Court Opinion

ID: 3626544
Source: CourtListenerOpinion
Date Created: 2016-07-06 00:06:59.319883+00
Date Added: 2024-06-11T14:07:38.506198
License: Public Domain

By the terms of the mortgage clause attached to the policy the defendant agreed that the insurance, as to the interest of the mortgagee only, should not be invalidated by any act or neglect of the mortgagor or owner of the property insured, nor by the occupation of the premises for purposes more hazardous than were permitted by the policy. But it was further agreed, in substance, that if the defendant should pay the mortgagee any loss, for which it would not be liable to the mortgagor, it should be subrogated to the rights of the mortgagee under all securities for the mortgage debt, or it might pay the amount due on the mortgage and take an assignment thereof.
I think that the intent of this clause was, that in case by reason of any act of the mortgagors or owners, the company should have a defense against any claim on their part for a loss, the policy should nevertheless protect the interest of the mortgagees, and operate as an independent insurance of that interest, and indemnify them against loss resulting from fire, without regard to the rights of the mortgagors under the policy; and that, to effectuate that intention, we should hold that, as against the mortgagees, the defendant cannot set up any defense based upon any act or neglect of the mortgagors, whether committed before or after the issuing of the policy, or the making of the agreement between the company and the mortgagees.
To hold otherwise would, I think, defeat the purpose intended, and deprive the mortgagees of the protection upon which they had a right to rely. Although the clause might be construed so as to exempt the mortgagees from the consequences only of acts of the owners done after the making of the agreement, I do not think, in view of its apparent purpose, that any such distinction was intended. For instance, the clause provides that the insurance, as to the interest of *Page 154 
the mortgagees, shall not be invalidated by the occupation of the premises for purposes more hazardous than permitted by the policy. If the agreement is to be construed as protecting the mortgagees only against future acts of the mortgagors, they would be deprived of protection, if it so happened that, at the time of making the agreement, the premises were being occupied by the mortgagors for purposes not permitted, though the mortgagees were ignorant of the fact. The language of the clause does not require such an interpretation, and I do not think it consistent with its spirit and intent.
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. It established a privity between the company and the mortgagees, and provided that, notwithstanding that the insurance might be invalidated as to the mortgagors, it should, nevertheless, protect the mortgagees; and, as a consideration for this undertaking, it was stipulated that, in case the company should be called upon to pay the mortgagees, under circumstances which discharged it from liability to the mortgagors, it should be indemnified by subrogation, or an assignment of the mortgage and all securities held by the mortgagees for the mortgage debt. This provision, in case the policy were invalidated as to the mortgagors, made it, in substance, an insurance solely of the interest of the mortgagees, by direct contract with them, unaffected by any questions which might exist between the company and the mortgagors. The same consequences would follow, protanto, from a partial, as from an entire invalidation, or a reduction of the policy as to the mortgagors.
There having been in the present case no additional insurance upon the interest of the mortgagees, which should reduce their claim to one for contribution, I do not think *Page 155 
they are affected by the additional insurance on the interest of the mortgagors, even though it existed at the time of the issuing of the policy now in question, the mortgagees having been ignorant of, and having no interest in, such additional insurance. For whatever amount the defendant may have to pay the plaintiffs in excess of the sum which the mortgagors could have collected on the policy, were there no mortgage, the company is entitled to reimbursement, by enforcing the bond and the mortgage, to which it is entitled by subrogation to that extent; or it may pay them and take an assignment, in which case it would be bound to give credit thereon, only for its contributive share of the loss for which it is liable in respect of the interest of the mortgagors. If the security is insufficient to make the defendant whole for its excessive payment, that is no answer to the claim of the plaintiffs; it is a loss resulting from the contract of the defendant with the mortgagees.
The mortgagors derive no benefit from the sum paid by the defendant in excess of its contributive proportion. The mortgage debt is not reduced by that payment, but only to the extent of the contributive share for which the policy stood for the benefit of the mortgagors. The mortgagors remain liable on their bond for the amount payable thereon beyond this contributive share, in case the company takes an assignment. If the mortgaged premises should, on a foreclosure, prove insufficient to pay this excess, the mortgagors will be liable for the deficiency. They have their claim against the Lycoming Insurance Company for its contributive share of the loss which is identical in amount with the excess which the defendant is obliged to pay the mortgagees. The Lycoming Insurance Company can claim no benefit from the payment by the defendant to the mortgagees. Whether the defendant can, for its indemnity, have any recourse against the proceeds of the policy in the Lycoming Company is a question not involved in the present case. The only question here is whether it can set up that insurance as against the claim of the mortgagees. *Page 156 
For the reasons stated I concur in the conclusion of my learned brother MILLER, J., that it cannot, and that the judgment should be affirmed.
All concur for affirmance, except ALLEN, FOLGER and ANDREWS, JJ., dissenting.
Judgment affirmed.