Buyer's Insurer Not Entitled To Contribution

The issue on appeal in this case was whether or not the sellers of a house had an insurable interest that warranted contribution by their insurer for fire damage that occurred after closing. The purchase agreement provided that they could continue occupancy thirty days after closing. The damage was incurred during that period.

The buyer purchased a policy on the house that was effective on the date of the closing. The sellers notified their insurance agent a month after the fire that they had sold the house, and the insurer terminated the coverage as of the closing date. The buyer's insurer paid the entire loss and filed a lawsuit to secure pro rata contribution from the seller's insurer. The latter appealed the trial court summary judgment requiring such contribution.

The sellers' insurer argued that its obligation ended before the fire loss due to a lack of insurable interest on the part of its insureds. The buyer's insurer contended that the sellers had an insurable interest as a result of pecuniary loss because their leasehold was terminated or because they agreed to surrender the property in the condition it was in at closing.

The appeal court said that if the sellers could not find alternative housing, they had a cause of action for breach of contract against their landlord and would not suffer pecuniary loss. On the second contention, the court found no showing of a purchase agreement provision fixing a duty to "surrender possession of the dwelling in the same condition as at closing."

Stating that the sellers did not have an insurable interest in the property without evidence that its destruction would cause them direct pecuniary loss, the court reversed the trial court's judgment in favor of the sellers' insurer and against the buyer's insurer.

Secura Ins. Co., Plaintiff, Appellee v. Pioneer State Mutual Ins. Co., Defendant, Appellant; MORSE, Defendant. MI Court of Appeals. No. 115628. April 2, 1991. CCH 1991-92 Fire and Casualty Cases, Paragraph 3269.