Eagle Sales Company owns a warehouse, subject to a mortgage obtained from First National Bank. Separately, Eagle and First National obtain insurance policies from Good Hands Insurance, Inc., to cover the warehouse. Later, Eagle sells the property to Interstate Distribution Corporation but keeps the insurance policy. First National agrees to act as Interstate's mortgagee, and Interstate obtains an insurance policy from Good Hands to cover the property. A fire totally destroys the warehouse.
Who can recover an amount for its loss?
Landlord / Tenant Lawyer
This is going to be determined by the contracts between the owners of the property and the insurance company. The Bank may have coverage separately from the owner as the mortgagee. It is not clear why the selling owner (Eagle) would sell the building and retain the insurance. The bank can allow Interstate to assume the role of mortgagor although why is unclear.
But if this is anything other than a bar exam question, someone is going to have to sit down with the insurance policies, the leases if any and the mortgage(s) in order to see exactly what they say and who recovers. Building owners will frequently require tenants to carry insurance for the benefit of the owner and it is possible that the policy provides coverage to the building owner and no one else, even if the tenant is paying for it.
Hope this helps. Elizabeth Powell
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