I want to make sure we are interpreting the policy correctly. 

We don't believe that the mortgagee is obligated to notify the carrier when the insured moves out of the insured's property. The policy language does not support this is a responsibility of the mortgagee. The homeowner bears the weight of responsibility of advising if the home is owner occupied or other occupied, to maintain their end of the policy requirements.

The policy language within the mortgagee clause reflects the mortgagee is only responsible for advising if the property becomes vacant, not if the homeowner specifically is no longer living there, at which point there is a change in the risk to the property. The lender should notify the carrier.

The carrier is auguring that the lender didn't notify them when the homeowner moved.   

California Subscriber

The key clause here is "…change ownership, occupancy or substantial change in risk of which the mortgagee is aware…" emphasis added. If the mortgagee isn't aware of when the homeowner moves out, it can't advise the carrier. The mortgagee's duty extends only to their knowledge of the situation; if the homeowner moves out in the middle of the night and the mortgatgee isn't aware of it until the homeowner has missed 3 or 4 mortgage payments, the mortgagee can't be held responsible for not notifying the carrier about something it didn't know. You are indeed correct.

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