FOREMOST INSURANCE COMPANY v ALLSTATE INSURANCE COMPANY
Docket No. 89808
Supreme Court of Michigan
Argued January 7, 1992. Decided May 15, 1992.
439 MICH 378
Docket No. 89808. Argued January 7, 1992 (Calendar No. 6). Decided May 15, 1992.
Foremost Insurance Company, as subrogee of the State Employees Credit Union, brought an action in the Ingham Circuit Court against Allstate Insurance Company, seeking to recover for the loss of a motor home insured by Allstate, of which the credit union was the lienholder, under a loss payable clause, following the burning of the motor home by the insured. The court, Thomas L. Brown, J., granted summary disposition for the plaintiff. The Court of Appeals, GILLIS, P.J., and MCDONALD and J. W. FITZGERALD, JJ., affirmed in an opinion per curiam, holding that because the State Employees Credit Union as lienholder had a separate contract with the insurer arising from the insured‘s policy, it was entitled to recovery under the loss payable clause even though the insured was excluded from recovering. The Court concluded that the insured‘s acts of arson and subsequent misrepresentation did not preclude the lienholder‘s recovery (Docket No. 115901). Allstate apрeals.
In an opinion by Justice RILEY, joined by Justices LEVIN, GRIFFIN, and MALLETT, the Supreme Court held:
The insured‘s acts of arson do not preclude recovery by the State Employees Credit Union as lienholder for the insured property under the standard loss payable clause.
1. In general, there are two types of loss payable clauses, otherwise known as mortgage clauses, contained in insurance policies that protect lienholders: ordinary and standard. Under an ordinary loss payable clause, the lienholder‘s right of recovery is no greater than the insured‘s, and a breach of the conditions of the policy by the insured precludes recovery by the lienholder. Under the standard loss payable clause, which applies in this case, a lienholder is not subject to the exclusions
2. Allowing a lienholder to recover its interest in property intentionally destroyed by an insured under a standard loss payable clause protects the lienholder‘s insurable interest in accordance with what the insurer promised to do, i.e., to cover the lienholder‘s security interest in the insured‘s property regardless of any act or neglect of the insured. Thus, the insured‘s acts of arson and misrepresentation to Allstate did not preclude the State Employees Credit Union as lienholder from recovering under the standard loss payable clause.
Justice BOYLE concurred except with respect to the question of conversion, and, instead, concurred with Justice BRICKLEY‘S resolution of the issue.
Justice BRICKLEY, joined by Chief Justice CAVANAGH, concurring, stated that the loss payable clause provides for recovery only where there has been loss or damage under the pоlicy, and its “any act or neglect” language cannot create a covered loss where there is none. There is a difference between acts that invalidate coverage and those that result in an exclusion from coverage. The policy‘s loss payable clause provides that the lienholder‘s coverage shall not be invalidated by any act or neglect of the owner of the insured property. An intentional act that results in the destruction of the property is not an act that invalidates coverage; rather, such an act of destruction simply is not covered. The “any act or neglect” language protects the lienholder only from the owner‘s acts or neglect that would invalidate the policy.
Foremost can recover under the loss payable clause, however, because the loss was accidental from the perspective of the lienholder. Under a standard loss payable сlause the lienholder‘s right of recovery is not derivative because there are two contracts of insurance within the policy—one between the lienholder and the insurer and the other between the insured and the insurer. Likewise, the provision against conversion protects the lienholder‘s interest in the insured property. Strictly construed, it does not include the intentional destruction of the insured property by arson.
Affirmed.
185 Mich App 119; 460 NW2d 242 (1990) affirmed.
GMAC v ACIA, 168 Mich App 733; 425 NW2d 156 (1988), overruled.
GMAC v Ibrahim, 171 Mich App 483; 431 NW2d 41 (1988), overruled.
INSURANCE — ARSON — LIENHOLDERS — STANDARD LOSS PAYABLE CLAUSE.
