Failing to understand the relationship between himself, his mortgage company, and his insurer, the plaintiff was left without coverage for damage caused by Hurricane Katrina.  Dace v. Novastar Mortgage Inc., 2011 La. App. Unpub. LEXIS 233 (La. Ct. App. April 13, 2011).

   Novastar held the mortgage on the plaintiff's property in New Orleans.  There were two residences on the property.  Novastar collected and held in escrow property taxes and fire/hazard insurance premiums.  Novastar secured a policy with Lloyd's, but only one of the residences was insured under the policy.  In August 2005, the property sustained significant wind damage from Hurricane Katrina.  After the hurricane hit, Lloyd's refused to provide coverage for one of the residences because it was not covered under the policy.

   The plaintiff sued Novastar and Lloyd's.  The complaint alleged Lloyd's denial of claim for the second residence was in error because Novastar procured the policy to cover the entire property, including both residences.  Regarding the mortgagor, Novastar knew Lloyd's denied the claim for loss of the second residence, yet did not nothing to pursue this claim under the policy.  This caused damage to the plaintiff because he could not rent the second residence, which was the source of income for paying his mortgage.  Novastar responded by foreclosing on the property. 

   The trial court granted Lloyd's motion for summary judgment.  After a one day bench trial, the court ruled in favor of Novastar and dismissed the Plaintiff's claim.  The mortgage contract did not obligate Novastar to purchase any particular type or amount of coverage.

   The Court of Appeal affirmed.  The mortgage contract expressly obligated the Plaintiff to procure and maintain insurance coverage.  If the borrower failed to secure coverage, the lender could obtain coverage, at the lender's option.  Further, the lender could make proof of loss if not made promptly by the borrower, but was not obligated to do so.