pa. Aug. 12, 2026).
The insureds’ home burned down on the same day their homeowner’s policy expired. The expiration automatically triggered a forced-placed policy issued by American Security Insurance Company (ASIC) to the insureds’ mortgage company, Rocket Mortgage Company, LLC.
The forced-place policy included an endorsement whichvchanged the original coverage terms of the policy. The endorsement removed the net loan balance as a payout option. It also altered the Loss Payment Provision from making the loss “payable to the named insured” to “payable to the named insured and the borrower as their interests appear . . .” The policy further contained its own statute of limitations period requiring that any suit be filed within one year after the date of loss.
The insureds contended that the Limit of Liability in the policy exceeded the loan balance remaining on the property’s mortgage. Further, ASIC paid out the remaining loan balance only to Rocket, which was not an option under the Loss Settlement Provision as altered by the endorsement. The policy benefits were neither put toward satisfying the insureds’ mortgage nor toward restoring the property. The insureds did not receive a copy of the policy for two years despite numerous attempts by their public adjuster and counsel to obtain he policy from ASIC. Nevertheless, Rocket continued to seek premium payments from the insureds on a home that remained destroyed while keeping the policy funds issued to them by ASIC in their possession.
The insureds sued ASIC and Rocket for breach of contract and bad faith. Defendants moved to dismiss.
The defendants first argued the insureds did not have standing because they were neither named insureds under, nor third-party beneficiaries of, the policy. While the insureds were not named insureds, the court found that they alleged facts sufficient for intended third-party beneficiary standing. The insureds relied on the endorsement’s alteration of the Loss Settlement Provision.
The contract was between ASIC and Rocket and the purpose of the Loss Settlement Provision of the endorsement (in which both parties intentionally outlined deviations from the boilerplate policy) was to ensure that the policy benefits were issued toward one of three balances in the event of a loss: (1) the limit of liability, (2) the replacement cost of the damaged property, or (3) the money spent actually repairing or replacing the damaged property. The Loss Payment Provision further stated: “Loss will be made payable to the named insured and the borrower as their interest appear,” indicating that the policy contemplated a benefit to the insureds as borrowers.
The insureds plausibly pled they (1) had a significant interest in seeing through the issuance of the benefits as outlined in the policy; and (2) benefit from the right to legally enforce the policy. The lack of affirmative language in the policy dispossessing the insureds of legal enforcement rights meant the insureds had standing as third-party beneficiaries under the policy.
Further, the insureds’ claims were not time-barred under the policy. An insurer could not insist on strict compliance with a contractual suit-limitation period when the insurer’s own conduct misled the insured into a reasonably grounded belief that the claim would be settled, thus inducing the insured to delay filing suit.
The court also decided that the insureds stated bad faith sufficiently against ASIC but not against Rocket. The complaint provided enough indicia of delay and failure to act on the part of ASIC to support a bad faith allegation against it. A bad faith insurer claim could not apply to Rocket, however, as it related to the policy in which Rocket was not listed as the insurer.
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