The 5th Circuit Court of Appeals issued an opinion regarding commercial policies that would be of interest to some businesses. The case is styled, Sierra Equipment, Incorporated v. Lexington Insurance Company.
Lexington insured LWL Management for construction equipment leased from Sierra. Sierra argues that, even though it was not a party to the insurance policy, it has standing to sue Lexington for coverage pursuant to Texas’s equitable lien doctrine. Because the lease agreement between LWL and Sierra did not require LWL to obtain insurance with loss payable to Sierra, this Court determined that the equitable lien doctrine does not apply and thus, Sierra lacks standing to sue Lexington for coverage under Texas law.
The lease agreement between Sierra and LWL required LWL to insure the leased equipment, deliver a copy of the insurance policy to Sierra , and obtain a policy in form, in terms, in amount, and with insurance carriers reasonably believe satisfactory to Sierra. The agreement did not require that the policy list Sierra as an additional insured or contain a loss payable clause listing Sierra.
It was discovered that the leased equipment was damaged, lost, or destroyed, and Sierra filed a declaratory judgment seeking: (1) Sierra was the rightful owner of the leased equipment; (2) LWL breached the lease agreement by failing to name Sierra as an additional insured under the policy; and (3) Sierra may assert a claim for the proceeds of the policy up to and including the extent of its loss related to the leased equipment.