Property Insurance – Insurable Interest

Weatherford insurance attorneys need to understand the idea of “insurable interest” as it relates to property insurance claims.
A person or entity must have an insurable interest in the insured property to recover under an insurance policy. This was clearly stated in the 1993, Dallas Court of Appeals case, Jones v. Texas Pacific Indemnity Company.
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 a pecuniary loss from its destruction.
In a Tyler Court of Appeals case, the sole owner of a corporation that was a holding company for business interests who suffered a pecuniary loss from the destruction of a building owned by the corporation had an insurable interest in the building.
In a San Antonio Court of Appeals case, the owner of a house offered the house to a house mover, as long as he could remove it by December 31, 1982. The owner also gave the insured a letter permitting his to move it after January 1, 1983, if the mover failed to exercise his option. Before the mover’s option expired, the insured applied for a “builder’s risk” policy on the house, and the insured’s agent issued a binder on the policy. A fire destroyed the house on December 21, 1982. The Court held that the insured did not have an insurable interest in the property, as he suffered no pecuniary loss as a result of the destruction of the property.
To have an insurable interest in the property, it is not necessary that the party own the property.
Different persons may have an insurable interest in the property at the same time, for example:
1) joint owners such as joint tenants and community property 2) mortgagor and mortgagee 3) life tenant and remainderman 4) vendor and purchaser 5) lessor and lessee A mortgagee has an insurable interest in mortgaged property separate from the mortgagor’s to the extent of debt secured, regardless of any other security that he or she may hold. This was clearly stated in the 1995, Texarkana Court of Appeals case, Gilbreath v. White.
However, tenants at sufferance do not have an insurable interest in the dwelling they inhabit. This was stated in the above mentioned Jones case. The court in Jones reasoned that the tenants at sufferance were subject to immediate eviction, had no future legal interest in the dwelling, and had diminished motive and opportunity to protect the property. Moreover, they did not suffer any pecuniary loss in the dwelling from the fire that occurred or receive any benefit from the dwelling.
When in doubt about whether or not an insurable interest exists, get a copy of the insurance policy and contact an experienced Insurance Law Attorney.