Case Name: Simon Heilbrunn, Appellant, v. German Alliance Insurance Company of New York, Respondent
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1910-11-04
Citations: 140 A.D. 557
Docket Number: 
Parties: Simon Heilbrunn, Appellant, v. German Alliance Insurance Company of New York, Respondent.
Judges: 
Reporter: Appellate Division Reports
Volume: 140
Pages: 557–570

Head Matter:
Simon Heilbrunn, Appellant, v. German Alliance Insurance Company of New York, Respondent.
First Department,
November 4, 1910.
Insurance — fire insurance, loss payable to mortgagee — notice and proof of loss not prerequisite to recovery by mortgagee.
The mortgagee of real property insured against loss by fire under the form of policy standard in this State and bearing the usual mortgage clause providing that the loss, if any, is payable to the mortgagee as his interest may appear, such interest not to be invalidated by any act or neglect of the mortgagor, etc., is not required to allege or prove that he or the mortgagor gave notice of the loss to the insurer and furnished proof of loss within the time prescribed by the policy in order to recover thereon against the insurer.
The interest of the owner of the mortgaged premises and the interest of the mortgagee are regarded as distinct subjects of insurance covered by separate contracts.
Laughlin, J., dissented, with opinion.
Appeal by the plaintiff, Simon Heilbrunn, from an order of the Supreme Court, made at the Mew York Special Term and entered in the office of the clerk of the county of Mew York on the - 16th day of May, 1910, sustaining the defendant’s demurrer to the amended complaint.
Jacob R. Schiff, for the appellant.
C. Arthur Levy, for the respondent.

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 mortgagee 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 and the amount of loss resulting therefrom, the other insurances on the property and the proportion of the loss for which defendant is liable 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's 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 Assurance Co. v. Chicago Mutual Bldg. & Loan Assn. (98 Ill. App. 152; affd., 198 Ill. 474); Queen Ins. Co. v. Dearborn Savings, Loan db Bldg. Assn. (75 Ill. App. 371; affd., 175 Ill. 115); Dwelling House Ins. Co. v. Kansas Loan & Trust Co. (5 Kan. App. 137; 48 Pac. Pep. 891); Glens Falls Ins. Co. v. Porter (44 Fla. 568; 33 So. Rep. 473); Adams v. Farmers' Mut. Fire Ins. Co. (115 Mo. App. 21). On the other hand it has been held that a mortgagee must furnish proofs of loss in Lombard Investment 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 Assn. v. Home Ins. Co. of New Orleans (94 Ga. 167); American Bldg. & Loan Assn. v. Farmers Ins. Co. (11 Wash. 619). To the same effectis Union Inst, for Savings v. Phænix Ins. Co. (196 Mass. 230), 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 issued in this State (Hicks v. British Am. Assur. Co., 162 N. Y. 284), 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 any 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 Rapallo, J.: "I think 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 are. 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 wliat conditions and obligations apply to and rest upon a mortgagee as follows : " If, with the consent of this 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 described 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 become absolutely controlling. Lines 7 to 55, preceding the mortgagee clause, refer to acts done 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 obligations 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 obligations imposed upon the insured by lines 60 to 112 of this policy-are, 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 ten dollars costs and disbursements, and the demurrer overruled, with ten dollars costs, with leave to defendant to withdraw the demurrer and answer within twenty days upon payment of such costs.
Ingraham, P. J., McLaughlin and Clarke, JJ., concurred; Laughlin, J., dissented.