An insured‘s act of arson of insured property does not preclude recovery by a lienholder for the property under a standard loss payable clause.
Willingham & Coté, P.C. (by Curtis R. Hadley and John A. Yeager), for the plaintiff.
Denenberg, Tuffley, Bocan, Jamieson, Black, Hopkins & Ewald, P.C. (by Curt A. Benson and Jeffrey R. Learned), for the defendant.
Amici Curiae:
O‘Reilly, Rancilio, Nitz, Andrews & Turnbull, P.C. (by Neil J. Lehto), for General Motors Acceptance Corporation.
Gross & Nemeth (by James G. Gross) for Auto Club Insurance Association and Castle Insurance Company.
Strobl & Manoogian, P.C. (by Brian C. Manoogian and Brian M. Gottry), for Chrysler Credit Corporation.
RILEY, J. We granted leave to appeal to resolve a conflict in the Court of Appeals1 over whether a
I
The parties stipulated the following set of facts pursuant to
On July 24, 1985, Bobby Taylor executed an installment note with the State Employees Credit
In recognition of State Employees Credit Union‘s interest in Bobby Taylor‘s vehicle, Allstate Insurance Company issued to the Credit Union a “Loss Payable Clause,” which reads in pertinent part as follows:
“Loss or damage, if any, under the policy shall be payable as interest may appear to [State Employees Credit Union] and this insurance as to the interest of the Bailment Lessor, Conditional Vendor, Mortgagee or other secured party of Assignee of Bailment Lessor, Conditional Vendor, Mortgagee or other secured party [herein called a Lienholder] shall not be invalidated by any act or neglect of the Lessee, Mortgagor, Owner of the within described automobile or other Debtor nor by any change in the title or ownership of the property; provided, however, that the conversion, embezzlement or secretion by the Lessee, Mortgagor, Purchaser or other Debtor in possession of the prоperty insured under a bailment lease, conditional sale, mortgage or other security agreement is not covered under such policy unless specifically insured against and premium paid therefor . . . .”
On August 25, 1985, the motor home was destroyed by an incendiary fire. Bobby Taylor filed a claim with Allstate for insurance proceeds. It is undisputed that Bobby Taylor committed arson in an effort to defraud the Company. In addition, Mr. Taylor committed fraud and false swearing. His acts amounted to a material breach of contract, and on June 11, 1986, Allstate expressly and unequivocally denied his claim.
On February 10, 1988, Foremost Insurance Company, as subrogee of State Employees Credit Union, filed a Complaint against Allstate seeking to recover for the loss of the motor home.
II
In general, there are two types of loss payable clauses, otherwise known as mortgage clauses, contained in insurance policies which protect lienholders. The first type, commonly known as an ordinary loss payable clause, directs the insurer to pay the proceeds of the policy to the lienholder, as its interest may appear, before the insured receives payment on the policy.6 Under this type of policy, the lienholder is simply an appointee to receive the insurance fund to the extent of its interest, and its right of recovery is no greater than the right of the insured.7 There is no privity of contract between the two parties because there is no consideration given by the lienholder to the insured.8 Accordingly, a breach of the conditions of the policy by the insured would prevent recovery by the lienholder.9
The second type of loss payable clause is known
Traditionally, insurers have undertaken the risk that the insured will commit fraud against them by inserting a standard loss payable clause in the insurance contract for the lienholder‘s protection.13 The lienholder, usually the financial or lending institution, is assured, through the incorporation of the clause, that they will not be required to evaluate the borrower‘s insurance claim history when approving a loan.14 Thus, the lender protects its interest by requiring the borrower to obtain insurance with a loss payable clause made payable to the lender prior to purchasing the vehicle that will protect the lender against the defenses that
In the instant case, both parties agree that the loss payable clause used by Allstate is a standard loss payable clause. Allstate, however, argues that its clause does not operate as a standard loss payable clause in the traditional sense because it provides less than complete protection: it excludes coverage where the insured converts, embezzles, or secretes the property.15 Thus, Allstate would have us read the loss payable clause in reference to the underlying insurance policy that defines “loss” as a “direct and accidental loss” and take the coverage for the lienholder out of its hands. We do not agree.
