What Is An Insurable Interest?

Insurance lawyers know that a party must have an insurable interest in the insured property to recover under an insurance policy.  This is made clear in the 1993, Dallas Court of Appeals opinion styled, Jones v. Texas Pac. Indem. Co.  It is not necessary that the party owns the property to have an insurable interest.  An insurable interest is an exposure to financial loss possessed by a person giving rise to a legal interest that the insured possesses a right to protect.  An insured who owns a house or auto therefore has an insurable interest in the house or auto because the insured would be hurt financially if the house or auto were damaged or destroyed.  This was discussed in the 1963, Texas Supreme Court opinion styled, Smith v. Eagle Star Ins. Co.  An insurable interest does not constitute an entitlement to insurance because the insurer is permitted to underwrite and price the risk sought to be insured.  Even if an insurance policy is issued, it cannot be enforced by a party who has no insurable interest, even if that party is a named insured.  This was discussed in the 1972, Amarillo Court of Appeals opinion styled, North River Ins. Co. v. Fisher.