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(Article from Insurance Law Alert, April 2015)

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A Florida appellate court ruled that state statutory law requiring an insurable interest in property at the time of the loss does not apply when the original insured assigns insurance policy rights to another party after a loss has occurred. Accident Cleaners, Inc. v. Universal Ins. Co., 2015 WL 1609973 (Fla. Dist. Ct. App. Apr. 10, 2015).

A homeowner assigned the rights to his property policy to a cleaning service company after a loss. When the insurance company refused to pay the full amount of cleaning services associated with the loss, the cleaning company filed suit. The trial court dismissed the complaint on the basis that the cleaning company did not have an insurable interest in the property at the time of loss, as required by Florida statutory law. See Florida Statutes section 627.405 ("No contract of insurance of property … shall be enforceable … except for the benefit of persons having an insurable interest in the things insured as at the time of the loss"). The appellate court reversed.

The appellate court ruled that section 627.405 does not require a post-loss assignee to have an insurable interest at the time of loss. The court reasoned that under Florida common law, the right to recover under an insurance contract is freely assignable after loss. The court explained that because section 627.405 did not express an intent to displace or otherwise alter this common law, an owner’s insurable interest may be imputed to a post-loss assignee so long as the property owner who holds the insurance policy had an insurable interest at the time of the loss. As the court noted, "[t]his interpretation allows both the insurable-interest requirement and free assignability of post-loss claims to coexist."