Insurable Interest. Claude and Mildred owned their home in Lexington and had a fire insurance policy on it. Claude and Mildred contracted with Benjamin to build a new home for them in exchange for cash and transfer of their present home. After conveying
the home to Benjamin, Claude and Mildred continued living there and paid both rent and the insurance premium. The fire insurance policy was never assigned to Benjamin. While Claude and Mildred were still living in their old home, a fire damaged it. The insurance company would not pay, claiming that Claude and Mildred had no insurable interest in the property at the time of the loss. Discuss fully how a court will rule.
Insurable interest
Claude and Mildred have an insurable interest in their home, despite the fact that they had conveyed its ownership to Benjamin, because they had a contractual liability to "trade in" the house as part of consideration for construction of the new house. The court stated that "in general a person has an insurable interest in the subject matter insured where he has such a relation or connection with, or concern in, such subject matter that he will derive pecuniary benefit or advantage from its preservation, or will suffer pecuniary loss or damage from its destruction, termination, or injury by the happening of the event insured against." The court found that there was a direct pecuniary interest in the preservation of the subject property.
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