The concept of an insurable interest in property insurance claims is a very important one. Without an insurable interest, you cannot recover damages in a claim. But the concept of the insurable interest does not always follow the legal concept of title. Having title, ownership, occupancy and responsibility for all expenses related to a property may often be the case with the typical residential claim scenario, and makes the insurable interest easy to find. But what about the person that has an ownership interest in a company and that company is the title owner of the property?

In a recent New York case,1 the court discussed this situation and the fact that "insurable interest" under Insurance Law § 3401, Insurance Law, means "any lawful and substantial economic interest in the safety or preservation of property from loss, destruction or pecuniary damage." In the case, the insurance carrier argued that the policyholder, Mr. Bardakjian, did not have an insurable interest in a property that was damaged by wind and hail. Mr. Bardakjian held a 25% ownership interest in the company that held legal title to the property at the time the loss occurred. So Mr. Bardakjian did not have title to the property in his name at the time the loss occurred. He did obtain a policy of insurance in his name individually.

The Court took evidence from Mr. Bardakjian that he had lived in the property for several years, including at the time the loss occurred. The Court noted that the company that held title to the property (of which Mr. Bardakjian had a 25% interest) paid for all expenses and repairs to the property involved in the claim at the time the loss occurred.

Based on these factors, the Court held that Mr. Bardakjian has an insurable interest within the meaning of Insurance Law section 3401. The Court noted that under the statute’s plain language, “a legal or equitable interest in the property insured is not necessary to support an insurable interest.” In so holding, Mr. Bardakjian has the insurable interest and right to pursue the recovery for damages in the claim through the Court case even though he did not hold title to the property in his name at the time the loss occurred.

1 Bardakjian v. Preferred Mut. Ins. Co., 2013 NY Slip Op 51086, 2013 WL 3497609 (N.Y. Sup. Ct. Albany County June 24, 2013).

  • Also, once you enter into a contract to buy a building, you have an insurable interest in that building.

  • Shaun Marker

    Thanks Steve and yes that is a great point.

  • Gene Angelotti

    There is an interesting case in Texas that is dealing with insurable interest on a Hurricane Ike loss. The management company was named on the policy however the owners were not. This is a multimillion dollar loss. It is scheduled to be argued in court in the near future. The insurance company is arguing insurable interest and damages.

    201047654- 7 Harris County

  • Mark Kass

    You, a person P, own 100% of a corporation A. Corporation A owns 1/3rd of an LLC B. P is active in the management of A and B.

    B leases an office space in its LLC name. The name of the 2/3rd owner of B is on a placard as is LLC B’s name. P uses about 1/3rd of the office space for his personal use and to supervise B’s business, and does not have a placard on the door with P’s name.

    After several years, the office space is destroyed in a fire. Does P have an insurable interest in the office space to obtain insurance proceeds for the remaining value of the Lease. P obtained free rent, now he has to go out and get new space for himself.

    Thanks for your help.

  • Shaun Marker

    It would seem P has an Insurable interest particularly if he, or his business, is paying rent, bills etc. Were there build outs done to the rented space and who paid for those? What does the lease say about who is responsible for build outs? Whose name is the lease in? Did P obtain an insurance policy in his name?

  • How about the case of Macaura v Northern Assurance Comp (1925) that the claim was refused since Mr Macaura had no insurable interest in the asset of the company ?