Date St. Cap. v. Clearcover Ins. Co., No. 2 CA-CV 2023-0065 (App. Div. II, November 21, 2023) (J. Eckerstrom) https://www.appeals2.az.gov/decisions/CV20230065Opinion.pdf

WHERE A RIGHT TO DISMISSAL TURNS UPON THE DETERMINATION OF A MATERIAL FACTUAL ISSUE RULE12(d) REQUIRES COURT ALLOW ALL SIDES TO PRESENT EVIDENCE ON THE ISSUE/WHERE RIGHT TO INSURANCE COVERAGE TURNED ON WHETHER INSURANCE POLICY HAD A STANDARD MORTGAGE CLAUSE OR LOSS PAYABLE MORTGAGE CLAUSE REQUIRES COURT CONSIDER LANGUAGE OF POLICY IN DECIDING COVERAGE

Date Street, the lienholder on a car that was damaged made a property damage claim against the purchaser of the car's insurer Clearcover.  Clearcover denied coverage claiming Date Street had no legal interest in the claim as a lienholder where the policy was properly rescinded due to the purchaser's failure to put her name on the policy as a listed driver. Only her imprisoned ex-husband  was listed as a driver.  Date Street brought this declaratory relief action under A.R.S. § 12-1831 seeking a declaration that it was entitled to coverage on the damaged car. The trial court dismissed the matter under rule 12(b)(6) failure to state a claim. Specifically the court found had Dale Street had no interest in the insurance claim because it had no privity of contract with Clearcover and therefore lacked standing to bring this claim. Dale Street argued privity did exist under the loss-payable clause in the Clearwater policy and that the court improperly considered evidence (Clerwater's recission letter) outside the pleadings in deciding the motion without turning the motion to dismiss into a motion for summary judgment and considering evidence from both parties and specifically the language in the insurance policy.  The Arizona Court of Appeals vacated and remanded.

A lienholder named in a standard loss-payable mortgage clause typically is allowed to collect on the policy. 

In short, whether Date Street's complaint presents a

cognizable legal claim turns at least in part on the factual question of

whether the insurance contract contains a basic loss-payable mortgage

clause or, instead, a standard mortgage clause such that an independent

contractual obligation runs between Clearcover and Date Street. In light of

the unresolved dispute over that material fact, summary judgment was

improper without providing both parties the opportunity to present

evidence regarding the insurance contract's loss-payable clause. See

Strategic Dev. & Constr., 224 Ariz. 60, ¶ 14. Likewise, the superior court's

determination that no privity of contract exists between Date Street and

Clearcover hinges on whether any clause in that contract does, in fact,

assign rights to Date Street, whether as a loss payee or otherwise.

A declaratory relief action under A.R.S. § 12-1831 is the appropriate vehicle for the coverage issue here to be decided, but the trial court cannot properly make the coverage determination here without turning this motion to dismiss into a motion for summary judgment and considering the loss-payee language in the policy.