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Simpkins v. American Modern Home Insurance Co.

United States District Court, E.D. Virginia, Alexandria Division

March 16, 2018



          Liam O'Grady United States District Judge

         This matter comes before the Court on Defendant American Modern Home Insurance Company's (AMHIC) Motion for Summary Judgment (Dkt. 37) and Defendants OCWEN Loan Servicing, LLC (OCWEN) and Deutsche Bank National Trust Company's (Deutsche Bank) Motion for Summary Judgment (Dkt. 39). The motions are fully briefed and the Court heard oral argument on January 12, 2018. For the following reasons and for good cause shown, the Court GRANTS summary judgment for the Defendants.

         I. Background [1]

         Plaintiffs Martina and Anthony Simpkins own 6012 Pike Branch Drive, Alexandria, VA 22310 (the Property). Dkt.45, Exh. 1, ¶ 1. Deutsche Bank holds the deed of trust on the Property and OCWEN services the loan on the Property and have held these roles since before 2015. Id. ¶¶ 3, 5. On January 26, 2015, the Simpkins's home insurance through State Farm Casualty Company lapsed for non-payment. Id. ¶ 7. Pursuant to the deed of trust, OCWEN force-placed insurance on the Property through AMHIC. Id. Force-placed insurance, also known as lender-placed insurance, insures the lender's collateral when the borrower fails to maintain insurance, allowing the lender to protect its exposure on a property up to the amount of the mortgage on the date of issuance. Williams v. Certain Underwriters at Lloyd's of London, 398 Fed.Appx. 44, 45 (5th Cir. 2010). OCWEN was the named insured on the AMHIC policy J Dkt. 40, "Undisputed Material Facts, " ¶ 11. The AMHIC policy required AMHIC to pay the lesser of either the "repair or replacement cost of that part of the building damages using commonly used building materials" or "the amount actually and necessarily spent to repair or rep] ace the damaged building." Id. The policy also provided that AMHIC would "adjust any loss with [OCWEN] and the mortgagor" and that AMHIC would "pay [OCWEN] to the extent of] [OCWEN's] interest in the property, " with excess benefits to be paid to the mortgagor. Id. Shortly after the force-placed insurance went into effect, on February 5, 2015, the Property sustained substantial fire damage. Dkt. 45, Exh. 1, ¶ 6.

         Following the fire, AMHIC sent an adjuster to estimate repair costs for the home. Dkt. 40, "Undisputed Material Facts, " ¶ 14. That estimate came out to $192, 938.52, less a $1, 000 deductible. Id. AMHIC also estimated recoverable depreciation in the amount of $34, 494.74, bringing the total available funds for repair to the Property to $226, 433.26. Id. Pursuant to this estimate, AMHIC issued a check to OCWEN in the amount of $191, 938 52 to cover the costs of repairs, with the recoverable depreciation available as needed. See Id. ¶ 15. From these funds, OCWEN began reimbursing the Simpkins for repairs. Id. ¶ 16. OCWEN agreed to pay for a second opinion adjuster on behalf of the Simpkins. Id. ¶ 17. That adjuster never performed work and the Simpkins have not presented any evidence that they obtained a second opinion on the costs of repair. In March 2016, Plaintiffs hired Joseph Mason, a general contractor, to complete the necessary repairs for $212, 000, less than the $226, 433.26 available. \See Id. ¶ 21. OCWEN issued $59, 000 in funds to pay for the beginning of that repair work. A/.|¶ 24. In September 2016, despite Joseph Mason not going forward with repairs to the house, OCWEN reimbursed the Simpkins for approximately $7, 000 in new appliances, which are now stored in the basement of another of Plaintiffs' residences. Id. ¶¶ 24, 25, 26. To date, the house hap not been repaired. Id. ¶ 30. The current cost of repair to the home, in light of the initial damage and the three years the home has languished unrepaired, is $414, 590. See Dkt. 45, Exh. 1, "F. Damages." The Simpkins owe approximately $513, 000 on the property and the mortgage account has an arrearage of $27, 000.

         To this list of facts, Plaintiffs seek to add facts pertaining to why force-placed insurance became necessary based on a premise that OCWEN had breached the deed of trust by letting the State Farm policy lapse.[2] However, these facts are immaterial to the instant case because Plaintiffs never pleaded a breach of the deed of trust on this ground. It is well established that Plaintiffs cannot amend their complaint via responsive briefs at the summary judgment stage. See, e.g., Zee Co. v. Williams, Mullen, Clarke & Dobbins, P.C., 871 F.Supp.2d 498, 507 n. 21 (E.D.Va.2012).

