A mortgagee that foreclosed on a fire-damaged apartment building in Massachusetts cannot recoup lost rent under a business owner’s policy, the state’s Appeals Court has ruled.
The case centered on a lawsuit filed by Casco Bay Finance Co. against Quincy Mutual Fire Insurance Co. over a business owner’s policy it had written covering Nick Pereira, the owner of a multi-unit rental property in Peabody. The policy designated GreenPoint Mortgage Funding Inc. as mortgagee. During the policy term, the building was severely damaged by fire, and all of the rental units became uninhabitable.
GreenPoint subsequently transferred and assigned the mortgage and associated agreements to Casco Bay. When Pereira defaulted on his mortgage, Casco Bay foreclosed and purchased the property, leaving a large deficiency.
Casco Bay sued Quincy Mutual to recover lost rent under the business owner’s policy that had been issued to Pereira. Casco Bay argued that a commercial loan rider signed by Pereira, as well as the standard mortgagee clause in the policy, entitled the company to recoup the lost money — an argument which was dismissed by Superior Court judge who first heard the case.
The Massachusetts Appeals Court upheld that dismissal, ruling that neither the policy, nor the rider provided coverage for lost rent to the mortgagee.
“That coverage, which is limited to actual loss of business income sustained by Pereira due to necessary suspension of his operations, was for the benefit of Pereira, and is not within the scope of the limited coverage afforded the mortgagee,” the court said.
Was this article valuable?
Here are more articles you may enjoy.