Commerce Bank v. West Bend Mutual Insurance Company, 2015 Minn. LEXIS 628

West Bend issued property insurance on a Burnsville building; Commerce Bank was named mortgagee under a standard (union) mortgage clause.
Policy covered vandalism but contained a vacancy clause denying coverage for vandalism if the building had been vacant for more than 60 consecutive days (vacant defined as <31% used for customary operations).
The building was vacant from November 2010 and Commerce Bank knew of the vacancy; West Bend did not. The building was vandalized on September 15, 2011.
West Bend denied Commerce Bank’s claim based on the vacancy clause; Commerce Bank sued for breach of contract.
District court granted summary judgment for West Bend; Court of Appeals reversed in favor of Commerce Bank. Minnesota Supreme Court granted review.
The Supreme Court reversed the court of appeals and remanded for factual findings on whether the owner’s acts caused the vacancy and, if so, whether the mortgagee had knowledge of those acts.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether a mortgagee may recover under a standard mortgage clause when a vacancy clause bars the owner’s coverage for vandalism	Commerce: standard mortgage clause creates independent coverage; vacancy exclusion applies only if denial is "because of" mortgagee’s acts — here vacancy resulted from owner’s failure to occupy so mortgagee can recover	West Bend: vacancy clause denies coverage based on condition of property regardless of cause; if building vacant >60 days, no coverage for anyone	The mortgagee has coverage only if the vacancy (or resulting denial) was caused by the owner’s acts or failure to comply with the policy; if vacancy was not caused by owner acts, mortgagee is not covered.
Whether summary judgment was appropriate without determining cause of vacancy and mortgagee knowledge	Commerce: factual cause of vacancy irrelevant; entitlement flows from mortgage clause	West Bend: objective vacancy condition ends coverage as a matter of law	Court: Neither side’s legal view reconciles clauses; remand required for factual determination whether owner caused the vacancy and, if so, whether mortgagee knew of those acts.

Allen v. St. Paul Fire & Marine Ins. Co., 167 Minn. 146 (standard mortgage clause creates independent contract protecting mortgagee from mortgagor acts)
Am. Nat’l Bank & Trust Co. v. Young, 329 N.W.2d 805 (Minn. 1983) (mortgagee coverage may apply when mortgagor’s acts trigger an exclusion)
Magoun v. Fireman’s Fund Ins. Co., 86 Minn. 486 (standard mortgage clause prevents mortgagor’s acts from invalidating mortgagee’s rights)
H.F. Shepherdson Co. v. Cent. Fire Ins. Co., 220 Minn. 401 (mortgagee recovery under union clause despite mortgagor’s harmful acts)