Union Planters vs. American Home

This is an insurance case dealing with a standard loss-payee clause. On September 1, 1980, the appellee insurance company issued an aircraft hull and liability insurance policy to a commercial airline. The policy had an attached breach of warranty endorsement specifying the appellant bank as the loss payee for a particular airplane. In November 1980, the airline cancelled its insurance coverage for the airplane without giving notice to the bank. In December 1980, the airplane was found in Puerto Rico and seized by the United States government as an instrument of drug trafficking. When the airplane was seized, the seats and log books were missing. The bank sought recovery for the loss to the airplane under the breach of warranty endorsement attached to the original insurance policy. The insurance company denied coverage, and the bank sued the insurance company in the trial court below. The trial court granted summary judgment in favor of the insurance company. The bank now appeals. We reverse, finding that because notice of the cancellation of the insurance policy was not given to the loss-payee bank, the cancellation was not effective as to the loss-payee.