We’ve been to the Northeast, the Southwest and now we are heading to the Midwest for this episode of my continuing blog series. This week we’re traveling to Illinois to see how the Prairie State defines insurable interests.
Courts in Illinois have spelled it out plainly and clearly: “[a]n insurable interest at the time of the loss is essential to the validity of an insurance policy.”1 While one must have an insurable interest to have a valid policy and therefore a valid claim, one does not need to have clear title:
An insurable interest does not, of necessity, depend upon ownership of the property. It may be a special interest entirely disconnected from any title, lien, or possession. If the holder of an interest in property will suffer direct pecuniary loss, by its destruction, he may indemnify himself therefrom by a contract of insurance. The question is not what is his title to the property, but rather, would he be damaged pecuniarily by its loss. If he would, he has an insurable interest.2
More simply stated and in language we’ve seen before, “a person has an insurable interest in property whenever he would profit by or gain some advantage by its continued existence or suffer loss or disadvantage by its destruction.”3
Chip Merlin noted in his blog post last week, California Insurable Interest and the Merlin Law Blog Search Function, that “[m]any policyholders are ignorant about the fine detail of insurable interest requirements and are more concerned with ‘getting the property’ rather than ‘getting the right party’ insured.” Make sure you double check the policy before filing your client’s claim to confirm you have both the right property and the right party.
While I haven’t had the opportunity to visit Illinois yet, I look forward to spending time there someday soon, especially in Chicago. As always, I’ll leave you with a (mildly) related tune, here’s Old Blue Eyes, Frank Sinatra with Chicago My Kind of Town:
1 Hawkeye-Security Ins. Co. v. Reeg, 128 ILL.App.3d 352, 354 (Ill. App. Ct., Fifth Dist. 1984).
2 Id., citing Crossman v. American Ins. Co. of Newark, N.J., 198 Mich. 304, 308 (1917).