The following are void stipulations in property insurance –
A. a stipulation for the payment of the loss whether the person insured has or has not interest in the property insured – because it is a contract of indemnity.
B. Stipulation that the policy shall be received as proof of such interest – existence of insurable interest does not depend on the policy –
C. every policy issued by way of gaining or wagering shall be void.
Those insured without insurable interest – as they do not suffer a damage from the occurrence of the event insured against – they vested profit.
CONTINUATION OF ELEMENTS –
2. The insured is subject to risk of loss through the destruction or impairment of that interest by the happening of the designated risks.
3. The Insurer assumes the risk of loss
4. Such assertion is part of a general scheme to distributed actual loss among a large group of persons bearing somewhat similar risks
5. As a consideration for the insurer’s promise, the insured makes a ratable contribution called a premium to the general insurance fund.
WHO MAY INSURE A MORTGAGED PROPERTY
Both the Mortgagor and Mortgagee may take out separate policies with the same or different companies. The mortgagor – to the extent of the value of his property, the mortgagee – to the extent of his credit (Section 8).
WHAT ARE THE CONSEQUENCES WHERE THE MORTGAGOR INSURES THE PROPERTY MORTGAGED IN HIS OWN NAME BUT MAKES THE LOSS PAYABLE TO THE MORTGAGEE OR ASSIGNS THE POLICY TO HIM.
UNLESS THE POLICY PROVIDES OTHERWISE
a. The insurance is still deemed to be upon the interest of the mortgagor who does not cease to be a party to the original contract. HENCE, if the policy is cancelled, notice must be given to the mortgagor.
b. Any act of the mortgagor, prior to loss, which would otherwise avoid the policy or insurance, will have the same effect, although the property is in the hands of the mortgagee. HENCE, if there is a violation of the policy by the mortgagor , the mortgagee cannot recover. c. Any act required to be done by the mortgagor may be performed by the mortgagee with the same effect as if it has been performed by the mortgagor. Example: if notice of loss is required, the mortgagee may give it.
d. Upon the occurrence of the loss, the mortgagee is entitled to recover to the extent of his credit, and the balance, if any, is to be paid to the mortgagor, since such is for both their benefits.
e. Upon recovery by the mortgagee, his credit is extinguished.
IF ON THE OTHER HAND, (Section 9), the Insurer assents to the transfer of the insurance from the mortgagor to the mortgagee, and at the time of his assent, imposes further qualifications on the assignee, making a new contract with him, the acts of the MORTGAGOR cannot affect the rights of the assignee – NOTE UNION MORTGAGE CLAUSE – Creates the relation of insured and insurer between the mortgagee and the insurer independent of the contract of the mortgagor. In such case, any act of the mortgagor can no longer affect the rights of the mortgagee – the insurance contract is now independent of that with the mortgagor.
WHAT IS THE EFFECT OF INSURANCE PROCURED BY THE MORTGAGEE WITHOUT REFERENCE TO THE RIGHT OF THE MORTGAGOR;
a. The mortgagee may collect from the insurer upon occurrence of the loss to the extent of his credit.
b. Unless, otherwise stated, the mortgagor cannot collect the balance of the proceeds, after the mortgagee is paid.
c. The insurer, after payment to the mortgagee, becomes subrogated to the rights of the mortgagee against the mortgagor and may collect the debt to the extent paid to the mortgagee. d. The mortgagee after payment cannot collect anymore from the mortgagor BUT if he is unable to collect in full from the insurer, he can recover from the mortgagor.
e. The mortgagor is not released from the debt because the insurer is subrogated in place of the mortgagee.
C. DOUBLE INSURANCE AND OVER INSURANCE
DOUBLE INSURANCE – exists where same person is insured by several insurers separately in respect to same subject and interest (Sec. 93).
REQUISITES OF DOUBLE INSURANCE: 1. The person insured is the same;
2. Two or more insurers insuring separately; 3. The subject matter is the same;
4. The interest insured is also the same;
5. The risk or peril insured against is likewise the same. EFFECTS OF DOUBLE INSURANCE:
Where double insurance is allowed, but over insurance results, he can claim in case of loss only up to the agreed valuation or up to the full insurable value from any, some or all insurers, without prejudice to the insurers ratably apportioning the payments. Insured can also recover before or after the loss, from both insurers the excess premium he has paid (Sec. 94).
Multiple or Several Interests on Same Property
Both the mortgagor and the mortgagee may take out separate policies with the same property or with different companies. Only in this situation can there be a multiple parties who has an interest on the same party, the mortgagor to the extent of the value of the property and the mortgagee to the extent of his credit.
What are the consequences where the mortgagor insures the property mortgaged in his own name but makes the loss payable to the mortgagee or assigns the policy to him?
1. The insurance is still deemed to be upon the interest of the mortgagor who does not cease to be to the original contract. Hence, if the policy is cancelled, notice must be