Academic journal article Journal of Risk and Insurance

Jones V. Wesbanco Bank Parkersburg

Academic journal article Journal of Risk and Insurance

Jones V. Wesbanco Bank Parkersburg

Article excerpt

Husband and wife homeowners purchased an insurance policy from Motorist Mutual Insurance Company. The policy listed the bank as mortgagee. The property suffered a loss by fire during the policy period. The homeowners sought to recover $42,000 for the dwelling, $29,400 for personal property, and $4,200 for other structures.

The insurer denied coverage based on policy language that excludes loss caused intentionally by, or at the direction of, an insured and with the intent to cause such a loss.

Subsequently, the husband was convicted of arson and the wife was acquitted. Prior to the criminal trial, the couple filed a complaint against the insurer to recover under the insurance policy. Nine months after the fire, the mortgagee (bank) learned that the property had been destroyed. However, during that nine-month period, mortgage payments had continued to be made to the bank.

The insurer denied the bank's claim as mortgagee. The bank subsequently intervened in the lawsuit filed by the homeowners, alleging that it was owed payment under the insurance policy from the date of the fire loss and that the insurer had acted in bad faith.

The insurer responded that the mortgagee had sustained no loss by the insurer's refusal to pay because the loan indebtedness had continued to be paid up until the date the complaint was filed by the bank. 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 trial court found for the insurer and the bank appealed. The appellate court determined that the policy issued to the homeowners contained a standard mortgagee clause rather than an open mortgage clause. The court agreed that, if the policy contained an open mortgage clause, the bank would not be able to recover because of the insured's misconduct. …

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