The appellants, hypothecary creditors, sought to recover under a fire insurance policy containing a standard mortgage clause after the insured property was destroyed by arson.
The insurers refused to pay, arguing the policy was void ab initio due to misrepresentations by the hypothecary debtor when purchasing the policy.
The Supreme Court of Canada held that the standard mortgage clause creates a separate and distinct contract between the insurers and the hypothecary creditors.
This independent contract cannot be invalidated by any act, neglect, omission, or misrepresentation of the hypothecary debtor, whether occurring at the inception of the policy or subsequently.
The appeal was allowed.