We believe that Allstate‘s argument misses the mark because it runs contrary to the language and the purpose of the standard loss payable clause in its policy.16
We also believe that under Allstate‘s theory of the case, an insurer would be able to avoid its basic promise to hold the lienholder harmless from any act or neglect by the insured and, therefore, the lienholder would only be entitled to recover for an accidental loss. Allstate has failed to recognize the significance of the fact that we are evaluating two separate contracts of insurance. The Boyd Court‘s analysis is illustrative of the problems that arise by not recognizing the significance of the two contracts when evaluating the standard loss payable clause at issue.
In 1981, Boyd entered into a standard installment sales agreement with General Motors Acceptance Corporation to finance the purchase of her
A few years later, Boyd reported the car stolen and filed a claim with ACIA.23 ACIA denied her claim, alleging that Boyd intentionally destroyed the car, and also denied the claim of GMAC as the security lienholder under the loss payable clause, on the basis of its belief that a lienholder is subject to the same exclusions as the insured because it is part of the same insurance policy and does not provide any greater coverage than that provided in the policy.
The Boyd Court, as does Allstate, misinterprets the nature of the standard loss payable clause in relation to the policy issued to the insured by the insurer.25 As we have previously noted, there are two contracts of insurance involved in this case. One covers risk and outlines exclusions for the insured and the insurer. The other operates as an independent contract for the limited purpose of preventing the loss of coverage by any act or neglect between the insurer and the insured.26 The prevention of recovery under the contract between the insured and the insurer does not prohibit the recovery by the lienholder under its separate contract of insurance with the insurer because the
We are not alone in the conclusion we reach today. Every jurisdiction that has considered this issue in light of the same or similar standard loss payable clauses has concluded that the lienholder‘s interest in the insured‘s property will not be avoided by any acts, representations, or omissions of the insured.28
Thus a policy payable to the mortgagee as his interest may appear, and which contains clauses of the character under consideration, is to be construed so as to effectuate the parties’ interests, and so constitutes two separate contracts of indemnity which relate to the same subject matter, but cover distinct interests therein, and it effects a new and independent insurance which protects the mortgagee as stipulated, and which cannot be destroyed or impaired by the mortgagor‘s acts or by those of
III
Allstate suggests that if we find that their loss payable clause operates as a traditional standard loss payable clause, coverage should be denied to Foremost because Bobby Taylor converted the State Employees Credit Union‘s interest in the motor home when he intentionally destroyed it.
The crux of Allstate‘s argument is that the conversion proviso refers to State Employees Credit Union‘s lien or security interest. Foremost, however, argues that it refers to Bobby Taylor‘s motor home. The pertinent part of Allstate‘s standard loss payable clause provides:
“[p]rovided, however, that the conversion, embezzlement or secretion by the Lessee, Mortgagor, Purchaser or other Debtor in possession of the property insured under a bailment lease, conditional sale, mortgage or other security agreement is not covered under such policy, unless specifically insured against and premium paid therefor . . . .” [Emрhasis added.]
We are persuaded that the exclusion simply provides that the insured will not be covered when he converts his own property. In other words, the conversion provision focuses on the insured‘s property and not on State Employees Credit Union‘s lien.30 Having so concluded, we must now deter-
In the civil context, conversion is defined as any distinct act of domain wrongfully exerted over another‘s personal property in denial of or inconsistent with the rights therein.31 In general, it is viewed as an intentional tort in the sense that the converter‘s actions are wilful, although the tort can be committed unwittingly if unaware of the plaintiff‘s outstanding property interest.32
In the instant case, we believe that Bobby Taylor‘s intentional destruction of his motor home, as well as his fraud and false swearing to his insurer, Allstate, cannot be considered conversion. In each of the cases referred to above, the property converted belonged to another person who had original ownership or possession. In this case, however, the alleged converter owned the item that Allstate contends was converted. We agree with the Court of Appeals in the instant case that “a person can[not] ‘convert’ his own property,” and therefore we reject Allstate‘s second argument.33
IV
Allstate‘s final argument is that public policy should preclude recovery by the lienholder because allowing recovery will encourage automobile own-
A simple reading of the loss payable clause reveals that it is a conversion of the insured property, not of the mortgagee‘s interest in that property, which would shield the insurer from liability.
