Case Name: HEILBRUN v. GERMAN ALLIANCE INS. CO. OF NEW YORK
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1910-11-04
Citations: 125 N.Y.S. 374
Docket Number: 
Parties: HEILBRUN v. GERMAN ALLIANCE INS. CO. OF NEW YORK.
Judges: 
Reporter: West's New York Supplement
Volume: 125
Pages: 374–384

Head Matter:
HEILBRUN v. GERMAN ALLIANCE INS. CO. OF NEW YORK.
(Supreme Court, Appellate Division, First Department
November 4, 1910.)
1. Insurance (§ 646 )—Actions on Fire Policies—Presumptions.
Where the complaint, in an action on a fire policy brought by the assignee of the mortgagee of the property insured, does not set forth either the policy or the mortgage clause in its precise words, the court must assume that the policy was in the standard form, which alone can be lawfully issued in the state.
[Ed. Note.—For other cases, see Insurance, Cent. Dig. § 1645; Dec. Dig. § 646.*]
2. Insurance (§ 156*)—Fire Insurance—Mortgage Clause—Construction.
The mortgage clause in the standard fire policy, providing that the insurance as to the interest of the mortgagee shall not be invalidated by any act or neglect of the owner of the property covered by the policy, creates a new and distinct contract, which places the mortgagee on a different footing from that of a mere assignee or appointee to receive the loss, and the contracts with the owner and the mortgagee are separate, in which each is subject only to the obligations expressly imposed on him.
[Ed. Note.—For other cases, see Insurance, Cent. Dig. §§ 316-322; Deo. Dig. § 156.*]
3. Insurance (§ 533*)—Fire Insurance—Mortgage Clause—Construction.
The mortgage clause in the standard fire policy, providing that the insurance as to the interest of the mortgagee shall be subject to the conditions “hereinbefore contained/' etc., inserted after stipulations referring to acts done by insured prior to the issuance of the policy and to contingencies under which insurer will be relieved from liability, and before provisions referring wholly to conditions to be complied with by insured after a loss, by requiring insured to give notice and proofs of loss, does not require a mortgagee to furnish proof of loss, or to give any other notice than that involved in the commencement of his action on the policy for a loss.
[Ed. Note.—For other cases, see Insurance, Cent. Dig. § 1320; Dec. Dig. § 533.*]
Laughlin, J., dissenting.
Appeal from Special Term, New York County.
Action by Simon Heilbrun against the German Alliance Insurance Company of New York. From an order sustaining a demurrer to the complaint, plaintiff appeals.
Reversed, and demurrer overruled, with leave to answer.
Argued before INGRAHAM, P. J., and LAUGHLIN, CLARKE, McLaughlin, and Scott, JJ.
Jacob R. Schiff, for appellant.
C. Arthur Levy, for respondent.
For other eases see same topic & 5 number in Dec. & Am. Digs. 1907 to date, & Rep’r Indexes

Opinion:
SCOTT, J.
The action is upon a policy of fire insurance issued by defendant to one Cecelia M. Siff, to cover loss by fire to a specified building. The plaintiff's assignor held a mortgage upon the insured building, and there was attached to the policy a mortgage clause which, as the demurrer admits, provided that the loss or damage, if any, to the premises insured, should be payable to Henry Gerken, mortgagee, as interest might appear, and further provided that the insurance, as to the interest of the said mortgagee therein, should not be invalidated by any act or neglect of the mortgagor or owner of the property described therein, nor by any change in the title or ownership of the property. The complaint alleges the fire on the premises, the amount of loss resulting therefrom, the other insurances on the property, and the proportion of the loss which defendant is liable for under its said policy. The complaint does not allege that the insured) or Gerken, the mortgagee, or plaintiff, as assignee of the latter, had ever served notice of loss or proofs of loss upon defendant, and the demurrer for general insufficiency is directed especially to this omission.
The decision below rested upon the proposition that the plaintiff'? assignor, although only a mortgagee, was bound, as a condition precedent to a recovery, to allege and prove that he, or the mortgagor, had. within the time prescribed by the policy, given to the defendant notice of the loss and furnished proofs of loss. Whether or not such an obligation rested upon the mortgagee is the crucial question involved in this appeal. The question has never been directly passed upon in this state, and in other jurisdictions there are decisions both ways. That no such obligation rests upon a mortgagee has been held in Northern Association Company v. Chicago Mutual Bldg. & Loan Ass'n, 98 Ill. App. 152, affirmed 198 Ill. 474, 64 N. E. 979; Queens Ins. Co. v. Dearborn Savings Loan & Bldg. Ass'n, 75 Ill. App. 371, affirmed 175 Ill. 115, 51 N. E. 717; Dwelling House Ins. Co. v. Kansas Loan, etc., Co., 5 Kan. App. 137, 48 Pac. 891; Glens Falls Ins. Co. v. Porter, 44 Fla. 568, 33 South. 473; Adams v. Farmers' Mut. Ins. Co., 115 Mo. App. 21, 90 S. W. 747. On the other hand, it has been held that a mortgagée must furnish proofs of loss in Lombard Invest. Co. v. Dwelling House Ins. Co., 62 Mo. App. 315, apparently overruled by Adams v. Farmers' Mut. Fire Ins. Co., supra; Southern Home Bldg. & Loan Ass'n v. Home Ins. Co. of New Orleans, 94 Ga. 167, 21 S. E. 375, 27 L. R. A. 844, 47 Am. St. Rep. 147; American, etc., Ass'n v. Farmers' Ins. Co., 11 Wash. 619, 40 Pac. 125. To the same effect is Union Inst. for Savings v. Phœnix Ins. Co., 196 Mass. 230, 81 N. E. 994, 14 L. R. A. (N. S.) 459, although the precise point was not involved. In that case neither the policy nor the mortgagee clause seems to have been the same as those in use in this state, and the case turned rather on the right of a mortgagee to make proofs of loss, than upon his'obligation so to do, although the opinion upholds both the right and the obligation.
