#1 Jeff is a book dealer who purchased a building from Richard. To purchase the building, Jeff obtained a loan from Gateway Bank, which took a mortgage on the building to secure their loan. Jeff planned to store his inventory of books in the building. He also planned to use part of the building for a fast-food restaurant. When Jeff applied for property insurance on the building, he did not tell the agent about the restaurant because the cost of the insurance would have been much higher. Eight months after the policy was issued, a fire started in the restaurant and caused substantial damage to the building and its contents. Jeff filed a claim for all of the damages and losses.

An investigation by the Fire Marshall revealed that the fire had been caused by an error made by the electrician that did the wiring for Jeffs new restaurant. The electrician directly paid Jeff an amount that was approximately 40% of the total loss.

1. How would the principle of indemnity apply in this case?
2. How would the concept of misrepresentation apply? How about concealment of material facts?
3. The policy included a subrogation clause. How would that apply?
4. Would Gateway Bank be entitled to any of the payments from the insurance company or the electrician? Why? How would the notion of insurable interest apply to them?