Policy Structure & ProvisionsQuestion 471 of 474
A dwelling fire is traced to arson by the owner. Under the mortgage clause, the mortgagee shown on the declarations:
a.Is paid its interest in the property
b.Collects only the unearned premium
c.Loses its claim along with the insured
d.Must sue the owner to collect the debt
Explanation
The mortgage clause gives the mortgagee rights of its own, so denial of the owner's claim for an act such as arson does not defeat the lender's interest, provided the mortgagee meets its own duties, which include paying the premium on demand and filing a proof of loss if the insured will not. Having paid the mortgagee alone, the insurer takes over that much of the debt and may pursue the owner.
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