Insurance lawyers will tell you that a person must have an insurable interest in the insured property to recover under an insurance policy. This is also stated in the 1993, Dallas Court of Appeals opinion, Jones v. Texas Pacific Indemnity Co.
The purpose of the requirement of an insurable interest is to discourage the use of insurance for illegitimate purposes as discussed in the 1999, Austin Court of Appeals opinion, Valdez v. Colonial County Mutual Insurance Co.
The 1998, Fort Worth Court of Appeals opinion, Foust v. Old American County Mutual Fire Insurance Co., tells us an insurable interest exists when the insured derives a pecuniary benefit or advantage by the preservation and continued existence of the property or would sustain pecuniary loss from its destruction.
As an example, in the 1997, Austin Court of Appeals opinion, State Farm Mutual Automobile Insurance Co. v. Kelly, the insured drove a car he had purchased without knowing it was stolen. The car was later confiscated. There is no evidence the insured knew or should have derived a substantial benefit from its continued loss. The insured paid valid consideration for the car and would have derived a substantial pecuniary loss when the car was confiscated. He also suffered a substantial pecuniary loss when the car was confiscated. As a good faith purchaser for value, he had an insurable interest in the vehicle as a matter of law, even though he never was the legal owner.
As stated in the Jones case above, a claimant has the burden of proving an insurable interest in the property, and whether he or she has an insurable interest in the property is a question of law, not fact.