Insurance — Prior insurance — Insurable interest — Judgment creditor — Loss made payable to third party beneficiary — Beneficiary designated as mortgagee — Condition — Knowledge of insurer — Fraudulent act of insured — Rights of judgment creditor beneficiary — Standard mortgagee clause — Separate contract — Acts of May 17, 1921, P.L. 682 and June 23, 1931, P.L. 904.
1. A judgment creditor has an insurable interest in real estate of his debtor.
2. An owner of property insured under a fire insurance policy may have the loss made payable to a creditor or other third party beneficiary.
3. A provision in a policy insuring an owner of property that the loss shall be payable to a third person as first mortgagee imports a condition that, to be entitled to receive the amount of the loss or damage, the beneficiary must have a mortgage upon the property, but where the insurer has knowledge at the time of issuance of the policy that the interest of the beneficiary is other than that of mortgagee, it is estopped from asserting a breach of such condition in an action by such third party in the right of the insured owner.
4. Where an insurance company, in writing an insurance policy, inserts therein a condition, in favor of itself, the breach of which is to invalidate its promise to pay, and the company knows at the time that this condition is inconsistent with and inapplicable to the facts of the case, and will entirely frustrate the purpose of the party or parties applying for insurance protection, the company will not be allowed to set up breaches of such condition for the purpose of avoiding its promise to pay, being estopped from so doing.
5. Such rule is not applicable where a provision is alleged to have been intended to operate in favor of the insured or one who derives his claim through the insured, by enlarging the insurer's liability.
6. Knowledge of the facts of the case by the agent who, with the authority to do so, issued the policy, is deemed knowledge by the insurance company.
7. A voluntary and intentional burning of a building by the insured under a policy of fire insurance does not create a right of action upon the policy in favor of such insured, or one whose claim is derived through him.
8. In the absence of a stipulation giving to a lien creditor, who is made a beneficiary-payee, higher rights than the insured owner, the former's right is a derivative one.
9. Where, under a policy insuring the owner of property, the loss was made payable to a named beneficiary as first mortgagee and the policy further provided that the insurance, as to the interest of the mortgagee, should not be invalidated by any act of the owner of the property, such provision was held not to create a separate and independent contract of insurance with the beneficiary, so as to preclude the insurer from setting up against the beneficiary the act of the insured in intentionally setting fire to the premises, where it appeared that the interest of the beneficiary was that of judgment creditor of the insured owner and not that of mortgagee; and this was so, although the insurer had knowledge of the interest of the beneficiary, where there was no evidence to show that the judgment creditor beneficiary ever contemplated obtaining a separate policy, insuring its own special interest as a judgment creditor, or changing its security from a judgment to a mortgage, and was dissuaded from taking such action by the acts or representations of the insurer or its agent.
10. Under the Act of May 17, 1921, P.L. 682, a standard form of fire insurance policy is prescribed, and such standard form of policy does not authorize a clause or rider to a policy insuring an owner of property, which gives to his judgment creditor an independent contract of insurance unaffected by the fraudulent acts of the insured owner, such as is expressly allowed to a mortgagee.
11. Under the Act of May 17, 1921, P.L. 682, as amended by the Act of June 23, 1931, P.L. 904, no form other than the standard form of policy may be used in this state, without the previous approval of the insurance commissioner.
Subrogation — Time of — Payment.
12. Subrogation cannot be demanded in advance of the actual discharge of the liability out of which it grows, and until payment thereof has been made in full, subrogation cannot take place upon any terms whatever.
Argued April 17, 1935.
PER CURIAM, July 18, 1935:
The material issues involved in this case are all satisfactorily disposed of in the clear and convincing opinion of President Judge BROWNSON of the court below. It is not necessary to add to it beyond citing, as additional authority, the cases of Banco Commerciale de Puerto Rico v. Royal Exchange Assurance Corp., 71 Fed. (2d) 933, C.C.A. 1st Circuit, and Overholt v. Reliance Ins. Co., 319 Pa. 340, 179 A. 554; and calling attention to the fact that the standard form of fire insurance policy is prescribed by statute (Act of May 17, 1921, P.L. 682, pp. 732, 733, secs. 522, 523, 40 PS secs. 657, 658) and does not authorize a clause or rider to a policy insuring an owner of property, giving to his judgment creditor an independent contract of insurance unaffected by the fraudulent acts of the insured owner, such as is expressly allowed to a mortgagee or a trustee under a deed of trust in the nature of a mortgage; and no form other than the standard form may be used in this State, (Act of May 17, 1921, supra, sec. 524, p. 739), without the previous approval of the Insurance Commissioner (Act of June 23, 1931, P.L. 904, pp. 910, 913); and further that there is no evidence at all in this case which would warrant a finding by a jury that the plaintiff bank ever contemplated obtaining a separate policy insuring its own special interest as a judgment creditor, or changing its security from a judgment to a mortgage, and was dissuaded from taking either of these steps by the acts or representations of defendant's agent. Had there been such evidence a different question would be presented.
With this additional comment, the judgment of the lower court is affirmed on Judge BROWNSON'S opinion.