The Insurable Interest Doctrine
The Insurable Interest Doctrine: What is it?
And What Does It Mean? Evan B. Sorensen, Esq.
Kenne J. Zielinski, Esq. Tressler LLP
The Insurable Interest Doctrine | 1
The Insurable Interest Doctrine: What is it? And What Does It Mean?
While one cannot define an insurable interest with complete certainty or precision, in general it exists when the policy holder derives pecuniary benefit or advantage by the preservation or continued existence of the property or will sustain pecuniary loss from its destruction.1 In other words, the insurable interest doctrine requires a person or entity which holds an insurance policy to have some significant interest in the property insured by the policy.2 Traditionally, the insurable interest requirement has been very broadly read and interpreted with almost any interest being found to create an “insurable” interest. This article will explore the origins of the insurable interest doctrine following its migration from England to the United States, examine why the doctrine is important in the commercial coverage context, examine current trends and issues in determining the insurability of commercial interests, and finally discuss whether inter‐related but unnamed entities could potentially have an insurable interest. I.
Common Law and the Origins of the Insurable Interest Doctrine:
Insurance law has long required that policyholders possess an insurable interest in the property which they seek to insure.3 Essentially, the insurable interest requirement typically functions as a safeguard to an insurer allowing the insurer to justify nonpayment after a covered occurrence has taken place. If the insurer can successfully prove the insured lacked an insurable interest in the property, a
And What Does It Mean? Evan B. Sorensen, Esq.
Kenne J. Zielinski, Esq. Tressler LLP
The Insurable Interest Doctrine | 1
The Insurable Interest Doctrine: What is it? And What Does It Mean?
While one cannot define an insurable interest with complete certainty or precision, in general it exists when the policy holder derives pecuniary benefit or advantage by the preservation or continued existence of the property or will sustain pecuniary loss from its destruction.1 In other words, the insurable interest doctrine requires a person or entity which holds an insurance policy to have some significant interest in the property insured by the policy.2 Traditionally, the insurable interest requirement has been very broadly read and interpreted with almost any interest being found to create an “insurable” interest. This article will explore the origins of the insurable interest doctrine following its migration from England to the United States, examine why the doctrine is important in the commercial coverage context, examine current trends and issues in determining the insurability of commercial interests, and finally discuss whether inter‐related but unnamed entities could potentially have an insurable interest. I.
Common Law and the Origins of the Insurable Interest Doctrine:
Insurance law has long required that policyholders possess an insurable interest in the property which they seek to insure.3 Essentially, the insurable interest requirement typically functions as a safeguard to an insurer allowing the insurer to justify nonpayment after a covered occurrence has taken place. If the insurer can successfully prove the insured lacked an insurable interest in the property, a