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Eagle Sales Company owns a warehouse, subject to a mortgage obtained from First National Bank. Separately, Eagle and First National obtain insurance policies from Good Hands Insurance, Inc., to cover the warehouse. Later, Eagle sells the property to Interstate Distribution Corporation but keeps the insurance policy. First National agrees to act as Interstate's mortgagee, and Interstate obtains an insurance policy from Good Hands to cover the property. A fire totally destroys the warehouse.
Who can recover an amount for its loss?
I get a 210 word count. You can easily trim 10 word if you have to:
The answer to this problem involves isolating the primary legal issues that are raised by sales of property. The sale or transfer in this case is presumed to be for money or other valuable consideration. The issue is: insurable interest.
The only person who can ever recover for a casualty loss of property is the owner. Interstate being the owner is that person. Eagle cannot recover in spite of retaining an insurance policy on the property because it has no insurable interest in it. An individual ordinarily has an insurable interest when he or she would suffer a financial loss if the property should be destroyed by fire, flood, or other catastrophe. Thus they have a financial benefit in maintaining insurance on the property. On the other hand, if no such interest exists then any insurance policy that is issued on the property can be voided and the insurance company can refuse payment on it. Insurable interest is not dependent upon who pays the premiums of the policy. In fact, Eagle is entitled to a refund of the premiums that it has paid to Good Hands because Good Hands had no risk of loss under that policy. Good Hands risk was only under the policy that it sold to Interstate.