Troisi and Welch Secure Summary Judgment in Property Coverage Dispute

Michael Troisi and Michael Welch were successful in obtaining summary judgment dismissing plaintiff’s complaint in its entirety.  In this action, plaintiff claimed that it was the mortgagee under a homeowners insurance policy and entitled to coverage for a property damage loss.  Troisi and Welch argued that the plaintiff was merely a third party purchaser after a foreclosure sale and not the mortgagee under the policy.  The court agreed with each of our arguments and held that: the plaintiff was not the mortgagee on the policy prior to the foreclosure sale; the plaintiff was no more than a third party purchaser of the property after the sale; and that regardless of its status as the mortgagee/owner, plaintiff never filed for a deficiency judgment pursuant to RPAPL 1371 in order to preserve its insurable interest.  The lack of any insurable interest was fatal to plaintiff’s claim for coverage.

Plaintiff’s allegations concerned a claim for damages to property located in Beacon, New York.  Our client insured the property under a homeowners policy.  Plaintiff was not named as the mortgagee on the policy, which named a different mortgagee.  The mortgagee on the policy obtained a Judgment of Foreclosure and Sale and subsequently purchased the property at a foreclosure sale.  Thereafter, the mortgagee assigned its winning bid at the sale to plaintiff, and the property was eventually conveyed to plaintiff pursuant to a Referee’s Deed.  Prior to the foreclosure sale, the mortgage servicer submitted a claim purportedly on behalf of the plaintiff for damages caused by a pipe break.  The insurer denied the claim because plaintiff was the property owner and not the named mortgagee on the policy.  The policy did not insure any mortgagee “as owner,” but solely “as their interests appear” i.e., as mortgagee.   Additionally, because no mortgagee preserved their insurable interest in any debt that may have remained after the foreclosure sale by filing for a deficiency judgment pursuant to RPAPL 1371, any remaining debt was deemed satisfied by the foreclosure sale.  The lack of any mortgage debt barred recovery by the mortgagee under the policy, which only had an insurable interest up to the amount of any remaining debt.  Plaintiff’s claims were dismissed because it was not the mortgagee and had no insurable interest.

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