Hickman v. SAFECO Insurance Company

Hickman (plaintiff) obtained a mortgage on his home. The mortgage was later assigned to Guaranty (defendant). When Hickman failed to insure the home as required under the mortgage agreement, Guaranty obtained insurance from SAFECO Insurance Company (SAFECO) (defendant). The policy covered losses on the home, other structures, and the personal property of the “borrower” and the borrower’s family. Payments for losses on the home and other structures were to be paid to Guaranty up to the amount of its interest in the property, with the excess payable to the borrower. Payments for losses related to personal property were to be paid directly to the borrower. The policy also allowed the borrower to seek arbitration on any appraisal of loss determined by SAFECO. The insurance premiums were paid from an escrow account funded from Hickman’s monthly mortgage payments. Hickman’s home was damaged in a storm. SAFECO paid out a claim to Guaranty for more than the outstanding balance of the mortgage, and Guaranty paid the excess to Hickman. Hickman objected to the amount of the payment under the policy and sued SAFECO and Guaranty. The district court granted SAFECO’s motion for summary judgment, and the court of appeals affirmed. The Minnesota Supreme Court granted review on the question of whether Hickman was a third-party beneficiary of the insurance contract under the intent-to-benefit test.