Sec. 371. Insurable interest, p. 712.

Sec. 372. Right or obligation to insure, p. 714.

Sec. 373. Insurance in the name of the mortgagor, p. 716.

Sec. 374. Mortgage clause in insurance policy, p. 721.

Sec. 375. Insurance in the name of the mortgagee, p. 724.

Sec. 376. Application of insurance money, p. 726.

Sec. 371. Insurable interest

The mortgagor has by virtue of his equity of redemption an insurable interest in the mortgaged property, and his right to insure is co-extensive with the value of the property (a), but if he makes an absolute transfer of his equity of redemption he no longer has an insurable interest, and any insurance then existing in his favour ceases to be effectual unless it be assigned with the consent of the insurers to the transferee of the equity of redemption. In the absence of a transfer of the equity of redemption, the mortgagor's insurable interest does not cease until the mortgage debt has been paid, even though the mortgage has been foreclosed, for the mortgagor may nevertheless continue to be liable for the mortgage debt (b).

By a condition in a policy of insurance against fire the policy was to become void " if the assured is not the sole and unconditional owner of the property . . or if the interest of the assured in the property whether as owner, trustee . . . mortgagee, lessee or otherwise is not truly stated." It was held that a mortgagor was sole and unconditional owner within the terms of the condition. By another condition the policy was to be avoided if the assured should have or obtain other insurance, whether valid or not, on the property. The assured applied for other insurance, but before being notified of the acceptance of his application the premises were destroyed by fire. It was held that there was no breach of the condition (c).

(a) Glover v. Black, 1763, 1 Wm. Bl. 396; 3 Burr. 1394.

(b) Parsons v. Queen Insurance Co., 1878, 29 U.C.C.P. 188, at p. 211

A mortgagor who had made a mortgage, pursuant to the Short Forms of Mortgages Act, containing a covenant to insure the mortgaged premises against fire, effected an insurance thereon with the defendant company, the loss, by the policy, being payable to the plaintiff, the mortgagee, as his interest might appear under the mortgage. Subsequently the mortgagor conveyed his equity of redemption to the mortgagee without the consent of the company having been obtained therefor. The premises having been afterwards destroyed by fire, it was held that the plaintiff was not entitled to the insurance moneys, for (1) the fact of the conveyance made by the mortgagor to the plaintiff, whereby the former ceased to have any interest at the time of the fire, was a good answer to the claim; and (2) such conveyance constituted a breach of a statutory condition which provides against the insured premises being assigned without the company's consent (d).

In order to come within a condition providing against the assignment of the insured premises, an assignment must be an absolute transfer of the subject matter. An assignment by way of mortgage (e) or an agreement to sell, the vendor retaining the legal estate (f), does not constitute a breach of the condition.

(c) Western Assurance Co. v. Temple, 1901, 31 Can. S.C.R. 373, following Commercial Union Assurance Co. v. Temple, 1898, 29 Can. S.C.R. 206.

(d) Pinhey v. Mercantile Fire Insurance Co., 1901, 2 O.L.R. 296.

(e) Sands v. Standard Insurance Co., 1879, 26 Gr. 113, 27 Gr. 167; Sovereign Fire Insurance Co. v. Peters, 1885, 12 Can. S.C.R. 33.

A mortgagee, unpaid vendor or other person having a limited interest in property, may effect insurance either (1) on his own interest merely, or (2) on his own interest as well as the interests of all other persons in the property. For instance, a mortgagee may effect insurance either (1) on his own interest as mortgagee or (2) on the property as a whole, including the equity of redemption (g).

It has been held in New Brunswick that the interest of the mortgagee as such ends on foreclosure absolute, and that if a loss occurs thereafter the mortgagee cannot recover on a policy issued to him as mortgagee (h).