open mortgage clause

open mortgage clause

An insurance clause providing that the mortgagee (lender) will be paid in the event of a loss “as its interest may appear.”This is far less protection to the lender than a union mortgage clause,which stipulates that the policy will be payable to the mortgagee unless it,or its agents,were the cause of the loss.In other words,if the homeowner burns the house to the ground and no insurance is payable to the homeowner as a result,then the lender with only an open mortgage clause will also receive nothing,but a lender with a union mortgage clause will still be paid.

References in periodicals archive ?
The insurer argued that the insurance policy at issue contained a loss payable or open mortgage clause rather than a standard mortgagee clause and, thus, under such a clause a loss due to the misconduct of the insured would prevent recovery by the insured and the mortgagee.
The court contrasted this with the open mortgage clause. Pursuant to an open mortgage clause, the mortgagee is considered to be the appointee to receive the proceeds to the extent of his interest.

Full browser ?