Summary
In Schleimer v. Empire Mut. Ins. Co., 71 Misc.2d 1014, 337 N.Y.S.2d 872 (1972), aff'd 43 A.D.2d 825, 352 N.Y.S.2d 429 (1974), the court held that a party designated under a loss payable clause is not entitled to notification of cancellation because "[u]nder a limited loss payable clause the rule is that if the policy is not collectible by the insured, the appointee cannot recover."
Summary of this case from Vargas v. Nautilus Ins. Co.Opinion
October 13, 1972
Appeal from the Civil Court of the City of New York, New York County, FRANK J. BLANGIARDO, J.
Raymond J. MacDonnell, Philip Hoffer, Rose L. Hoffer and Peter T. Affatato for appellant.
Irving G. Schleimer for respondent.
The issue in this case is whether an insurer of an automobile is under a duty to give notice to a party named as "loss payee" of cancellation of the policy.
A party so designated has generally been considered to be a mere appointee with the right to receive the proceeds of the loss to the extent of his interest. Under a limited loss payable clause the rule is that if the policy is not collectible by the insured, the appointee cannot recover (5A Appleman, Insurance Law and Practice, § 3335, pp. 143, 144, 146). There are, of course, loss payable clauses which more fully protect the interests of the payee but, in this case, the designation was in a binder in which the plaintiff was only described as loss payee. We cannot hold that this plaintiff is entitled to the same protection as a mortgagee under a policy containing the standard mortgagee clause since notice must be and is required under that clause (Insurance Law, § 168).
In the absence of either contractual or statutory protection, the loss payee cannot recover unless the named insured had a viable policy and could collect the proceeds ( Eastside Garage v. New Brunswick Fire Ins. Co., 198 App. Div. 408).
The judgment should be reversed with $30 costs and the complaint dismissed.
This is not a case where the policy was not viable under its own terms, as in Eastside Garage v. New Brunswick Fire Ins. Co. ( 198 App. Div. 408). In the matter before us, plaintiff financed the purchase of an automobile; the financing arrangement required the purchaser to obtain fire, theft and collision insurance; and defendant issued a binder for this coverage, naming plaintiff as loss payee. During the following month, defendant canceled the binder for reasons dehors the binder by giving notice of cancellation to the purchaser of the car but not to plaintiff. Subsequently a loss occurred for which plaintiff sought recovery. In this fact pattern Trial Term properly held that the binder was not canceled as against plaintiff.
The binder insured plaintiff under the terms of the usual policy issued by defendant. Unless something in the binder indicated a contrary intent, written notice was required to cancel it ( Sherri v. National Sur. Co., 243 N.Y. 266, 270-271, affg. 215 App. Div. 808, which affd. 124 Misc. 450). "Generally the insurer must give notice to all of the insureds named in the policy." (6A Appleman, Insurance Law and Practice, § 4182, p. 526.) This includes a lienholder under an automobile policy named in the loss payable clause even where the insured was under no contractual obligation to obtain insurance for the lienholder ( Chase v. National Ind. Co., 129 Cal.App.2d 852). For the loss payable "clause amounts to notice by the insurer of its recognition of such person's interest" (5A Appleman, Insurance Law and Practice, § 3335, p. 143; Fields v. Western Millers Mut. Fire Ins. Co., 290 N.Y. 209, 212-213).
To put it differently, the loss payable clause created an independent contract of insurance for the benefit of plaintiff. Valid and enforceable in its inception, this insurance continued in force until the contract was canceled by proper notice to plaintiff (see Goldstein v. National Liberty Ins. Co., 256 N.Y. 26, 29, 31-32; Syracuse Sav. Bank v. Yorkshire Ins. Co., 301 N.Y. 403, 407). Absent notice of cancellation to plaintiff, as to her the binder was in force and effect when the loss occurred.
I therefore dissent and vote to affirm.
QUINN, J.P., and STREIT, J., concur in Per Curiam opinion; MARKOWITZ, J., dissents in memorandum.
Judgment reversed, etc.