Allowing a lienholder to recover its interest in the рroperty that was intentionally destroyed by the insured under a standard loss payable clause simply protects the lienholder‘s insurable interest in accordance with what the insurer promised to do. That is, the insurer promised to cover the lienholder‘s security interest in the insured‘s automobile regardless of any act or neglect of the insured. Thus, rejection of Allstate‘s public policy arguments, which endorse the holding in Boyd, would at most simply return lenders and insurance companies to the traditional role they play in the commercial marketplace. Lenders will be returned to the role of evaluating credit risk associated with the making of commercial loans, and insurance companies will be returned to their traditional role of evaluating every conceivable risk of loss in order to price their respective premiums for policyholders.34
LEVIN, GRIFFIN, and MALLETT, JJ., concurred with RILEY, J.
BOYLE, J. I concur except as to the issue discussed in part III as to which I concur with Justice BRICKLEY‘S part II.
BRICKLEY, J. (concurring). I agree with the majority‘s conclusion that because a lienholder has a separate contract of insurance with an insurer, pursuant to a standard loss payable clause, it is entitled to recovery under the policy even when the owner of the insured property was excluded from recovery. I write separately to address more directly the language of the insurance contract and to further explain my reasoning.
I
Relying on Boyd v General Motors Acceptance Corp, 162 Mich App 446; 413 NW2d 683 (1987), Allstate argues that the standard loss payable clause included in its policy issued to Bobby Taylor does not allow Foremost to recover where there has been no covered “loss” from the perspective of Bobby Taylor. The loss payable clause provides, in pertinent part:
Loss or damage, if any, under the policy shall be payable as interest may appear to [State Employees Credit Union] and this insurance as to the interest of the [lienholder] shall not be invalidated by any act or neglect of the Lessee, Mortgagor, Owner of the within described automobile or other Debtor nor by any change in the title or ownership of the property . . . .
Allstate argues, and the Boyd Court held, that because “loss” is defined in the policy as “direct and accidental loss of or damage to” the automobile, Bobby Taylor‘s intentional destruction by fire of his vehicle did not result in a “loss” according to the meaning of that term as used in the policy. Thus, according to the Boyd analysis, because the loss payable clause only allows recovery where there is “[l]оss or damage, if any, under the policy,” the lienholder has no right of recovery where the owner of the insured vehicle intentionally destroys it. Boyd, supra at 453.
The majority rejects Allstate‘s argument as being contrary to the purpose of a standard loss payable clause because it would allow an insurer to “avoid its basic promise to hold the lienholder harmless from any act or neglect by the insured . . . .” Ante at 386. I reject Allstate‘s argument as being contrary to the language of the standard loss payable clause in its policy.
A
I agree with Allstate that Foremost cannot recover unless there has been a loss under the policy. Therefore, to the extent that the majority relies on the “any act or neglect” language of the loss payable clause, I disagree. As the Boyd Court noted, supra at 455, there is a difference between acts that invalidate coverage and acts that result in an exclusion from coverage:
“A condition subsequent is to be distinguished from an exclusion from the coverage: the breach of the former is to terminate or suspend the insurance, while the effect of the latter is to declare that there never was insurance with respect to the excluded risk. Accordingly, the suicide clause in a life insurance policy is not a condition subsequent but rather suicide is simply not a risk insured against.” [Id. at 455, quoting 7 Couch, Insurance, 2d (rev ed), § 36:49, p 483.]
