Nationwide Mut. Ins. Co. v. Citizensbank & Trust Co. (Majority)Annotate this Case
Nationwide Mutual Fire Insurance Company issued a policy to Danny Ludwick insuring his home and its contents. The policy named Citizens Bank & Trust Company as the first mortgagee. The dwelling was subsequently destroyed by fire. However, based on material misrepresentations in Ludwick's application, Nationwide voided the policy back to its inception. Citizens submitted a claim to Nationwide. Nationwide denied the claim on the basis that the policy was void ab initio, allegedly extinguishing not only Ludwick’s interest but also Citizen’s interest as mortgagee. Citizens filed a complaint for wrongful denial of its claim. The circuit court granted summary judgment to Citizens. The Supreme Court affirmed, holding (1) an insurance company is entitled to rescission of its insured’s policy based on the insured’s fraud or misrepresentation, but the rescission of the policy has no effect on an independent contract with the mortgagee; and (2) because the policy at issue contained a standard mortgage cause, which operated as an independent contract between the insurance company and the named mortgagee, the rescission of Nationwide’s policy had no effect on the independent contract with Citizens.