Home Savings of America v. Continental Insurance

In this appeal, we must decide whether a loss payable clause, patterned after the ISO (Insurance Services Office, Inc.) Standard Mortgagee Clause, is a standard loss payable clause. We also must determine various coverage and exclusion issues concerning a mortgagee’s claim under an all-risk homeowners policy. While the policy was in force, the named insured transferred title and moved out of the home. The home was then demolished for redevelopment purposes. Upon the insured’s default on the note, the mortgagee foreclosed against the deed of trust. Due to the impairment of security caused by the demolition of the residence, the mortgagee sustained a loss for which it filed a claim on the policy. After the insurer denied the claim, the mortgagee filed suit. The trial court entered summary judgment for the insurer, finding the loss payable clause is not a standard loss payable clause that protects the mortgagee from defenses available against the named insured. We reverse the summary judgment with directions.

Background

In late 1989, John and Joan Veenstra purchased a beachfront home in Corona Del Mar. To finance the purchase, the Veenstras borrowed $997,500 from plaintiff…