The loss payable clause in Allstate‘s policy provides that the lienholder‘s coverage “shall not be invalidated by any act or neglect” of Bobby Taylor. However, an intentional act that results in the destruction of the insured property is not an act that invalidates the coverage; rather, such an act of destruction is not included in the coverage of the policy. Thus, the “any act or neglect” language in the loss payable clause protects the lienholder only from Bobby Taylor‘s acts or neglect that would invalidate the policy. Thereforе, the loss payable clause provides for recovery only where there has been loss or damage under the policy, and the “any act or neglect” language cannot create a covered loss where there is none.
B
Although I agree with Allstate and the Boyd panel with respect to the construction of the “any act or neglect” language, I conclude that Foremost can recover under the loss payable clause because the loss was “accidental” from the perspective of the lienholder. Implicit in the Boyd Court‘s holding is the conclusion that the policy definition of “loss” as “accidental” means that a loss must be accidental from the perspective of the insured. I agree. Clearly, the definition of loss as “accidental”
While the Boyd Court stated it had no quarrel with other decisions holding that the standard loss payable clause constitutes a separate contract of insurance, id. at 453, the Court failed to grasp the significance of this fact. The majority correctly finds that the standard loss payable clause differs from an ordinary loss payable clause where the lienholder is merely an appointee and has no right of recovery greater than the right of the owner of the insured property. Ante at 383-384. In contrast, under a standard loss payable clause the lienholder‘s right of recovery is not derivative because, as the majority notes, “there are two contracts оf insurance within the policy—one with the lienholder and the insurer and the other with the insured and the insurer.” Id. at 384.1 Like the Boyd panel, in concluding that Foremost can re-
Because the standard loss payable clause creates a separate contract of insurance between the lienholder and the insurer, the lienholder is also clearly an insured under the policy. The Boyd Court was correct in its conclusion that a covered loss must be accidental from the perspective of the insured. However, in determining the meaning of “accidental” loss only through the eyes of the owner of the automobile, Boyd ignored the fact that the insured making a claim under the policy in that case was the lienholder and not the owner of the intentionally destroyed vehicle. Had the lienholder in Boyd applied for insurance independently of the car owner‘s insurance, the lienholder‘s recovery surely would not turn оn whether a loss was accidental from the perspective of a party insured under a separate policy. Likewise, where a standard loss payable clause creates a separate contract for insurance between the lienholder and the insurer, equivalent to a policy obtained independently of the car owner‘s policy, it is the lienholder‘s perspective that governs in terms of whether there has been accidental loss or damage under the policy. Thus, the correct interpretation of “accidental” loss in Allstate‘s policy must be from the perspective of the insured who is making a claim, which in this case is Foremost, as subrogee of the lienholder, and not Bobby Taylor.2
II
Allstate‘s second argument, in support of its assertion that Foremost is barred from recovery, is
[T]he conversion, embezzlement or secretion by the Lessee, Mortgagor, Purchaser or other Debtor in possession of the property insured under a bailment lease, conditional sale, mortgage or other security agreement is not covered under such policy, unless specifically insured against and premium paid therefor . . . .
Allstate argues that Bobby Taylor “converted” the lienholder‘s interest in his vehicle by intentionally destroying it. The majority rejects Allstate‘s argument, concluding that the conversion proviso focuses on the property insured and not on the lienholder‘s interest in that property. Ante at 390. Thus, according to the majority, because a person cannot convert his own property, by intentionally destroying it or otherwise, the conversion proviso does not prevent Foremost from recovering on the basis that Bobby Taylor intentionally destroyed his vehicle. Id. at 390-391.
