Fire Insurance Recovery Rights of the Foreclosing Mortgagee: Is His Lien Lost in the Ashes?

This note explores the question of a mortgagee's insurable interest under a standard mortgage clause as the process of foreclosure ripens his status from that of mortgagee to property owner. The author argues that while fire insurance recovery rights of the foreclosing mortgagee may appear to be a viable solution to apportionment of indemnity, when the rules are applied to deny recovery, the system becomes unjust. This creates an incentive for the mortgagee to avoid the foreclosure sale (when there is a fire loss to the property), so as to force the loss on the insurance carrier.