A tenant exclusion endorsement is not enforceable in a Standard Mortgage Clause

Tenant Exclusion Endorsement inconsistent with Standard Mortgage Clause and therefore unenforceable.

Hum v. Grain Insurance and Guarantee Co., [2009] A.J. No. 1351, December 4, 2009, Alberta Court of Queen’s Bench, R. Stevens J.

The Applicants sought a Declaration of Coverage, as mortgagees, under the Standard Mortgage Clause in a fire insurance policy. The policy was issued by the Respondent Insurer to an Insured who was not a party to the proceedings. The Insurer had denied coverage on the basis of a Tenant Exclusion Endorsement which provided that loss and damage caused directly or indirectly by vandalism or criminal or malicious acts was excluded. The fire had been deliberately set by the property’s tenant. The Applicants argued that the Standard Mortgage Clause was all encompassing and should prevail over the Tenant Exclusion Endorsement. The Court agreed finding that while the Tenants Exclusion Endorsement expressly excluded coverage for loss or damage resulting from malicious or criminal acts, it was inconsistent with the Standard Mortgage Clause which protected the Applicants from any act of the occupants and expressly stated that it superseded any policy provisions in conflict with it. The Tenant Exclusion Endorsement was therefore unenforceable.

This case was originally digested by Cameron B. Elder and originally edited by David W. Pilley.

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