The Texas Department of Insurance (Department) has learned that some insurers are not providing notice to mortgagees when an insured requests cancellation of a commercial property/fire policy.
The purpose of this bulletin is to remind insurers of the statutory provisions contained in Article 6.15, Texas Insurance Code.
Article 6.15 provides that the interest of a mortgagee or trustee under any fire insurance contract issued covering any property situated in this state shall not be invalidated by
(i) any act or neglect of the mortgagor or owner of the property or
(ii) the happening of any condition beyond the mortgagee's or trustee's controland any stipulation in any contract that conflicts with this provision shall be null and void.
Both state and federal courts have consistently held that Article 6.15 of the Insurance Code is a part of the insurance contract that protects the mortgagee's interests separately from the mortgagor's interest, and the mortgagee's interest is not affected by any act or neglect of the mortgagor. 1 Thus, courts have held Article 6.15 requires reasonable notice to the mortgagee of any cancellation of the policy as a result of any act or neglect of the mortgagor or owner of the property. 2
On a prospective basis, the Department will only approve commercial property/fire policies regulated pursuant to Article 5.13-2 that contain language which conforms to Article 6.15. The Department is advising insurers to review the provisions of Article 6.15 and the court cases construing these provisions and file revised policy forms as they deem appropriate.
Questions regarding this bulletin may be addressed to:
David Nardecchia, Manager
Commercial Property/Casualty Division MC 104-PC
Texas Department of Insurance
P.O. Box 149104
Austin, TX 78714-9104
512-305-7544
David.Nardecchia@tdi.state.tx.us
Sincerely,
Marilyn Hamilton, Deputy Commissioner
Commercial Property/Casualty Division MC 104-PC
1 Camden Fire Insurance Association v. Harold E. Clayton & Co., 6 S.W.2d 1029 (1928).
John Robert Claire v. Jim Richards and City National Bank of Sulphur Springs v. Texas Specialty Finance, Inc.,
979 F. Supp. 487, on reconsideration in part 992 F. supp. 891 (E.D. Tex., Paris Division 1997).
2 Standard Fire Insurance Company v. United States of America, 407 F.2d 1295 (5 th Cir. 1969)