from the United States District Court for the Northern
District of Texas
REAVLEY, ELROD, and SOUTHWICK, Circuit Judges.
JENNIFER WALKER ELROD, Circuit Judge:
appeal arises from a property insurance policy that Lexington
Insurance Company issued to LWL Management to insure
construction equipment that LWL leased from Sierra Equipment.
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 that LWL obtain insurance with loss payable to
Sierra, we determine that the equitable lien doctrine does
not apply and Sierra lacks standing to sue Lexington for
coverage under Texas law. Accordingly, we AFFIRM.
leased various pieces of heavy construction equipment to LWL
according to an equipment lease agreement. The lease
agreement 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 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.
year after Sierra and LWL entered into the lease agreement,
LWL filed for bankruptcy. The following year, Lexington
issued a domestic property insurance policy with LWL as a
named insured. The policy did not include Sierra as a named
insured, nor did it mention Sierra. Furthermore, though
required by the lease agreement, LWL did not provide Sierra
with a copy of the policy.
LWL's bankruptcy proceedings, and after Sierra
inventoried the leased equipment, Sierra claims that it
discovered that much of its equipment had been damaged, lost,
or destroyed. Sierra filed an application with the bankruptcy
court seeking payment from LWL for this damage. According to
Sierra, however, no substantial payments from LWL ever came
of this claim. This led to an investigation by Sierra,
Sierra's discovery of the Lexington policy, a demand by
Sierra for payment from Lexington, and eventually this
action, which was filed in Texas state court but removed by
Lexington on the basis of diversity jurisdiction.
seeks declaratory judgment that: (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. At the district court,
Lexington filed multiple dispositive motions, including a
motion to dismiss for lack of standing.
district court granted Lexington's motion to dismiss with
prejudice, stating that "only where the lessee had a
duty to take out insurance for the lessor's benefit, or
include the lessor as an additional insured, and the lessee
failed to do so, can the lessor maintain a direct action
against the insurer." Analyzing the lease agreement, the
district court found that it "does not include any
language creating a duty that LWL procure insurance for
Sierra's benefit or with Sierra as an additional
insured." Thus, the district court held that Sierra had
no standing to bring a direct action against Lexington. The
remaining motions were dismissed as moot. Sierra timely
Court reviews a dismissal for lack of standing de novo."
Moore v. Bryant, 853 F.3d 245, 248 (5th Cir. 2017).
Where the district court decides the motion to dismiss based
on undisputed facts, "our review is limited to
determining whether the district court's application of
the law is correct and . . . whether those facts are indeed
undisputed." Barrera-Montenegro v. United
States, 74 F.3d 657, 659 (5th Cir. 1996).
this diversity action, we must apply Texas law as interpreted
by Texas state courts." Gilbane Bldg. Co. v. Admiral
Ins. Co., 664 F.3d 589, 593 (5th Cir. 2011) (quoting
Mid-Continent Cas. Co. v. Swift Energy Co., 206 F.3d
487, 491 (5th Cir. 2000)). Our task is to make an
Erie guess as to how the Texas Supreme Court would
decide the question before us. Id. "We consider
Texas Supreme Court cases that, 'while not deciding the
issue, provide guidance as to how the Texas Supreme Court
would decide the question . . . .'" Id. at
594 (quoting Am. Int'l Specialty Lines Ins. Co. v.
Rentech Steel L.L.C., 620 F.3d 558, 564 (5th Cir.