Property insurance requires that an insured has a financial interest in the insured property. Courts have defined an "economic interest" as either: "(1) a monetary right, title or legal interest in the property; (2) a monetary benefit, profit and liability, ie. a monetary share or claim on the property; or (3) a monetary share of the ownership or control of the property. 1 A financial interest may include a lease interest in accordance with a written lease agreement if the lease agreement contains an obligation to procure insurance or repair the property.
In a recent case 2 a husband and wife bought a commercial building, a car park and a concrete barrier wall in 1996. In 2007, they transferred the property to a revocable trust created by them. In 2015, a lease agreement was signed for the property between a company (which was also controlled by them) and the husband and wife as "landlord" and "owner" of the property.
The lease agreement required the tenant to obtain property insurance for the entire compensation value. The tenant then received a commercial property insurance for the property. After someone drove a car through the concrete barrier wall and partly into the building on the property, the insured tenant submitted a claim. The insurer finally denied the claim on the grounds that the insured did not have a financial interest in the property because the insured did not have a legal or fair interest or a valid lease with the trust that owned the property. After disputes, the insurer arose that it was not obliged to pay income from damages to the insured tenant because it had no financial interest in the property.
The Court of Appeal of Indiana finally ruled that the insured tenant does not have a valid rental agreement with the owner of the property and thus lacked a financial interest in the property according to the requirements of the insurance policy. Since the insured tenant did not have a financial interest in the property, the court found that the insurer had a legitimate reason to refuse the insured tenant's claim.
1 JAM Inc. v. Nautilus Ins. Co. 128 SW3d 879 (Mo. Ct. App. 2004).
2 Nuell, Inc. v. Marsillett 164 NE3d 768 (Ind. Ct. App. 2021).