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Lack of standing bars recovery

Lack of standing bars recovery

December 20
13:14 2019

Lack of standing bars recovery

Liberty Transportation, Inc., owned property that was insured by Massachusetts Bay Insurance Company for property damage, loss of income, and fair rental value. On or about August 28, 2011, the property sustained wind and water damage during a hurricane. Liberty filed a claim for damages for lost income and lost fair rental value. Massachusetts Bay denied the claim, and in August 2013, Liberty filed suit alleging breach of contract and breach of the implied covenant of good faith and fair dealing.

On September 6, 2017, Massachusetts Bay filed a motion to dismiss on the ground that Liberty lacked standing to bring its claim for lost rental income for two commercial units at the property because Liberty had sold the property to a third party on January 10, 2012, and had assigned any insurance payment for any damages existing at the time of the closing of the transaction.

On October 6, 2017, Liberty filed a memorandum in opposition to the insurer’s motion to dismiss. It argued that the loss of rental income occurred before the formation of the real estate purchase agreement. It also contended that it had retained an interest in the damaged units as a result of its decision to exercise a leaseback provision set forth in the purchase agreement.

On March 27, 2018, the court granted Massachusetts Bay’s motion to dismiss, concluding that Liberty lacked standing because, by virtue of assignment, it had no legal interest in alleged insurance proceeds that were due and payable on account of damage to the property. Liberty appealed.

On appeal, Massachusetts Bay contended that Liberty made an assignment to Capital Three Development, LLC, of Liberty’s right to the insurance proceeds pursuant to the real estate purchase agreement between Liberty and Capital.

The court explained that an assignment is valid if two elements are satisfied. The first element is that the assignor possessed an intent to assign; the second element is that the subject matter of the assignment must be adequately identified.

The court stated that the language of the real estate purchase agreement satisfied both elements. The agreement was unambiguous and reflected that Liberty intended to assign its right to the insurance proceeds to Capital. The agreement also adequately identified the subject matter of the assignment between Liberty and Capital.

Liberty also asserted that the interest it retained in the property’s rental units pursuant to the agreement gave it standing. The court disagreed, stating that any property (leasehold) interest that Liberty retained in the rental units was separate and distinct from any contractual right that Liberty allegedly had in the insurance proceeds. Therefore the alleged interest that Liberty retained in the property’s rental units did not give it standing. The court upheld the lower court’s decision granting Massachusetts Bay’s motion to dismiss.

Liberty Transportation, Inc., v. Massachusetts Bay Insurance Company-Appellate Court of Connecticut-No. AC 41553-March 18, 2019.


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