SAND POINT VILLAGE, LTD., AND SAND POINT OFFICE CENTER, LTD., APPELLANTS,
v.
HIGHLANDS INSURANCE COMPANY, ET AL., APPELLEES
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A second mortgagee's appeal of a settlement between an insurance company and property owner was successful because the trial court erred in approving the settlement and dismissing the action without allowing the second mortgagee adequate time to conduct discovery on the settlement's fairness and its impact on the mortgagee's rights.
A trial court errs in approving a settlement that discharges an insurance company's liability without first permitting a non-party second mortgagee materially affected by the settlement adequate opportunity to conduct discovery.
[1] A non-party second mortgagee materially affected by a settlement between an insurer and property owner must be afforded adequate opportunity to conduct discovery regardin…
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Join FLexlaw to unlock all legal intelligenceProperty was damaged in a fire and an insurance company settled with the property owner. The settlement discharged the insurance company from liabilit…
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PER CURIAM.
The second mortgagee, on property damaged in a fire, appeals a final order that approved a settlement stipulation between an insurance company and the owner of the property and, furthermore, dismissed the main action that was pending below. The settlement both discharged the insurance company from further liability relating to the fire and made provisions for the payment of proceeds to the first mortgagee. The second mortgagee argues that it was unable to determine its rights, as to whether the settlement was fair and reasonable, because it was denied the opportunity to conduct meaningful discovery. We agree.
First, the record reflects that the second mortgagee was not a party to the settlement. The record further reflects that the second mortgagee was not given an adequate amount of time to fully explore the ramifications leading up to the settlement agreement entered into between the owner of the property and the insurance company. Since the second mortgagee is materially affected by the decision as to whether or not it receives proceeds from the insurance company or, in the alternative, the amount of insurance proceeds paid to the first mortgagee (thereby reducing the principal owed on the first mortgage), we find that the trial court erred in approving the settlement agreement, thereby discharging the insurance company, prior to the second mortgagee being permitted to take advantage of its right to conduct the necessary discovery relating to the settlement agreement.
Accordingly, the order appealed from is reversed, and this cause is remanded for further proceedings consistent herewith.
Reversed and remanded.