If a mortgage or other encumbrance against real property does not indicate beneficial ownership of the claim in favor of the insurer, what penalties apply?

• A. The penalties are trouble damages or $1000, whichever is greater.
• B. A flat $1000 penalty.
• C. Treble damages.
• D. A civil penalty of $500.

Answer: (A)

When an encumbrance on real property omits indicating the insurer’s beneficial ownership, the rule imposes a monetary penalty designed to deter misrepresentation and protect the insurer’s rights. The penalty is the greater of treble damages (three times the actual damages) or $1000. This means in larger claims, the threefold damages apply, while in smaller cases the minimum $1000 ensures a meaningful remedy. A flat $1000 only would underestimate losses in bigger cases, and fixed penalties unrelated to the damages wouldn’t align with the “greater of” provision.