Chip Merlin and John Garaffa
Chip Merlin and John Garaffa

It is amusing and almost stunning to find others who used to be young attorney “rookies” in this field of property insurance law become masters. John Garaffa of Butler Weihmuller Katz Craig, is now a master in this field of law. He captured the room of property insurance law lawyers with what would normally be an impossible boring discussion regarding insurable interest. He provided specific examples explaining concepts and issues of insurable interest only gained through experience and a long time of thoughtful study. If my mentor, Paul Butler, could hear him, I am certain he would be proud.

Garaffa’s presentation, Whose Money Is It? Recognizing Insurable Interests, Lienholders, and Others, had many thoughts on this topic, but was kept simple in an outline as follows:

  • Why—The Insurable Interest Doctrine—Prevent Wager Contracts
  • What—Majority Rule—Factual Expectancy Test of Financial Interest
  • When—Time of Interest—At Time of Loss, Time of Writing of Policy or Both?
  • Who—Listed in declarations page and/or policy definition
    • Mortagee vs Loss Payee…
    • “provided the the mortgagee shall notify this company of any change of ownership or occupancy or increase of hazard which shall come to the knowledge of said mortgagee.”
    • Land contract, between buyer and seller, when does this change
    • lienholders, recorded and equitable liens?
    • Assignees, known or unknown to insurer.
    • third party beneficiary, who was intended to be insured and protected but not listed.

The Merlin Law Group blog has many discussions regarding insurable interest and to start your research on those, I would suggest reading California Insurable Interest and the Merlin Law Blog Search Function, and Chase Mathis‘ discussions on this topic, ending at Insurable Interests Defined: A Blog Series – Episode Eight, South Carolina.