Seller Of Restaurant Not Entitled To Policy Proceeds
A seller of a restaurant and its buyer entered into a security agreement. Its intent was to ensure payment of the remainder of the restaurant’s purchase price. The agreement required the buyer to maintain fire insurance on the property. The seller was to be named as a "loss beneficiary" and provided with a copy of the policy.
Only the buyer was named in the policy that it obtained, and the covered property was completely destroyed by fire ten months after its issue. The seller notified the insurer by certified mail of its claim to the policy's proceeds. But the carrier sent a settlement check to the buyer, who deposited it a month later. The check did not reference the seller, as it had not been included as a loss payee in the policy.
In the course of legal action to recover the policy proceeds, the seller moved for summary judgment on a complaint that the insurer had acted negligently. An appeal followed the denial of the seller's motion and the granting of the insurer's motion to dismiss the complaint.
Upon appeal, the seller argued that it "had an equitable lien on the proceeds of the fire insurance policy, and thus, the carrier was negligent in failing to name the plaintiff as a payee on the proceeds check." The appeal court said that because the seller was not a party to the insurance contract, the insurance company was not obligated to investigate its claim to the policy proceeds. It quoted from its holding in another case: "....a secured creditor is in the best position to police the enforcement of its agreement with its debtor with respect to insurance coverage on collateral."
With dissenting opinion, the appeal court affirmed the trial court's grant of the insurer's motion for dismissal of the complaint against it.
Rosario-Paolo, Inc., Appellant v. C & M Pizza Restaurant, Inc., Defendant; Investors Ins. Co. of America, Inc., Respondent. New York Supreme Court, Appellate Division, Second Judicial Department. No. 91-06081. June 28, 1993. CCH 1993-94 Fire and Casualty Cases, Paragraph 4442.
