In the case of Savarese v. Ohio Farmers' Insurance Co. the New York Court of Appeals recently held that a mortgagee, insured against fire loss under a standard mortgagee clause inserted in the policy of the owner, could recover on the policy despite the fact that the owner had gratuitously completely restored the premises after the fire. The court reasoned that to deny recovery would be to permit an act of the owner (mortgagor) to defeat the rights of the mortgagee, in contravention of the terms of the mortgagee clause; also that while a mortgagee has an insurable interest only to the extent of the mortgage debt, the measure of his recovery in the event of fire is the amount of damage to the property insured, this being arbitrarily considered as the amount of impairment of his security at the time of the fire. Lehman, J ., dissented, arguing that before a cause of action arose in favor of the mortgagee the damage had been repaired, hence the owner did not "defeat" the rights of the mortgagee; and that the contract was one of indemnity only, which precluded recovery since plaintiff had been fully indemnified by the voluntary act of the owner.
INSURANCE - CONCEPT OF INDEMNITY AS LIMITING RECOVERY ON FIRE INSURANCE POLICIES,
Mich. L. Rev.
Available at: https://repository.law.umich.edu/mlr/vol32/iss4/8