First Westchester Nat. Bank of New Rochelle v. New England Ins. Co.

• Decision Date: 13 July 1960
• Citation: 204 N.Y.S.2d 754,11 A.D.2d 192
• Parties: FIRST WESTCHESTER NATIONAL BANK OF NEW ROCHELLE, Respondent, v. NEW ENGLAND INSURANCE CO., Appellant.
• Court: New York Supreme Court — Appellate Division

Page 754

204 N.Y.S.2d 754

11 A.D.2d 192

FIRST WESTCHESTER NATIONAL BANK OF NEW ROCHELLE, Respondent, v. NEW ENGLAND INSURANCE CO., Appellant.

Supreme Court, Appellate Division, Second Department.

July 13, 1960.

Kent, Hazzard, Jaeger & Wilson, White Plains, Mizell Wilson, Jr., White Plains, of counsel, for appellant.

McGovern, Vincent, Connelly, New Rochelle, John M. Doyle, New Rochelle, of counsel, for respondent.

Before BELDOCK, Acting P. J., and UGHETTA, CHRIST, PETTE, and BRENNAN, JJ.

CHRIST, Justice.

Summary judgment was granted to respondent on the second cause of action in the amended complaint, which was for recovery upon the 'Collision or Upset' coverage in an automobile insurance policy. The pertinent facts are undisputed. The policy had been issued by appellant on August 8, 1951, for a three-year term, with respect to an automobile which was on that day bought by one Sheldon with financing furnished by respondent. Respondent bases its right to recover on the fact that it held a mortgage on the automobile at the time of the loss and that it was named as a 'Loss Payee' in the policy. The insurance had been procured in accordance with a provision in the mortgage requiring Sheldon to keep the automobile insured against 'collision for the benefit of the mortgagee.'

On August 8, 1953, an employee of respondent's 'repossession agent' took possession of the automobile in Pennsylvania, on behalf of respondent as mortgagee, because of Sheldon's failure to make some of the monthly payments due on the promissory note and mortgage which Sheldon had given respondent. While the car was being driven to New Rochelle, New York, where respondent's place of business was located, it was completely destroyed in a collision. The automobile had, in the meantime, been registered in New Jersey as being owned by Howard's Auto. The questions presented are of law only and are based on the premise that Sheldon was no longer the owner at the time of the happening of the accident.

The policy, which set forth Sheldon's name as the insured, also included the following provisions: 'Loss Payee: Any loss hereunder is payable as interest may appear to the insured and First National Bank [respondent's name at the time of the issuance of the policy] * * *. Except with respect to * * * mortgage or other encumbrance the insured is the sole owner of the automobile * * *. The purposes for which the automobile is to be used are Pleasure & Business' and 'This policy applies only while the automobile * * * is owned, maintained and used for the purposes stated as applicable hereto.' As to the amount recoverable, the policy stated it was 'Actual Cash Value less $50.00'. The parties stipulated that the liquidated damages were $1,460, thereby obviating the assessment of damages directed by the order under review. The stipulated amount was carried into the judgment appealed from as the principal amount owing to respondent.

Where a policy of insurance against property loss names the owner of the property as the insured, it is his interest in the property which is insured and not that of the holder of a mortgage on the property, even though the policy states that loss is payable to the mortgagee. The mortgagee's right to receive the loss payment, under such a provision, is wholly derivative from the interest of the owner. If the owner be not personally liable on the debt underlying the mortgage, he ceases to have an insurable interest in the property upon his transfer of the property to another. Therefore, if the property by damaged subsequent to such transfer, the loss is not his and he cannot recover for that damage. Since he cannot recover for the damage, the dependent mortgagee cannot recover (Grosvenor v. Atlantic Fire Ins. Co. of...