         II. Legal Standard

         Summary judgment will be granted where, viewing the facts in a light most favorable to the non-moving party, there remains no genuine issue of material fact. Fed. R. Civ. Pro. 56(c); Marlow v. Chesterfield Cty. Sch. Bd. 749 F.Supp.2d 417, 426 (E.D. Va. 2010). A party opposing a motion for summary judgment must respond with specific facts, supported by proper documentary evidence, showing that a genuine dispute of material fact exists and that summary judgment should not be granted in favor of the moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). Conclusory assertions of state of mind or motivation are insufficient. Goldberg v. B. Green & Co., 836 F.2d 845, 848 (4th Cir. 1988). As the Supreme Court has held, "the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Bouchat v. Baltimore Ravens Football Club, Inc., 346 F.3d 514, 519 (4th Cir. 2003) (quoting Anderson v. Liberty Lobby, Inc., 447 U.S. 242, 247-248 (1986)) (emphasis in original).

         III. Discussion

         Plaintiffs allege breach of contract against all Defendants and breach of duties imposed by the deed of trust against OCWEN and Deutsche Bank for failing to submit the highest and best claim for restoration and repair of the Property. In their opposition to the instant motions, Plaintiffs raise a third claim that OCWEN breached the deed of trust by failing to timely remit insurance payments from the mortgage escrow account. Dkt. 45, p. 15. In arguing that OCWEN was properly put on notice of this claim, counsel for the plaintiffs, in oral argument, noted Paragraph 12 of the Amended Complaint, which reads in relevant part, "On or about January 26, 2015, Plaintiffs' insurance with State Farm Mutual Insurance covering the property lapsed..." See Dkt. 13, ¶ 12. However, this statement, contained in the Amended Complaint's "Statement of Facts, " is woefully insufficient to have put Defendants on notice that | they were defending such a claim.[3] The claim not properly pleaded, the Court will not address it here.

         Breach of Contract

         To prove breach of contract, Plaintiffs must show 1) a legally enforceable obligation of Defendants to Plaintiffs, 2) breach of that obligation, and 3) damage arising from the breach. Filak v. George, 267 Va. 612, 614 (2004). It is uncontested that Plaintiffs were not named parties to the force-placed insurance contract. Nonetheless, Plaintiffs may have standing to sue for breach of that contract as third-party beneficiaries if the parties to the contract clearly and definitely intended to confer a benefit upon Plaintiffs that was more than merely incidental. William v. AES Corp., 28 F.Supp.3d 553, 569 (E.D. Va. 2014). Third-party beneficiary status is manifested by the clear and definite intent of both parties. Copenhaver v. Rogers, 238 V. 361, 367 (1989); Valley Landscape Co., Inc. v. Rolland, 218 Va. 257, 259-6o (1977).

         Plaintiffs contend that four key undisputed material facts demonstrate that they are third-party beneficiaries. First, a force-placed insurance policy provision state:? that losses will be adjusted with both the mortgagor and the named insured. Dkt. 45, pp. 8-9. Second, a force-placed insurance policy provision entitles the mortgagor to insurance proceeds paid in excess of the balance of the loan. Id., p. 9. Third, William Heed, an AMHIC employee, stated in his deposition that the contract "co-benefits" the mortgagor. Id. And fourth, Derrick Raleigh, an OCWEN employee, stated in his deposition that the force-placed insurance "might or might not protect borrower's equity in the property or the contents of the property against any risk ...". Id., pp. 10-11. Plaintiffs additionally contend that an unnamed OCWEN representative stated to Ms. Simpkins, "don't worry, we have you covered" after the fire. Id.

         These facts demonstrate that Plaintiffs are merely incidental beneficiaries, not third-party beneficiaries, of the force-placed insurance contract. Force-placed insurance policies insure the lender's collateral. Williams v. Certain Underwriters at Lloyd's of London, 398 Fed.Appx. 44, 45 (5th Cir. 2010). The deposition testimony that Plaintiffs could "co-benefit" from the force-placed insurance policy is plainly accurate, as the named insured's interest in restoring the value in the collateral happens to mirror Plaintiffs' interest in ...

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