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24
Dec
2021

Michigan Supreme Court: Secured Loan Loss Payable Clause

The Michigan Supreme Court has held that the Credit Union is protected as a secured party under the “loss payable” clause of an insurance policy, even if the Credit Union member burned the collateral and made false statements to the insurance company on its claim of loss.

Here, the Credit Union member executed an installment note with State Employees Credit Union secured by a motor home.

The Credit Union was named as a lien-holder on the title to the motor home. The debtor also obtained motor vehicle insurance that named the Credit Union as an insured party.

Thereafter, the motor home was burned and the insurance company denied the Credit Union’s claim for coverage. The “loss payable” clause in the insurance policy provided, in part, that:

Loss or damage . . . under the policy shall be payable . . . to [State Employees Credit Union] and this insurance . . . shall not be invalidated by any act or neglect of the . . . Owner….

Even if the debtor burned the motor home, the lower Courts held that the insurance company could not avoid coverage under the terms of the policy. (Mich. Sup. Ct., No. 89808).

Author: Charles R. Harroun, Attorney at Law



This entry was posted on Friday, December 24th, 2021 at 10:14 am and is filed under Mortgages, Secured Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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