After my last blog about insurable interests according to California case law, I received a request to research and present the same topic under Florida case law. Specifically I noted that home purchasers may not have proper insurance policies when they purchase homes with deeds held in trusts, corporations, or other business entities such as an LLC (limited liability company). Often, investors or buyers do this to protect their assets but a problem arises when the home held in the business is not the named insured under the policy. In Florida, the case law is very similar to that of California in that the proper named insured should match up with the owner of the deed of the property to have an active and proper policy where there is an insurable interest.
In California, we see a lot of claims where investors or wealthy buyers purchase homes held in trusts, corporations or other business entities such as the LLC (limited liability company). Often, investors or buyers do this to protect their assets. However, the irony is that it is exactly in these scenarios that homeowners find they may run into issues if they are not clear with their insurance brokers or agents and do not purchase their insurance policy properly.
In August, the U.S. Court of Appeals addressed whether a homeowners’ property insurance policy was rendered void after the insureds lost the home in foreclosure, yet continued to reside in the home and suffered a loss.1
Last week, I discussed the concept of insurable interest in Florida and the effect of a foreclosure judgment on a party’s insurable interest in property. Let’s continue the discussion of insurable interest this week. Does a property management company have an insurable interest in commercial property which it manages but does not own?
Can an insurance company waive a defense based on lack of insurable interest by accepting premiums for the policy and issuing it? It may depend on the jurisdiction you are in. If the insurance company issued the policy and accepted the premiums even though it should have known its customer did not have an insurable interest, the policyholder may be able to recover in some jurisdictions.1 New York Courts have recognized the theories of waiver and estoppel under these circumstances.2
When considering an insurable interest question in an insurance claim, there are two important times to look at: when the policy is issued and the time of loss. This is because the policyholder must have an insurable interest at the time the insurance policy is taken out and at the time of loss. A Florida case demonstrates this point.
Continuing the discussion last week on the importance of having an insurable interest in property to pursue a claim, I came across a New York case involving an “insurable interest” clause in an insurance policy with a different outcome from the New York case discussed last week in my post, One Can Have An Insurable Interest In Property Without Having A Legal Interest In The Property.
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?
Recently, I received a question from a public insurance adjuster who asked, “what happens to my client’s claim if he is listed as the named insured but does not own the property?”
Usually when a person buys a home or business, it is assumed that the purchaser or owner has an insurable interest in the property. However, when it comes to property insurance, the insured doesn’t always have to be the owner of the property. In fact, there are many other persons or entities that may have an insurable interest on a specific property at one time.