Northwest Farm Bureau Insurance Company v. Althauser

Glenn and Grace Althauser (defendants) owned a house subject to two mortgages. The Althausers had a homeowner’s insurance policy with Northwest Farm Bureau Insurance Company (Northwest) (plaintiff). Under the policy, covered losses caused by fire were to be paid to the mortgagees named in the policy to the extent of their interests. The mortgagees would be paid even if the Althausers breached the insurance policy. The policy also covered personal property. The Althausers’ house was damaged in a fire. Northwest paid the full value of the mortgage to the first mortgagee, who then assigned the mortgage to Northwest. The remaining insurance proceeds were paid to the second mortgagee. The Althausers sued Northwest for the personal-property losses. Northwest denied liability for those losses, in part because it claimed that the Althausers had made a material misrepresentation. The jury found that the Alsthausers had made a material misrepresentation regarding the loss claim. Judgment was, therefore, entered for Northwest. Northwest then sued the Althausers, seeking to foreclose on the Althausers’ property, because the Althausers had not made any mortgage payments since the fire. Northwest claimed that the Althausers’ material misrepresentation nullified the Althausers’ policy with Northwest. As a result, Northwest was subrogated to the mortgagees’ rights. The trial court granted Northwest’s summary judgment motion for foreclosure. The Althausers appealed.