The majority‘s interpretation of the conversion proviso renders it meаningless. The proviso specifically excludes coverage where there has been “conversion, embezzlement or secretion by the Lessee, Mortgagor, Purchaser or other Debtor in possession of the property insured . . . .” (Emphasis added.) Therefore if, as the majority concludes, the proviso refers only to the conversion of the insured property, and a person cannot convert his own property, the proviso is clearly without any effect.
I conclude that the better interpretation of the conversion proviso follows from the purpose of the loss payable clause to protect the lienholder‘s intangible interest in the insured property.
Thus, because the standard loss payable clause protects the lienholder‘s interest in the property insured—the lien—the proviso must refer to the conversion, embezzlement, or secretion of the lienholder‘s interest. This interpretation is consistent with the language of the proviso as well. While the proviso clearly refers to conversion by the owner of the insured property, the wording is less clear with regard to what must be converted, embezzled, or secreted in order to prevent coverage under thе policy without the payment of an additional premium. However, because the majority‘s interpretation would render the exclusion a nullity, the wording must be read to refer to the lienholder‘s interest.3
Thus, the issue that must be addressed is
A strict reading of the words “conversion, embezzlement or secretion” does not support Allstate‘s argument. While, as Allstate notes, Bobby Taylor‘s action in destroying the car was inconsistent with the lienholder‘s interest in the property, Allstate‘s use of theft-related terms in its standard mortgage clause cannot be strictly construed to include the act of arson. As another court has found, the terms conversion, embezzlement, and secretion “suggest crimes falling within the general category of theft or larceny . . . .” Nat‘l Casualty Co v General Motors Acceptance Corp, 161 So 2d 848, 852 (Fla App, 1964). Thus, as that court held,
An insurer will not be allowed by the use of
See also Warren Tool Co v Stephenson, 11 Mich App 274; 161 NW2d 133 (1968); Tuuk v Andersen, 21 Mich App 1; 175 NW2d 322 (1969); Miracle Boot Puller Co, Ltd v Plastray, 57 Mich App 443; 225 NW2d 800 (1975).property of another, which was lost. This conception has become, in the progress of law, an unmeaning thing, which has been discarded by most courts. Thus, it has been declared that an action for conversion lies for every species of personal property which is the subject of private ownership, whether animate or inanimate. [18 Am Jur, 2d, Conversion, § 7, p 150.]
obscure phrases or exceptions to defeat the purpose for which the policy was procured, and where two interpretations are available the one allowing the greater indemnity will prevail.
Therefore, although the conversion exclusion in the standard loss payable clause could be broadly interpreted in a general tort sense to apply to arson committed by the owner of the insured property, when read strictly the proviso is no more than a limit on the theft coverage of the policy.
Thus, as one commentator has argued, the conversion proviso in the standard loss payable clause is intended to prevent a lienholder from recovering where the owner of a vehicle fails to make payment and removes the vehicle from the reach of the lienholder.4 In such a case, the inability of the lienholder to enforce its security interest results from a credit problem rather than a risk of loss of or damage to the property for which the lienholder obtained insurance.5 Therefore, in a case where the purchaser of an automobile under a conditional sales contract tendered a bad check to the seller and thereafter absconded with the car, the California Supreme Court held that the conversion exclusion in the insurance policy6 prevented recovery by the lienholder. Fiske v Niagara Fire Ins Co of New York, 207 Cal 355; 278 P 861 (1929). The Fiske court reasoned that the parties, through the conversion exclusion, intended to exclude as a risk insured against the dishonest act of
Therefore, under the required strict construction of the conversion exclusion in Allstate‘s standard loss payable clause, the terms “conversion, embezzlement or secretion” do not include within their meaning the intentional destruction of the insured property by arson. I agree with the majority that if Allstate wishes to exclude from the lienholder‘s coverage loss or damage that results from such an intentional act by the owner of the insured property, it may do so by expressly stating that “arson” committed by any insured is not a covered risk under the policy, or in broader terms by providing that the lienholder‘s right to recovery is no greater than that of the property owner.