In the present case the complaint does not undertake to set forth either the insurance policy or the mortgagee clause in their precise words. We must assume, therefore, that the policy was in the standard form, which alone can be lawfully issued in this • state (Hicks v. Insurance Co., 162 N. Y. 284, 56 N. E. 743, 48 L. R. A. 424), and that the mortgagee clause is substantially in the form set forth in the complaint and admitted by the demurrer, to wit, that it provides that the insurance as to the interest of the said mortgagee therein shall not be invalidated by ány act or neglect of the mortgagor or owner of the property described therein. The effect of such a clause has long been settled in this state. It created a new and distinct contract, which places the mortgagee upon another and a different footing from that of a mere assignee or appointee to receive the loss, and removes him beyond the control or effect of any act or neglect of the owner of the property, and renders such mortgagee a party who has a distinct interest separate from the owner, embraced in another and a separate contract. The interest of the owner and of the mortgagee are regarded as distinct subjects of insurance. As was said by Rapello, J.:
"I think that the intent of the clause was to make the policy operate as an insurance of the mortgagors and the mortgagees separately, and to give the mortgagees the same benefit as if they had taken out a separate policy, free from the conditions imposed upon the owners, making the mortgagees responsible only for their own acts." Hastings v. Westchester Fire Ins. Co., 73 N. Y. 141.
Considering the contracts with the owner and the mortgagee as separate contracts, in which each is subject only to the obligation expressly imposed upon him, we must next turn to the standard form of fire insurance policy to ascertain what those obligations áre. That form of policy was devised with the greatest care, and constitutes the only lawful form of policy which may be issued in this state. Its conditions are plainly expressed in numbered lines. Lines 56 to 59, inclusive, state distinctly what conditions and obligations apply to and rest upon a mortgagee, as follows:
"If, with the consent of the company, an interest under this policy shall exist in favor of a mortgagee, or of any person or corporation having an interest in the subject of insurance other than the interest of the insured as expressed herein, the conditions hereinbefore contained shall apply in the manner expressed in such provisions and conditions of insurance relating to such interest as shall be written upon, attached, or appended hereto."
The use of the word "hereinbefore" in the above clause is most significant, and when we come to consider the nature of the conditions which precede the clause, and those which follow after it, the significance of its language and its location in the policy becomes absolutely controlling. Lines 7 to 55, preceding the mortgagee clause, refer to acts doné by the insured prior to the issuance of the policy, or to certain contingencies under which the insurer will be liable to no one, as, for instance, if a loss occurs by reason of invasion, insurrection, riot, etc. Lines 60 to 112, on the other hand, which follow after the above-quoted mortgagee clause, refer wholly to conditions to be complied with by the insured after a loss has occurred. Many of these bbligations thus imposed upon the owner relate to matters concerning which a mortgagee is not to be presumed to have knowledge, or with which, in the nature "of the case, he could not comply. Throughout the policy it is quite apparent that the "insured," who is required to do certain things after a loss has occurred, does not include a mortgagee. The obligation imposed upon the insured by lines 60 to 112 of this policy is therefore by the very terms of the policy imposed upon the original insured person, and not upon the mortgagee. This includes the giving of immediate notice of the loss, of which the mortgagee may be ignorant for a long time, and the furnishing of proofs of loss, which the mortgagee may be quite unable to do, and by the neglect of the owner or mortgagee to do which it is expressly provided that the insurance as to the interest of the mortgagee shall not be invalidated.
We are therefore of the opinion that the mortgagee was under no obligation to furnish proof of loss, or to give any other or earlier notice of loss, than that involved in the commencement of this action. It was not, therefore, necessary to allege that he, or the mortgagors, had given such proofs of loss, or to set up an express waiver thereof by the insurer.
It follows that the order appealed from must be reversed, with $10 costs and disbursements, and the demurrer overruled, with $10 costs, with leave to defendant to withdraw the demurrer and answer within 20 days, upon payment of such costs.
INGRAHAM, P. J., and McLAUGHLIN and CLARKE, JJ., concur.