What is Meant by Insurable Interest?

J.P. Gonzalez-Sirgo
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Founder of J.P. Gonzalez-Sirgo, P.A.

Insurable interest is a term that you will often hear in a discussion of insurance related matters, but it is one that is not often understood in its entirety because of its broad and flexible use. A good starting point would be to provide the standard definition written in 17 Fla. Prac., Insurance Law § 27:2 (2018-2019 ed.).

The definition reads as follows:

“The standard definition of “insurable interest” is any “actual, lawful, and substantial economic interest in the safety or preservation of the subject of the insurance free from loss, destruction, or pecuniary damage or impairment.” The true measure of an insurable interest in real property is the extent to which the insured might be injured or damaged by the injury, loss, or other impairment.”

In simpler terms, it is a pecuniary or monetary interest in an object that would validate recovery in the scenario where an economic loss related to the object occurs. However, do not oversimplify this understanding by assuming mere title ownership is indicative of an insurable interest or lack thereof means one does not exist.  Legal and equitable title are factors considered as well as are the contractual right to proceeds stemming from the object. When should a determination of whether an individual has an insurable interest be made? This will depend on the circumstances surrounding your insurance plan and asset. In Florida, generally the time frame examined is the time of the covered loss. However,  always be cautious when determining whether this applies to you because each policy has unique applications even when complying with state law.

For more depth on the applicability of “insurable interest” and the implications for such a categorization within Florida, an in-depth look at Florida statutory code will help understand how this applies to you.  F.S.§ 627.405, is a statutory restriction and guide to insurable interests in property. This statute is separated into three subsections.

Section (1) states the following:

“No contract of insurance of property or of any interest in property or arising from property shall be enforceable as to the insurance except for the benefit of persons having an insurable interest in the things insured as at the time of the loss.”

This means an insurance contract is not enforceable unless it involves property that you have an “insurable interest” in. They further limit the application of this statute by stating that this interest is to be determined at the time of loss. Insurance companies operating within Florida must adhere to this statutory prohibition.

Section (2) states the following:

““Insurable interest” as used in this section means any actual, lawful, and substantial economic interest in the safety or preservation of the subject of the insurance free from loss, destruction, or pecuniary damage or impairment.”

This definition creates a narrower understanding of “insurable interest” than the one previously discussed in this blog post. If you are in Florida, your insurance company must adhere to this definition since your policy is subject to the laws that govern your jurisdiction. Any material deviation from statutory code may give rise to a civil action or a contestation of denied coverage.

Section (3) states the following:

“The measure of an insurable interest in property is the extent to which the insured might be damnified by loss, injury, or impairment thereof.”

This section creates a general scale that your policy will use to determine the level of interest you have in the property to appropriately compensate you in a scenario of loss or destruction.  If you are still confused about the concept of “insurable interest” or how it applies to you, a legal expert can help analyze your policy within the context of your congruent state law. If you have denied claims, an experienced insurance claims attorney can also possibly dispute the denial and recover the compensation you are entitled to.

You can reach Miami Insurance Claims Lawyer J.P. Gonzalez-Sirgo by dialing his direct number at (786) 272-5841, calling the main office at (305) 461-1095, or Toll Free at 1 (866) 71-CLAIM or email Attorney Gonzalez-Sirgo directly at[email protected].

Sources:

-17 Fla. Prac., Insurance Law § 27:2 (2018-2019 ed.)

-Florida Statute  § 627.405

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