LOSS PAYEES UNDER AUTO INSURANCE POLICY WITH STANDARD MORTGAGE CLAUSE CAN RECOVER EVEN IF THE APPLICANT MADE MISREPRESENTATIONS
Thanks to Legal Extern and ASU Law Student Isaac Behnke for this summary.
In a case of first impression, the Court of Appeals held that, “in Arizona, a loss payee properly named in a standard loss-payable mortgage clause is entitled to collect under an automobile insurance policy, notwithstanding a misrepresentation by the applicant at the inception of the contract.”?
Date Street was the secured lienholder on a car purchase. The agreement was contingent on the buyer obtaining insurance and naming Date Street as the loss payee. The buyer got into a car accident and Clearcover Insurance denied coverage because she listed her husband (in prison during the duration of the policy) as the primary driver.?
Date Street filed a complaint against Clearcover, seeking a judicial declaration that Clearcover could recover under the policy. The court dismissed the case under Ariz. R. Civ. P. 12(b)(6) for failure to state a claim, stating that Date Street lacked standing sue “because it was not in privity of contract with Clearcover.” Date Street appealed.?
领英推荐
The court of appeals found reversible error and remanded.?
Under the Uniform Declaratory Judgments Act, Arizona courts have the “power to declare rights, status, and other legal relations whether or not further relief is or could be claimed.” A.R.S. § 12-1831. Since Date Street presented a judiciable claim, the declaratory judgments statute “is remedial and therefore liberally construed.” Mills v. Ariz. Bd. of Tech. Registration, 253 Ariz. 415, ? 25, 514 P.3d 915 (2022). Date Street’s legal interest in the matter turned on the loss-payable language contained in the contract. The court of appeals ruled that the matter required analysis of the loss-payable clause, and that Date Street would be entitled to collect if it was a standard clause but would not be so entitled if it was a basic loss-payable mortgage clause.??
The Appellate Court held that the lower court erred when it failed to convert the motion to dismiss into a motion for summary judgement, stating that there was a genuine issue of material fact related to the contract language. The court of appeals acknowledged the exception to conversion referenced by the lower court but held that the exception did not apply because the 12(b)(6) motion included evidence not in the complaint or central to it (the insurance policy) and because the court, by not converting the matter, denied Date Street the opportunity to respond to that new evidence.??