Pereira owned a multi-unit rental property. Greenpoint was the mortgagee. (For those of you who have trouble keeping straight which is the mortgagor and which is the mortgagee, as my property law professor used to say, "The mortgagEE [the bank] has the monEY.")
A fire rendered all of the rental units uninhabitable. GreenPoint subsequently transferred and assigned the mortgage and associated agreements to Casco Bay. The decision does not address whether Casco Bay was aware that it was acquiring the mortgage of a destroyed property.
Pereira defaulted on his mortgage loan. Casco Bay foreclosed and purchased the property. Unsurprisingly, a large deficiency remained.
Casco Bay sought to recover lost rent on the property from Pereira's business owner's insurance policy. In Casco Bay Fin. Co., LLC v. Quincy Mut. Fire Ins. Co., 77 Mass. App. Ct. 913 (2010, the Massachusetts Appeals Court held that the standard mortgage clause, mandated by Mass. Gen. Laws ch. 175 § 88, Twelfth, does not provide coverage to a mortgagee for lost rent where the mortgagor has executed an assignment of rent to the mortgagee. The mortgage clause provides, "We will pay for covered loss of or damage to real estate to each mortgageholder . . . " The court held that rent is not included in the meaning of "real estate."
The court also held that Casco Bay could not recover under the policy's coverage for loss of business income. It held that that coverage is limited to loss of business income sustained by Pereira and was for his benefit only. Pereira's assignment of rents to the mortgagee did not give the mortgagee the right to recover, because the policy provides that the insured's rights and duties may not be transfered without the insurer's written consent.
Thanks to Mike Tracy of Rudolph Friedmann LLP for bringing this case to my attention.