A homeowner's insurer discovers the insured committed arson and voids the policy. The home has a mortgage. Under the standard mortgage clause, what is the mortgagee's right?

Why this is the answer

The standard mortgage clause (also called the union mortgage clause) is fundamentally different from a simple loss payable clause. Under a loss payable clause, the mortgagee stands in the insured's shoes — if the insured's claim is void (due to arson, fraud, or policy breach), the mortgagee's claim is equally void. Under the standard mortgage clause, the mortgagee has a separate, independent contract with the insurer. The insured's misconduct does not automatically void the mortgagee's right to recovery. The insurer pays the mortgagee (up to its interest) and is then subrogated to the mortgagee's rights under the mortgage, or may pay off the mortgage and take an assignment of it. The clause's only 60-day window is the mortgagee's time to submit a signed, sworn statement of loss after the insurer notifies it that the insured failed to; no deadline to sue runs from discovery of the arson. See FL Outline §III.