Insurance obtained by private mortgagee is solely for their own protection and not for that of the mortgagor

Insurance law – Homeowner’s insurance – Mortgages – Standard mortgage clause – Subrogation – Right of insurer to subrogation – Practice – Summary judgments – Appeals

Hanson v. Totten Insurance Group Inc., [2018] O.J. No. 2500, 2018 ONCA 446, Ontario Court of Appeal, May 10, 2018, J.L. MacFarland, H.S. LaForme and G.J. Epstein JJ.A.

The mortgagors were unable to obtain home insurance which ran for both their benefit and that of the private mortgagees. Pursuant to the standard charge term 16, the mortgagees obtained insurance for their own benefit, and the mortgagors were required to pay for the insurance.

Following a fire loss, policy limits were paid to the mortgagees, which did not cover the full extent of their loss. The mortgagees brought an action for the remainder of their losses and the insurer brought a subrogated claim for amounts paid under the policy. The mortgagors then brought an action seeking a determination that the policy covered their interest in the property so that the payment on the policy extinguished the mortgage debt.

The mortgagors were unsuccessful both on summary judgment and on appeal. The policy was for the sole benefit of the mortgagees as per the wording of standard charge term 16. The insurer was permitted to proceed with its subrogated claim against the mortgagors.

This case was digested by Laura E. Miller, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter.

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