Mortgage borrower gets an unpleasant shock when he tries to argue a payment amount
A Florida appeals court has ruled that a homeowner cannot sue an insurance company under a lender-placed policy, finding that the contract’s protections were intended solely for the mortgage lender - not the borrower.
In a unanimous decision issued Wednesday, the state’s Third District Court of Appeal affirmed the dismissal of a lawsuit filed by Kazi Ahmed, a Monroe County homeowner who sought to enforce coverage under a force-placed policy issued to his lender. The ruling clarifies that under Florida law, a borrower who benefits incidentally from such a policy does not have standing to sue unless the insurance contract explicitly reflects an intent to benefit the borrower.
The case, Kazi Ahmed v. Hamilton Insurance DAC, arose from property damage caused by Hurricane Irma in 2017. After Ahmed failed to maintain hazard insurance on his home, Shellpoint Mortgage Servicing - successor to Bayview Loan Servicing - procured a “Mortgage Guard” policy from Hamilton Insurance DAC covering the property between March 2017 and March 2018.
Following the hurricane, Hamilton paid $81,521.13 to Shellpoint, which accepted the sum without objection. Ahmed, contending the payment was insufficient, sued the insurer directly, alleging breach of contract and seeking recovery as a third-party beneficiary. The breach of contract claim was dismissed early and not appealed. The remaining claim was dismissed with prejudice by the trial court, which held that Ahmed lacked standing to sue under the policy.
No intent to benefit borrower
On appeal, Ahmed argued that provisions within the policy - particularly language incorporated from a "Homeowners Special Form" - suggested coverage for personal property and additional living expenses. He also pointed to his insurable interest in the property and the absence of language explicitly excluding him from coverage.
The court rejected those arguments.
Writing for the panel, Judge Monica Gordo Lindsey emphasized that the policy unambiguously identified the “Named Insured” as the “Lending Institution,” and the loss payable clause stipulated that any insurance proceeds were to be adjusted with and paid solely to the lender. No other payees were identified.
“To establish standing as a third-party beneficiary, Florida law requires clear evidence that the contracting parties intended to primarily and directly benefit the third party,” the court wrote. “The four corners of the policy reveal no such intent with respect to Mr. Ahmed.”
The court found that any incidental benefit to the homeowner did not suffice to confer standing.
Surplus lines law trumps insurable interest
Ahmed also invoked Florida’s statute on insurable interest (§ 627.405, Fla. Stat.) and cited precedent allowing parties with a financial stake in insured property to enforce coverage. But the court found that argument inapplicable.
Because the Hamilton policy was issued as a surplus lines contract - governed by sections 626.913 through 626.937 of the Florida Statutes - the typical consumer insurance protections, including those governing insurable interest, did not apply unless expressly included.
The court underscored that surplus lines policies are exempt from most of the regulatory provisions of the Florida Insurance Code. “As such, Ahmed cannot rely on general statutory protections to override the specific terms of this policy,” the panel concluded.
No express disclaimer required
Ahmed had also pointed to a prior case, Reconco v. Integon National Insurance Co., in which a borrower’s claim failed due to an explicit disclaimer of any contractual relationship. The Hamilton policy, by contrast, included no such language. Still, the court found that absence immaterial.
“Whether or not the policy disclaims a relationship with the borrower is not determinative,” the panel noted. “What matters is whether the contract expresses an intent to benefit the borrower — and here, it does not.”
Implications for lenders and borrowers
The case - originally tried before Judge Mark H. Jones in Monroe County Circuit Court - reaffirms the legal distinction between primary and incidental beneficiaries in insurance law, particularly in the context of lender-placed policies. These policies, typically procured by mortgage servicers when a borrower fails to maintain their own coverage, are designed to protect the lender’s interest in the collateral, not the borrower’s equity or use of the property.
For mortgage servicers and their insurers, the ruling affirms the enforceability of force-placed insurance structures and underscores the importance of policy clarity. For borrowers, it serves as a caution: having an insurable interest in property is not the same as having a contractual right to coverage - especially under policies crafted solely for lenders.
Ahmed was represented on appeal by Nicholas A. Shannin and Carol B. Shannin of the Shannin Law Firm in Orlando. Hamilton Insurance DAC was represented by Richard Singer and Aaron B. Beharie of Wood, Smith, Henning & Berman LLP in Boca Raton.
The court’s decision in Ahmed v. Hamilton Insurance DAC further solidifies Florida’s strict approach to third-party claims under surplus lines policies, reinforcing the requirement that any right to sue must be grounded in a clear and express contractual benefit.
