Hurricane Ike damaged property owned by Optimum Deerbrook LLC. Optimum’s lender, ViewPoint Bank, was a loss payee on Optimum’s property insurance policy with Allied Property & Casualty. Allied paid the claim, issuing checks jointly to Optimum and ViewPoint, but Optimum endorsed and deposited the checks in its own account. As a result, ViewPoint never received any of the insurance funds. ViewPoint sued Allied for breach of the insurance contract and a claim under article 3 of the UCC. The trial court granted summary judgment for the insurer, but the Court of Appeals reversed. Citing the Texas Supreme Court’s recent decision in McAllen Hospitals, LP v. State Farm, the Court held that the insurer had not fulfilled its payment obligation by delivering the checks only to the insured, and that delivery to both payees is required because neither of them, acting alone, could enforce or negotiate the instrument. The Court also held that summary judgment should have been granted in favor of the bank on its UCC claim because the drawer of a check is not discharged from its obligation when the check is issued to nonalternative copayees and is paid without one of their necessary endorsements. However, the Court held that the bank’s attorney fees affidavit was not sufficiently detailed to support summary judgment and remanded the case for further consideration of an award of attorney fees.
ViewPoint Bank v. Allied Prop. & Cas. Ins. Co., No. 05-12-01370-CV