Question

Ted borrowed $140,000 from ABC Bank to purchase a home and pledged the home as collateral for the loan. Shortly after purchasing the home, Ted lost his job. He could not find another job and could not pay the monthly mortgage. Ted set fire to the home. The claims adjuster suspected arson, and an investigation proved that Ted intentionally caused the loss. Under the mortgage clause of the Homeowners 3 policy, how will this loss be settled

Answer 1

Under the Mortgage clause of the policy, the insurance company will pay out the insurable interest it would have paid to Ted, to ABC bank.

Ted will now owe the insurance company whatever it was that they paid to the bank and they will be able to legally go after him to pay off that amount using any legal means necessary.