This 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. I.Sierra 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.About a 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.During 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.Sierra 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 ofits loss related to the leased equipment. At the district court, Lexington filed multiple dispositive motions, including a motion to dismiss for lack of standing.The 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 appealed.II.“This 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).“In 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. 2010)). In addition to decisions of the Texas Supreme Court, which are weighed more heavily, we consider decisions of the Texas intermediate appellate courts. Id.III.In Texas:The rule is established . . . that [an] insurance policy is a personal contract between the insurer and the insured named in the policy and a stranger to the policy may not ordinarily maintain a suit on it. There is an exception or corollary to this general rule in such instances as those where a mortgagor or lessee is charged with the duty of procuring such a policy with loss payable to the mortgagee or lessor, as the case may be. In those instances, in pursuance of equitable principles, it is established that equity will treat the policy as having contained such a provision upon the principle that equity treats that as done which should have been done.Duval Cty. Ranch Co. v. Alamo Lumber Co., 663 S.W.2d 627, 632 (Tex. App.— Amarillo 1983, writ ref’d n.r.e) (citations omitted). This is known as the equitable lien doctrine.In Farmers Insurance Exchange v. Nelson, 479 S.W.2d 717 (Tex. Civ. App.—Waco 1972, writ ref’d n.r.e.), a Texas appellate court extended the equitable lien doctrine from mortgagee-mortgagor relationships to lessor- lessee relationships. The Farmers court specifically held “that a breach by a lessee of a contract to insure the leased property for the benefit of his lessor will charge the benefits of any insurance taken out by the lessee on the leased property with a lien in favor of the lessor,” allowing the lessor to proceed directly against the insurer. 479 S.W.2d at 721. The focus of this appeal is the meaning of the language “for the benefit of his lessor.” Id.Sierra argues that the nature of its agreement with LWL, including the fact that LWL was required to deliver the insurance policy to Sierra and obtain a policy in terms satisfactory to Sierra, is such that the agreement required LWL to obtain insurance for Sierra’s benefit. Indeed, Sierra goes so far as to say that “the fact that the insurance benefits the lessor is self-evident.” As a result, in Sierra’s view, it has standing. Texas courts, however, have not applied the equitable lien doctrine in the broad way that Sierra suggests. Instead, Texas courts have looked to whether the insurance policy included, or the parties agreed that it would include, a loss payable clause to the party bringing suit.In extending the equitable lien doctrine to lessors and lessees, the Farmers court discussed the equitable principles set forth in Fidelity & Guaranty Insurance Corp. v. Super-Cold Southwest Co., 225 S.W.2d 924 (Tex. Civ. App.—Amarillo 1949, writ ref’d n.r.e.). Farmers, 479 S.W.2d at 721. In Super-Cold, a Texas appellate court held that an agreement between a mortgagor and a mortgagee under which the mortgagor is charged with procuring insurance on the mortgaged property “for the benefit of the mortgagee” will encumber the proceeds of any insurance procured by the mortgagor with a lien in the mortgagee’s favor. 225 S.W.2d at 927. The Super- Cold court further held that:[i]n such cases, it is the duty of the mortgagor to have a provision inserted in the policy that the proceeds shall be payable to the mortgagee as his interest might appear but, where he fails to do so, equity will treat the policy as having contained such a provision upon the principle that equity treats that as done which should have been done.Id. Thus, the court reasoned that what “should have been done” under the agreement—and what it treated as done—was the inclusion of a loss payable clause to the mortgagee.For the proposition that the insurer should treat the policy as having a loss payable clause where that was the agreement, the Super-Cold court cited an even earlier case, Walter Connally & Co. v. Hopkins, 195 S.W. 656 (Tex. Civ. App.—Texarkana 1917), opinion approved, 221 S.W. 1082 (Tex. Comm’n App. 1920).[1] In Hopkins, the court granted an equitable lien to a mortgagee where the contract covering the sale of certain machinery stated that the mortgagors “would keep the machinery fully insured . . . , the loss, if any, payable to [the mortgagee] as their interest appeared.” 195 S.W. at 659. The equitable lien doctrine was therefore applied only where the contract stated that any loss under the policy would be payable to the mortgagee. Id.Furthermore, just last year, a Texas appellate court explicitly listed as a requirement for an equitable lien that “the named insured agreed to protect the third-party’s security interest by obtaining insurance with a loss-payable clause in the third party’s favor.” Westview Drive Invs., LLC v. Landmark Am. Ins. Co., 522 S.W.3d 583, 596 & n.6 (Tex. App.—Houston [14th Dist.] 2017, pet. denied). Indeed, Texas courts have consistently considered whether the parties agreed on the inclusion of a loss payable clause in the insurance policy in deciding whether to apply the equitable lien doctrine.[2]Here, the agreement between Sierra and LWL did not require that LWL obtain insurance with a loss payable clause to Sierra.[3] And the Lexington policy does not contain such a clause. Thus, pursuant to Texas case law, Sierra, who was not a party to the insurance policy, does not have standing to sue Lexington.[4] On these grounds, the district court’s judgment is AFFIRMED.
