Insurable Interests

Fort Worth insurance attorneys need to be able to advise a person whether or not they are entitled to recover under a policy of insurance. Just because a person has insurance does not mean they are automatically entitled to make a recovery on lost property. From a legal standpoint – a person must have an insurable interest.
A 1993, Dallas Court of Appeals case sheds some insight into how a person who has insurance on a piece of property, not be be able to recover for the loss of that property. The case is styled, Jones v. Texas Pacific Indemnity Company.
Here is some background:
This is a summary judgment case. The Joneses sued Texas Pacific Indemnity Company on an insurance policy. The trial court granted Texas Pacific’s motion for summary judgment.
The Joneses owned their home subject to Henry and Diana Martin’s mortgage interest. They insured their home with Texas Pacific. The policy listed the Joneses as the “Named Insureds” and the Martins as “Mortgagees.” When the Joneses defaulted on their mortgage payments, the mortgagees foreclosed . The Joneses remained in the home as tenants at sufferance. Eleven days after foreclosure, the home burned.
Texas Pacific paid the Joneses the policy limits under their homeowner’s policy for content loss and additional living expenses. It reimbursed the Martins for the dwelling’s damage. The Joneses sued on the policy to collect for the structural damage to the home.
Texas Pacific moved for summary judgment. It claimed that, because the Joneses were not the owners, they could not recover for structural damages under the policy.
The Joneses moved for partial summary judgment on liability under the policy. They contended that, although they no longer owned the property, they still had an insurable interest and were entitled to the insurance proceeds for damage to the structure. The trial court granted Texas Pacific’s motion for summary judgment and denied the Joneses’ motion for summary judgment.
The Joneses argue that the trial court erroneously granted Texas Pacific’s motion for summary judgment. They contend the trial court granted Texas Pacific’s motion because the Joneses no longer held title to the dwelling. The Joneses maintain that title is not necessary to show an insurable interest in the dwelling. In their second point of error, the Joneses contend that the trial court erroneously denied their motion for partial summary judgment because they had an insurable interest in the property and were entitled to recover for the dwelling’s structural damage.
Texas Pacific argues that the Joneses confuse insurable interest with right to indemnification. It maintains that to recover under the dwelling coverage, the Joneses must suffer some actual loss in property “over which they have some ownership rights.” Because the foreclosure divested the Joneses of right, title, and interest in the property, Texas Pacific claims the Joneses cannot show any loss.
The applicable law in this case tells us:
A party must have an insurable interest in the insured property to recover under an insurance policy. It is not necessary that the party own the property to have an insurable interest. An insurable interest exists when the insured derives pecuniary benefit or advantage by the preservation and continued existence of the property or would sustain pecuniary loss from its destruction.
Applying the law to the facts:
Under the Jones-Martin deed of trust, the Joneses became tenants at sufferance after the foreclosure. As tenants at sufferance, the Joneses were subject to immediate eviction. They had no future legal interest in the dwelling, and diminished motive and opportunity to protect the property. The Joneses did not suffer any pecuniary loss in the dwelling from the fire or receive any benefit from the dwelling. They had no insurable interest in the dwelling.
Most these situations are relatively easy for an insurance attorney to give good advice about. But to be sure, always discuss it.