Intended Beneficiaries Of Insurance Policies

If a person or entity is not a named beneficiary, can they be an intended beneficiary?

Other persons who may sue for benefits under an insurance contract are “intended beneficiaries” also known as “third party beneficiaries.”

A third party for whose benefit an insurance contract is made may enforce the insurance contract against the promissor.  As discussed in the 1985, opinion from the 14th Court of Appeals, styled, Hermann Hosp. v. Liberty Life Assur. Co., the controlling factor in determining whether a third party may enforce a contract is the intention of the contracting parties.

A presumption exists that parties intended to contract only for themselves, so the contract will not be construed as having been made for the benefit of another, unless it clearly appears that this was the intention of the contracting parties.  According to the 1997, 5th Circuit opinion styled, Marine Indem. Ins. Co. of America v. Lockwood Warehouse & Storage, any doubts are construed against such an intent.

To qualify as a third party beneficiary, the plaintiff must prove: (1) that she was not privy to the written agreement; (2) that the contract was made at least in part for her benefit; and (3) that the contracting parties intended for her to benefit from their written agreement.

In the 1990, 5th Circuit opinion styled, Palma v. Verex Assur., Inc., the borrower was a third party beneficiary of private mortgage insurance, which protected the lender in case Palma defaulted.  She was not a party to the contract, and the agreement was made in part for her benefit. because it protected her from a claim by the lender once the insurer paid.  The Court also found the contracting parties intended for the borrower to benefit from their written agreement.

One thing to be aware of in these cases is ERISA.  ERISA preempts state common law and statutory claims when an insurer or beneficiary receives the insurance in question under an employee benefit plan.  Pursuant to 29 U.S.C.A. Section 1132(a), relief is limited to those set forth in ERISA:  recovery of the claim amount, clarification with respect to future claims, attorney fees and costs and, on rare occasion, limited equitable relief.

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