Insurable Interest

Insurable Interest

1. Concept:

   • required by law (reasons):
     • absence will result to Wager Policy - bet upon future event
     • deterrence to insured
       • insured will be more interested in destruction rather than preservation
     • measure the limit of recovery
     • insurance must not be means of profiting
   • interest to preserve the subject matter
   • GR: deemed to have insurable interest to insured if he will derived more benefits from preservation & suffer great loss from destruction
   • EXCEPT: Life insurance
     • not need be pecuniary
     • Grounds for insurable interest: business or by blood

2. Types

   • Life Insurance
     • No insurable interest: prohibit to make donation = cannot be beneficiary (VOID)
       • adultery/concubinage
       • guilty of criminal offense
       • public officer & family
     • GR: extent of interest = UNLIMITED
     • Interest must exist when policy is effected
     • interest in life & death of:
       • himself, spouse, children
         • himself = can assign beneficiary even w/o interest
         • if other person securing policy & beneficiary = insurable interest required
       • any person who depends for support
       • any person under legal obligation, whose death/illness might delay performance
         • EXCEPTION: limited to the amt of debt
           • if debtor insured himself for the benefit of creditor: upon full payment, benefit will go to debtor's estate
           • if paid prior death, creditor can no longer recover
       • Any person whose life, any estate or interest vested in him depends
     • Interest of beneficiary = forfeited if he's the caused of death;
       • no beneficiary = proceeds will go to estate
   • Property Insurance - if they derived benefit from its existence or would suffer loss from destruction
     • consist in
       • Existing Interest
         • legal title (naked ownership) or equitable title (usufruct)
       • inchoate interest (future interest) founded on existing interest
         • e.g shareholder interest
       • expectancy, coupled with existing interest
         • e.g crops to grow on land owned by farmer
     • Extent of interest: Limited to actual value of property or loss
     • Interest exist: at time policy effected & peril happens
     • ALWAYS have insurable interest
     • Change of Interest in Property Insurance
       • GR: owner of policy & owner of insured property = different people = POLICY SUSPENDED (no right to recover)
         • Remedy: if new owner of property = owner of policy
       • EXCEPT (right to recover)
         • in life, accident, & health insurance
         • change occurs AFTER the peril
         • change in one or more (NOT ALL) properties covered by one policy
         • change by will or succession
         • transfer between partners, joint owners
         • policy is so framed
       • need consent of insurer to validly transfer
     • Void Stipulation
       • for payment of loss even if no insurable interest
       • policy shall be received as proof of interest
       • policy is to be executed as means of gaming

3. Special Cases

   • Carriers & Depositories
     • interest in thing held by them
     • Extent: value of thing loss
   • Mortgaged Properties
     • Mortgagor
       • Extent: Full value of mortgaged property
     • Mortgagee
       • Extent: debt owed by mortgagor
     • Loss Payable Mortgage Clause
       • mortgagor secures insurance and designate mortgagee as beneficiary ; deemed interest of mortgagor