Facts: The plaintiff purchased a residential
condominium unit located in the basement of the building. The condominium was
located in a floodplain area designated as an AE flood zone, an area of special
flood hazard. Under 42 U.S.C. §
4012a(b)(1), federally regulated lending institutions are forbidden to make any
loan secured by improved real estate located in an area of special flood
hazard, unless the property is covered for the term of the loan by flood
insurance in specified amounts. Elizabeth Kelley (Kelley), a paralegal employed
by the attorney representing the plaintiff’s mortgage lender, contacted the
management company for condominium and requested proof of flood insurance on
the unit. Endlar issued a certificate. The certificate identified the plaintiff
as the unit owner and stating that “above unit owner is insured…” and the
policies listed in the certificate had issued in favor of the condominium. Incident
to his purchase of his condominium unit, the plaintiff also purchased a policy
of title insurance from First American. The policy specifically states that any
losses resulting from governmental regulations, including building codes are
excluded from coverage. On May 15, 2006, the unit was completely destroyed as
the result of a flood of the Shawsheen River and it cannot be rebuilt due to
applicable building code requirements. The plaintiff was denied insurance
coverage by both Endlar and First American. The defendants, Endlar and First
American, filed a summary judgment and the court granted summary judgment for
both defendants.
Issue: Whether the judge properly granted summary
judgment in favor of Endlar and First American?
The judgment dismissing the plaintiff’s
claims against Endlar is reversed. Endlar was aware that Kelley, on behalf of
the plaintiff, requested proof of flood insurance coverage for the plaintiff’s
unit. In addition, the plaintiff alleged that he relied, to his detriment, on
the insurance certificate. Endlar knew that the plaintiff and his mortgage
lender would rely on the certificate it furnished to constitute that proof.
Therefore, the court concluded that it is reasonable for the plaintiff to rely
to his detriment on that representation.
The court held that the judge correctly
granted summary judgment dismissing the plaintiff’s claims against Frist
American because the policy specifically excludes any losses resulting from
governmental regulations (including zoning and building codes) from coverage. (YK)
