Smith borrows Bank money to buy Property and buys Insurance to protect Property against common risks (like fire).
Bank’s loan is secured by Property. Bank has an interest in that Property and requires Smith to carry insurance that also covers Bank as a condition of extending the loan to Smith.
Let’s say that Smith is an arsonist and he celebrates the holidays with a memorable blaze lighting up Property. We all know that Smith cannot then claim insurance money due to the damage to the property by fire. But what about Bank? Can Bank get the benefit of insurance coverage or is Bank out of luck because of the insured/borrower’s wrongful act?