Business Law

CASE IN POINT 11.12 Jessica Robbins bought a house in Tennessee. U.S. Bank financed the purchase, and Tennessee Farmers Mutual Insurance Company issued the homeowner's insurance policy. The policy included a clause that promised payment to the bank for losses unless the loss was due to an "increase in hazard" about which the bank knew but did not tell the insurer. When Robbins fell behind on her mortgage payments, the bank started foreclosure proceedings. No one told the insurer. Robbins filed for bankruptcy, which postponed foreclosure. Meanwhile, the house was destroyed in a fire. The bank filed a claim under the policy, but the insurer refused to pay because it had not been told by the bank of an "increase in hazard"the foreclosure. The bank then filed a law- suit. The court found that the plain meaning of the words "increase in hazard" in the policy referred to physical con- ditions on the property that posed a risk, not to events such as foreclosure. Thus, the bank was not required to notify the insurer under the terms of the policy, and the lack of notice did not invalidate the coverage. 8. U.S. Bank, N.A. Tennessee Farmers Mutual Insuntnce Co., 277 S.W.3d 381 (Tenn.Sup.Ct. 2009)