CONCLUSION
The standard loss payable clause in the policy protects a lienholder from loss of coverage, where the owner of the insured property intentionally destroys it, because such a loss is “accidental” from the lienholder insured‘s perspective and therefore is coverеd under the policy. Thus, a lienholder can recover when the loss is accidental from its perspective, but cannot recover, for example, when the lienholder colludes with the car owner to intentionally destroy the car. Further,
I believe the foregoing analysis best fulfills the mandate that an insurance contract, like any other contract, must be construed as a whole so that all its parts are harmonized, and if possible every word must be given effect. Associated Truck Lines, Inc v Baer, 346 Mich 106, 110; 77 NW2d 384 (1956).
I concur in the result reached by the majority.
CAVANAGH, C.J., concurred with BRICKLEY, J.
Notes
Some cases have held that a mortgage loss payable clause is, in effect, an independent agreement with the mortgagee, creating an independent contract between the company and the mortgagee for the latter‘s benefit. It is definitely true that this result obtains under a union or standard mortgage clause, it being considered that there the insurer has entered into a separate contract with the mortgagee just as if the latter had applied for the insurance entirely independently of the mortgagor.
The conception that an action for conversion lies only for tangible property capable of being identified and taken into actual possession is based on a fiction on which the action of trover was founded, namely, that the defendant had found the
See also Lehto, The standard mortgage clause, n 10 supra at 607.I think the intent of the clause was to make the policy operate as an insurance of the mortgagоrs and the mortgagees separately, and to give the mortgagees the same benefit as if they had taken out a separate policy, free from the conditions imposed upon the owners, making the mortgagees responsible only for their own acts. . . . This provision, in case the policy were invalidated as to the mortgagors, made it, in substance, an insurance solely of the interest of the mortgagees, by direct contract with them, unaffected by any questions which might exist between the company and the mortgagors.
“Loss or damage, if any, under thе policy shall be payable as interest may appear to . . . [lienholder] and this insurance as to the interest of the Bailment Lessor, Conditional Vendor, Mortgagee or other secured party or Assignee of Bailment Lessor, Conditional Vendor, Mortgagee or other secured party (herein called the Lienholder) shall not be invalidated by any act or neglect of the Lessee, Mortgagor, Owner of the within described automobile or other Debtor nor by any change in the title or ownership of the property; provided, however, that the conversion, embezzlement or secretion by the Lessee, Mortgagor, Purchaser or other Debtor in possession of the property insured under a bailment lease, conditional sale, mortgage or other security agreement is not covered under such policy, unless specifically insured against and premium paid therefor; and provided, also, that in case the Lessee, Mortgagor, Ownеr or other Debtor shall neglect to pay any premium due under such policy the Lienholder shall, on demand, pay the same.” [Id. at 449-450.]
The purpose of the standard loss payаble clause is to confer greater coverage to the lienholder than the insured has in the underlying policy. This is the distinction between that type of coverage and the coverage involved in an ordinary loss payable clause, which merely assigns the proceeds of the policy to the lienholder upon destruction of the automobile but does not cover the intentional acts or neglect of the insured.“A condition subsequent is to be distinguished from an exclusion from the coverage: the breach of the former is to terminate or suspend the insurance, while the effect of the latter is to declare that there never was insurance with respect to the excluded risk. Accordingly, the suicide clause in a life insurance policy is not a condition subsequent but rather suicide is simply not a risk insured against.” [Boyd, n 1 supra at 455, quoting 7 Couch, Insurance, 2d (rev ed), § 36:49, pp 482-483.]
We agree that this Endorsement shall not be invalidated as to the interest of the Lienholder in the described vehicle by any act or neglect of any Named Insured or of any owner except:
1) When that vehicle is intentionally damaged, destroyed or concealed by or at the direction of any Named Insured or by any owner; or
2) When the vehicle is damaged, destroyed or concealеd as a result of any other act which constitutes a breach of contract between any Named Insured or owner and the Lienholder.