Insurance attorneys always have to answer the above question when looking at an insurance policy case. This issue is discussed in the 1972 case from the Texarkana Court of Appeals styled, Doss v. Roberts.
This suit involves the division of monies received from the sale of land found not to be subject to partition in kind. Roberts brought suit to partition 22 acres of land jointly owned with James B. Doss. The jury found that the land was not subject to partition in kind, and the court ordered the land sold and monies divided. The parties each owned an undivided one-half interest in the property. The land was subject to a V.A. loan and lien. Doss purchased insurance on his interest in the dwelling located on the land in the amount of $10,000.00 and named the V.A. as loss payee. The improvements were destroyed. Doss paid the remaining balance due the V.A. in the sum of $8,964.87, and thereafter collected the insurance proceeds of $10,000.00. Roberts contended she was entitled to one-half of the insurance monies because the house was not rebuilt.
The main issue in this case is whether Roberts was entitled to one half of the proceeds from the insurance.
Doss and wife purchased insurance to cover their interest alone in the house and did not purchase a policy covering the full value of the house. When the house burned, the insurance proceeds stood in the place of the interest owned by the Dosses and insurance constitutes a personal contract between the company and the insured, and a stranger to such policy may not ordinarily sue thereon and is not entitled to a share of the proceeds where the terms of the policy limit liability to the interest of the insured. This Court announces the rule that when an insured structure is damaged or destroyed, the insurance proceeds stand in the place of the interest owned by the purchaser of the policy alone and do not inure to the benefit of other interest owners when the purchaser of the policy insures only his interest in the property.