mortgage (mortgagee) clause
A property insurance provision granting special protection for
the interest of a mortgagee (e.g., financial institution that has
an interest in the property) named in the policy, in effect setting
up a separate contract between the insurer and the mortgagee. It
establishes that loss to mortgaged property is payable to the mortgagee
named in the policy and promises advance written notice to the mortgagee
of policy cancellation. It also grants continuing coverage for the
benefit of the mortgagee in the event that the policy is voided
by some act of the insured (e.g., arson). In this situation, the
clause specifies the obligations of the mortgagee in continuing
coverage. The mortgagee would be expected to notify the insurer
of any changes in ownership, occupancy, or exposure; pay any due
premium; and submit a signed, sworn statement of loss within the
appropriate time frame. Without the protection of the mortgagee
clause, financial institutions would be unlikely to loan the large
amounts of money necessary to purchase homes, office buildings,
or factories. See also
Lenders loss
payable endorsement;
Loss
payee;
Loss payable clause.
Links for IRMI Online Subscribers
Only:
CPI IV.G,
V.K;
CRT XI.F;
PRMI 10.G