Court Opinion

ID: 7302488
Source: CourtListenerOpinion
Date Created: 2022-07-25 20:49:36.956123+00
Date Added: 2024-06-11T16:19:27.997654
License: Public Domain

CLIFFORD, J.,
concurring in result.
My misgivings about the conclusion that plaintiff is entitled to coverage spring from an uneasy feeling that we are interpreting the contract contrary to the intent of the mortgage clause, contrary to the reasonable interpretation of that clause, and contrary to both common sense and insurance sense. Although that kind of strong medicine ordinarily would be enough to prompt one to^disSent, for reasons that will appear I join in the majority’s result.
Defendant New Jersey Underwriting Association issued a policy of insurance that contained three contractual undertakings: one with John Chmielewski as owner of the apartment building covered by the policy; a second with Mohawk Savings & Loan Association, holder of a first mortgage on the property; and a third with plaintiff, 495 Corporation, the second mortgagee. During the policy period Chmielewski conveyed the property to 495 Corporation in satisfaction of the second mortgage— for our purposes, a “functional” foreclosure. 495 Corporation was thereupon made whole and Chmielewski became entitled to the return of any unearned portion of the premium he had paid. *170Thereafter the insured premises suffered damage from fire and vandalism. The insurer paid the first mortgagee, Mohawk Savings & Loan Association. The question is whether under the circumstances 495 Corporation, owner of the building when the fire and vandalism damage occurred, is entitled to any of the proceeds of the insurance policy. The answer can be found only in the terms of the contract of insurance.
The insurer’s contract was with 495 Corporation only as to the latter’s interest as mortgagee. It was named- as a “mortgagee,” along with Mohawk Savings & Loan Association, on the first page of the policy, which also bore Chmielewski’s name as the “insured.” The policy called for payment to plaintiff only as its “interest may appear under all present or future mortgages * * upon the property * * * in which the [mortgagee] may have an interest as mortgagee * * (emphasis added). When 495 Corporation took back the property, with no part of the mortgage debt remaining undischarged, it became the owner. It was no longer a mortgagee. As I read the policy, 495 Corporation’s interest under the policy in question was at an end. Had it wished to protect its interest as owner, it had simply to acquire a policy as owner — either by the transfer of the policy in question to 495 Corporation as owner and payment of the owner’s premium therefor, or by obtaining a new policy to protect its ownership interest and that of Mohawk Savings & Loan Association as mortgagee. It did neither.
However, the mortgage clause provided further that “this insurance, as to the interest of the mortgagee * * * only therein, shall not be invalidated by * * * any foreclosure or other proceedings * * * nor by any change in the title or ownership of the property.” This clause does not strike me as unclear on its face. As I read it, its apparent intent is to produce the very result achieved by the insurer after the fire in this case, namely, to protect and continue the insurable interest of the first mortgagee, Mohawk Savings & Loan Association, after 495 Corpora*171tion’s foreclosure. Nevertheless, this reading of the clause has not received universal approval; in fact, there is ample, longstanding case law to the contrary. That is the rub. Justice Pashman puts his finger right on the critical point — at least critical enough to sway my vote — when he points out, ante at 166:
Decisions in this State and elsewhere have long indicated that the precise meaning of the language of the standard clause is uncertain and, moreover, that the clause can be read as insuring any interest that the mortgagee has in the insured property at the time of loss. By including the standard clause in its policy, it must be assumed that the defendant accepted current judicial interpretations of the clause. If the defendant intended to provide coverage contrary to these interpretations, it should have drafted a new provision that would have removed any uncertainty about the extent of coverage offered. [Citations omitted.]
Precisely. The insurance industry is not, after all, in the position of Ethelred the Unready. One may reasonably assume that it has available perceptive and competent counsel aware of judicial decisions interpreting its standard policy, sensitive to the need to mold that policy to those decisions, and skilled in the craft of explicit expression. In view of the insurer’s failure to accommodate its policy to the realities of judicial interpretation, I would let the industry bear the consequences of what the courts, including New Jersey courts, have said its policy means— not because I think that that reading of the policy makes a lot of sense, but because the insurer has chosen to ignore the abundant notice given it as to how its policy would be interpreted. Hence I vote to affirm.
CLIFFORD, J., concurring in the result.
For affirmance — Chief Justice WILENTZ and Justices SULLIVAN, PASHMAN, CLIFFORD, HANDLER and POLLOCK —6.
For reversal — none.