Mortgagee Affiliates Corp. v. Commercial Union Ins. Co. of New York

• Decision Date: 16 January 1967
• Citation: 276 N.Y.S.2d 404,27 A.D.2d 119
• Parties: MORTGAGEE AFFILIATES CORP., Respondent, v. COMMERCIAL UNION INSURANCE COMPANY OF NEW YORK et al., Appellants, and Patrick J. Dooley, Defendant.
• Court: New York Supreme Court — Appellate Division

Page 404

276 N.Y.S.2d 404

27 A.D.2d 119

MORTGAGEE AFFILIATES CORP., Respondent, v. COMMERCIAL UNION INSURANCE COMPANY OF NEW YORK et al Appellants, and Patrick J. Dooley, Defendant.

Supreme Court, Appellate Division, Second Department.

Jan. 16, 1967.

Herman B. Zipser, New York City (Bernard Meyerson, Brooklyn, of counsel), for appellants.

David Kashman, Brooklyn, for respondent.

Before CHRIST, Acting P.J., and BRENNAN, RABIN, HOPKINS and BENJAMIN, JJ.

CHRIST, Acting Presiding Justice.

We are presented with one narrow issue for determination in this appeal. Shall the complaint of the plaintiff mortgagee, suing on fire insurance policies covering the mortgaged real property, be dismissed for the mortgagee's refusal to comply with the standard fire insurance provision, contained in each of these policies, requiring an insured to 'submit to examinations under oath * * * and * * * produce for examination all books of account, bills, invoices and other vouchers'? The third defense pleaded in the defendant insurers' joint answer raises this issue; the court at Special Term denied the insurers' motion for summary judgment seeking to dismiss the complaint; and the insurers have appealed.

The insurers admitted by their answer that each had issued a fire insurance policy with respect to the insured premises. The complaint alleges a fire loss of $22,000 and seeks recovery under the respective policies in favor of the mortgagee, which claims a principal balance due of $14,043.68. The insured owner did not join the mortgagee as a plaintiff; he was named a defendant, but was not served with process; and he has not appeared.

We find no previous ruling on this precise question. However, the following language in the majority opinion of Syracuse Savings Bank v. Yorkshire Ins. Co., 301 N.Y. 403, 407, 94 N.E.2d 73, 75, is helpful:

'It is well settled in this and most other States that a mortgagee clause in a standard form policy creates an Independent insurance of the mortgagee's interest just as if he had received a separate policy from the company but without any inconsistent or repugnant conditions imposed upon the owner and free from invalidation by the latter's 'act or neglect'.'

The court, though divided 4 to 3, held that the mortgagee was entitled to notice of and opportunity to participate in any appraisal to fix the value of the loss. No such right was given in the mortgagee clause and appeared only in the standard policy provisions. Judge Fuld, in a separate concurring opinion, noted that the selection-of-appraisers provision in the standard fire insurance policy, restricting the selection right to the insured owner and the insurer, did not contemplate an insured mortgagee interest. Nevertheless, he found it reasonable to construe the benefits of that provisions as available to anyone with an insured interest in the proceeds of the policy. The approach of the dissent was strict and technical. It argued that, since the standard mortgagee clause contained no express right of participation for the mortgagee, he should not have it under the standard policy provision.

Under the concept of a separate insurance coverage, the mortgagee is insulated from prejudicial acts by the insured owner. In such case, however, the insurer is obligated to pay the mortgagee's loss, all other requirements being satisfied. This being so, the insured mortgagee is clothed with responsibilities as well as benefits. He should, when he is the claimant and beneficiary, meet the minimal safeguards contained in the standard fire insurance...